The Government has declared changes to a controversial new tax system.
The timetable for making in the Making Tax Digital (MTD) lead has been extended.
The plan covers the initial entry of digital record-keeping and quarterly updates for the majority of firms, self-employed individuals and landowners.
Nevertheless, only firms with a turnover above the VAT threshold, currently £85,000, will now have to retain digital records for VAT purposes from 2019.
Businesspeople will not be required to preserve digital records, or to modernise HM Revenue & Customs (HMRC) quarterly, for other taxes till at least 2020, under the plans.
Financial Secretary to the Treasury and Paymaster General Mel Stride said: “Businesses agree that digitising the tax system is the right direction of travel.
“However, many have been worried about the scope and pace of reforms.
“We have listened very carefully to their concerns and are making changes so that we can bring the tax system into the digital age in a way that is right for all businesses.”
The progress follows public worries voiced about the first timetable, including by some of Tory MPs.
The House of Lords Economic Affairs Committee announced the previous timetable for implementation of MTD from April next year was “rushed” and that several small firms were not able to cope with the added administrative and financial needs of digital taxation.
National chairman of the Federation of Small Businesses, Mike Cherry, said: “We’re delighted that the Chancellor’s team in the Treasury has listened to our concerns about the mandatory aspects of Making Tax Digital, and has now decided to change their planned timetable.
“The exemption of the very smallest firms below the £85,000 turnover VAT threshold has been FSB’s top priority for reform, and now millions of business owners will be relieved.
“This is a positive decision and will be a real lifeline for small firms already facing a hugely challenging economic climate.”
Phil Hall, of the Association of Accounting Technicians, said: “Having a two-year implementation programme will greatly benefit all concerned, is a victory for common sense and indicates the Government’s willingness to take on board industry views.”
Labour’s shadow chief secretary to the Treasury Peter Dowd announced there was anxiety about other proposals in the planned Finance Bill.
He said: “There still remains huge uncertainty about a number of the planned measures within the Bill, and the amount of time Parliament will have to scrutinise it.
“Labour’s manifesto pledged to permanently exempt small businesses from quarterly reporting to HMRC, and we are glad to have forced the Government to reconsider such an onerous measure.
“On the issue of making tax digital, while we recognise the huge benefits of a digital tax system we still have great reservations about the timetable for implementation.
“For weeks, the Opposition has been asking the Government to present the ‘summer Finance Bill’ and utilise the relatively quiet legislative period to ensure that the Bill receives the proper parliamentary debate and oversight it deserves.
“The Government’s decision to ignore these calls and wait until after the summer recess will only extend the growing uncertainty for taxpayers and public finances.
“The Government’s legislative programme is in meltdown, and they are desperately trying to avoid proper parliamentary scrutiny by flying these serious pieces of legislation under the radar.”