Government plans to introduce quarterly tax returns have been scrapped, potentially saving the self-employed hundreds of pounds a year.
From the moment the government’s Making Tax Digital plans - including the introduction of quarterly reporting - were announced, small business owners have been arguing the case against the proposed new system.
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And it’s not just business owners breathing a sigh of relief, landlords would have also been required to file online records of their taxes multiple times a year.
Government ‘listens carefully’ to concerns
In the official statement on parliament.uk, the government say: “Having listened carefully to the concerns raised by the Treasury Select Committee, parliamentarians and stakeholders, the government is announcing policy changes that will be reflected in the legislation to be introduced.”
And as ‘policy changes’ go, the self-employed couldn’t be happier that this means the end (of sorts) of the dreaded quarterly tax return.
Smaller businesses set to save a fortune
Now the plans have been ditched, any business with a turnover of less than £85,000 will be exempt from having to file quarterly tax returns - at least in the near future. And whilst HM Treasury didn’t rule out making it mandatory in the future, businesses will be allowed to make the switch to digital reporting “at a pace that is right for them.”
The move away from quarterly reporting could mean significant savings for the smallest of firms - additional administration, accounting, and even software and training costs won’t have to be factored in.
Mike Cherry, chairman of the Federation of Small Business, described the changes as a “lifeline” for the self-employed who are already in the midst of a “challenging economic climate”.
Smaller firms should note that whilst they’re not required to use the quarterly returns system, they can should they choose to.
What about larger businesses?
However, those earning over the VAT threshold will be required to start using the quarterly system from 2019 - a year delay on the original 2018 deadline.
Larger businesses will be spared the full Making Tax Digital experience, though, with VAT acting as something of a trial for the system.
“The government will not widen the scope of MTD beyond VAT before the system has been shown to work well, and not before April 2020 at the earliest.” A statement read.
“This will ensure that there is time to test the system fully and for digital record keeping to become more widespread.”
Landlords also relieved
The news was welcomed by landlords, who will now fall under the same rules as businesses.
Previously, it had been proposed that any landlord with a turnover above £10,000 would be required to file online quarterly.
John Stewart of the Residential Landlord Association said: “The last thing landlords needed was an imminent change to the way they keep their records.
“The Treasury has made the right decision in giving landlords more time to prepare for the policy, where it applies to them, and we welcome the government listening and responding so positively to our concerns.”