Press release: CIOT welcomes deferral of Making Tax Digital obligations for small businesses

The Chartered Institute of Taxation (CIOT) welcomes today’s announcement by the Chancellor of the Exchequer that, for businesses trading below the VAT registration threshold, the mandatory requirement to maintain digital records and submit quarterly updates will be deferred from April 2018 to April 2019.

This means that smaller businesses, many of whom maintain accounting records in hard copy or on spreadsheets, will have an additional year to familiarise themselves with the requirements of Making Tax Digital, obtain appropriate software, and seek advice to ease the transition.

Adrian Rudd, Chairman of the CIOT’s Digitalisation and Agent Strategy Group, said:

“This announcement by the Chancellor recognises the challenges which will be faced by the many small businesses who are not currently maintaining digital records or interacting with HMRC on a frequent basis. The software being developed for MTD is not yet ready, and indeed may not be fully available until late 2017. Whilst testing of MTD software will take place on an increasing scale throughout 2017 and early 2018, it makes no sense for the government to require small businesses, which are likely to suffer the greatest proportionate impact, to be at the vanguard of MTD.”

The exemption from MTD for the self-employed and landlords also appears to have been confirmed at £10,000 per annum1, in line with previous announcements.

The main timescales for mandation into MTD will therefore be:

  • April 2018 – Unincorporated businesses with a turnover above the VAT registration threshold, for their Income Tax obligations2
  • April 2019 – Unincorporated businesses with a turnover above £10,000 but below the VAT registration threshold for their Income Tax obligations, PLUS all businesses (unincorporated and incorporated) for their VAT obligations
  • April 2020 – All incorporated businesses for their Corporation Tax obligations

Adrian Rudd said:

“Notwithstanding this very welcome relaxation for small businesses, the timetable for MTD remains extremely challenging. The many complexities of tax still need to be translated into functioning software, and the diverse nature of businesses accommodated, not to mention how their agents can support them.

“We would encourage HMRC to step-up their engagement with professional bodies, agents, software companies and businesses themselves. Success of MTD will only come from real collaborative working with all stakeholders.”


Notes for editors

  1. See https://www.gov.uk/government/publications/making-tax-digital-for-business/making-tax-digital-for-business
  2. An exception to this is that ‘complex’ partnerships, defined as those with a turnover exceeding £10,000,000 per annum, will be mandated into MTD in April 2020.
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