The government has announced a new timetable and revised plans for Making Tax Digital (MTD). This welcome announcement means that MTD is not going to be forced onto businesses in the immediate future. Read this blog post to find out why the plans have changed and what the new timetable is.
As a professional, I support the move to digital in principal, but was very unhappy with the proposed speed of transition, the unreasonable administrative burdens that it appeared to entail and the fact that it was mandatory for just about everybody. The government appears to have listened to both businesses and the accountancy profession and made changes.
What has changed?
Under the new proposals, businesses will not be forced to use the MTD system until April 2019. Even then, it will only be used to meet their VAT obligations.
Thus, it will only apply to businesses with turnover above the VAT threshold which are VAT registered. For our small business clients, this is great news and is one less regulatory burden for them to worry about.
Businesses with turnover below the VAT threshold will not be required to use the system but will be able to choose to do so if they wish. They may also be able to opt in for other taxes.
What does this mean in practice?
The proposals are as follows:
- Only businesses with turnover above the VAT threshold (currently £85,000) will have to keep digital records, and then only for VAT purposes;
- They will only need to do so from 2019;
- Businesses will not be asked to keep digital records, or to update HMRC quarterly for other taxes until at least 2020; and
- MTD will be available on a voluntary basis for smallest businesses and for other taxes, however, it will be mandatory to keep digital records for VAT purposes.
Exact detail has yet to be thrashed out, but all-in-all it is a good thing as businesses will be encouraged to use MTD without the need to mandate.
When do I need to take action?
HMRC has said it will start to pilot MTD for businesses for VAT by the end of 2017. They will initially do some small-scale private testing and follow that with a wider live pilot starting in spring 2018. This will allow for more than a year of testing before any businesses have to use the system.
The government has given assurances that it will not widen the scope of MTD beyond VAT until the system has been shown to work well, and not before April 2020 at the earliest. This will mean that there is time to test the system fully and for digital record keeping to become more widespread. We are very pleased with this revision to the MTD timetable and believe that it should lead to a successful implementation. In the long run, it will be a good thing.
If you have any questions about MTD, please contact us via email or call us on 01788 577613 (Rugby) or 01908 564701 (Stony) and we’ll be happy to help.