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Many SMES will benefit from the delayed timetable changes to Making Tax Digital

Proposed changes to the roll-out of the UK Government’s plans for businesses to keep digital records and report quarterly online are expected to be approved this month but at least they will be rolled out rather than introduced immediately.
I have previously expressed concern about the impact of quarterly reporting by SMEs, especially as most only see their accountant once a year when they report annual accounts as required under current legislation.
The timetable and other changes mean that from April 2019 only businesses with a turnover above the VAT threshold (currently £85,000) will have to keep digital records and only for reporting their VAT under new scheme, called Making Tax Digital (MTD).
It will also mean that businesses will not be asked to keep digital records or update HMRC quarterly for other taxes until at least 2020.
The Government has made it clear that it wants to test the new system thoroughly before rolling it out making it even possible that the deadline may slip further.
HMRC is expected to start a small-scale pilot of MTD for VAT by the end of this year, then widen the scope into a larger pilot starting Spring 2018.
The Government has also announced that MTD will be available on a voluntary basis for the smallest businesses, and for other taxes.
This means that businesses and landlords with a turnover below the VAT threshold will be able to choose when to move to the new digital system. They will also be given at least two years to adapt to the changes before being asked to keep digital records for other taxes.
The changes are expected to be approved during passage of the Finance Bill 2017, expected to take place this month, September 2017.
The changes have been welcomed by business groups, particularly by the FSB (Federation of Small Businesses) whose chairman Mike Cherry said it was a very positive decision and a welcome relief to the smallest businesses that were “already facing a hugely challenging economic climate”.

Record keeping and HMRC communication

SMEs should be prepared for HM Revenue and Customs (HMRC) to become more aggressive in following up on late payment and tax avoidance.
MPs criticised HMRC this month after it emerged that the difference between the amount it should collect and its actual collection total had increased by £1 billion (from £33bn to £34bn) in the year to April 2013.
The tax gap is also forecast to increase by a further £3bn for the year to 2014.
The House of Commons’ Public Accounts Committee has also criticised HMRC for not doing enough, quickly enough in tackling tax avoidance schemes.
SMEs are arguably easy targets when HMRC is coming under pressure so they would be wise to ensure that their records are all in order and payments up to date.
It is important to keep copies of all filings and communications with HMRC, preferably confirming phone calls in writing and to not ignore any communications from them.
If you are unable to pay a liability, they are helpful and providing you are proactive they will agree payment terms. If you do agree payment terms then stick to them otherwise they won’t believe any other undertakings you give so make sure your cash flow forecasts are realistic.
Independent of making any payments, make sure your various tax returns (VAT, RTI -PAYE and corporation tax) are submitted on time to avoid automatic penalties.
If it is all becoming too much, remember tax is one area where early help from a professional can be invaluable.