Expert advice on delays in tax system changes
9:30 a.m. on November 2, 2021
Making Tax Digital (MTD) for income tax has been delayed for a year, alongside proposed changes to aligning corporate tax dates with the fiscal year of the treasury. Graham Doubtfire, Tax Partner at Scrutton Bland, explains the latest developments.
Who will it affect?
The delay means more than four million businesses, freelancers and owners with incomes of over Â£ 10,000 a year will have their MTD start date postponed from April 2023 to April 2024.
At this point, they will need to keep accounting records in digital form and file quarterly updates with HM Revenue & Customs instead of a single annual update. MTD for general partnerships has been pushed back until April 2025, with no date given for other types of limited partnerships such as LLPs.
Why has MTD been delayed?â¯
The digitization of the tax system through Making Tax Digital (MTD) has been widely described as the biggest tax change in a quarter of a century, but the difficulties faced by businesses in the wake of the Covid-19 pandemic have created challenges additional at all levels. .
The delay will provide respite for small businesses and self-employed people with incomes over Â£ 10,000, many of whom have expressed concern over the extra work this administrative change will bring. We always recommend that you speak to one of our tax advisers who can give you professional advice and practical help on what needs to be done to become BAT compliant.
The reform of the base period has also been delayedâ¯
The Treasury also announced a year of delay in the planned modification of the “base period” of tax returns. This reform would have forced the self-employed and members of partnerships to align their accounting dates with the April date used by the Treasury and many others.
The proposed change of date for the base period would have meant, in many cases, that income tax had to be paid earlier than the current system, and despite the potential funds the government could have raised, it decided to postpone the move until April 2023.
The postponement of the change in the base period will no doubt be welcomed by many, but remains a change that could occur and needs to be incorporated into business plans. The surprising aspect is that despite the postponement of MTD for income tax until 2024, plans to change the base period appear to remain for 2023, which is likely to be the most disruptive aspect. for business owners who may well have an accounting period that does not coincide with the end of the tax year.
Our tax team can help you predict these additional taxes and suggest planning opportunities that will help reduce the amount of tax owed. This can include things like using multiple tax breaks and adjusting the capital expenditure schedule so that the capital allocations are used in the correct accounting period.