News Making Tax Digital

News added on 14.07.2017

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Plans to stall Making Tax Digital

In a shock statement from the Treasury, the government has announced massive changes to the projected Making Tax Digital (MTD) rollout, affecting not just timescale, but which businesses and which taxes are involved.

MTD: VAT only. The biggest change is that first off, MTD is only going to apply to VAT. From April 2019, businesses over the annual registration threshold (currently £85,000) will have to keep digital records for VAT purposes, providing their VAT information to HMRC through MTD software.

The logic is that VAT-registered businesses already provide quarterly information, so this won’t involve them in increased contact with HMRC. Whether it will be quite the plain sailing HMRC envisages will become apparent during the pilot. MTD for VAT will be piloted using small scale private testing towards the end of 2017, with a larger live pilot in Spring 2018. Submission direct from accounting software is likely to prove challenging, particularly for partially exempt businesses and those using VAT schemes.

MTD requirements won’t kick in for other taxes until at least 2020. Businesses below the VAT threshold won’t need to keep digital records or provide quarterly updates for other taxes until then.

Opt in. Businesses with a turnover below the VAT threshold will not be mandated to use MTD, but "can choose to do so", the Treasury says. It adds "Businesses will also be able to opt in for other taxes, benefitting from a streamlined, digital experience." It has not clarified, however, whether this will be as soon as the system is up and running or further down the line.

Breathing space. The Treasury take on MTD at this point is that digitising the tax system is "the right direction of travel". And having been forced to concede that MTD needs a longer phase-in, there’s an emphasis on brownie points for having listened to the concerns put forward by business and the professional bodies.

"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. This will ensure that there is time to test the system fully and for digital record keeping to become more widespread", the Treasury statement says.

MTD for direct taxes has been deferred until at least 2020. However, it will apply to VAT from April 2019, but some businesses may have to be ready sooner as limited testing will start in late 2017 and widen in spring 2018. HMRC will release more information in the near future.

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