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News added on 18.12.2018

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MTD for VAT still on course amid Brexit slowdown

An increase in workload has caused HMRC to rethink the MTD timetable yet again. What’s the reason for the latest delay and how might it affect your business?

Citing “tough choices” over where to use its resources, HMRC recently announced that it’s giving Brexit priority. Project teams are therefore being taken away from Making Tax Digital (MTD) to free up capacity. However, MTD for VAT (MTDfV) remains on course regardless of the Brexit reshuffle. In its latest statement HMRC said “The majority of customers with turnover above the VAT threshold will still be mandated to use the MTD for VAT service from April 2019”.

MTDfV takes effect for VAT return periods commencing on or after 1 April 2019 for those businesses which are, or are required to be, registered, subject to some exceptions and deferrals.

Exceptions and deferrals. Some businesses are exempt from MTDfV altogether. Broadly, these are those that meet the current criteria for exemption from submitting their VAT returns online. Some other businesses won’t start MTDfV until their first VAT period beginning on 1 October 2019. These includes trusts, not for profit organisations which aren’t companies, VAT divisions and groups, businesses based overseas and those making payments on account or using the annual accounting scheme.

It’s MTD for business (MTDfB) that bears the brunt of the latest MTD slow down. However, HMRC has stopped short of saying that the start date for MTDfB will be delayed, although that might be on the cards if Brexit absorbs even more of its resources. But development and delivery of some elements of MTDfB will be delayed. In its statement HMRC said “Work will continue to complete the Income Tax service for the million customers who are eligible to join and the pilot will remain open for those who wish to trial the service, but we will pause work to extend the service to cater for other customer types.” The MTD pilot scheme is for most businesses which pay income tax on their profits.

Beyond 2019. HMRC maintains that MTD won’t be mandatory for taxes other than VAT until at least April 2020, but a firm start date is becoming increasingly elusive.

Brexit is absorbing more of HMRC’s resources which means work on MTD has been scaled down. However, MTD for VAT will start as planned on 1 April 2019, subject to exceptions. Work on MTD for tax on business profits will be delayed, but the start date remains “no earlier than April 2020”.

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