Making Tax Digital

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On 13th July 2017, the government announced a new timetable and changes to the implementation of Making Tax Digital which will now take effect in April 2019 and will only be mandatory for businesses over the VAT threshold.

New timetable and focus on VAT

Under the new timetable:

  • only businesses with turnover above the VAT threshold (currently £85,000) must keep digital records and only for VAT purposes
  • they will need to do so from April 2019
  • businesses will not be asked to keep digital records, or to update HMRC quarterly, for other taxes until at least 2020

Businesses with turnover below the VAT threshold will not be required to use the system, but can choose to do so if they wish. Businesses will also be able opt in for other taxes.

The government has given assurances that it 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.

Welcome news

The postponement of MTD is welcomed news as the delayed introduction should allow enough time to ensure the system works properly. Removing mandating for the smallest businesses is a step forward and one less regulatory burden for SMEs to worry about.

Voluntary participation

MTD will be available on a voluntary basis for the smallest businesses and for other taxes. The Tax Faculty has noted the reference to keeping digital records is retained in the requirement for VAT.

Businesses and landlords with a turnover below the VAT threshold are able to choose when to move to the new digital system. If the new system is good, businesses will be encouraged to use it without the need for mandating.

VAT pilot

HMRC has announced that it will start to pilot MTD for business for VAT by the end of this year, starting with small-scale, private testing, followed by a wider, live pilot starting in Spring 2018. This will allow for well over a year of testing before any businesses are mandated to use the system.