Making Tax Digital: New Timetable
On 13 July 2017 the Government announced that it would be delaying the introduction of Making Tax Digital (MTD).
In response to concerns raised by MPs, businesses and professional bodies such as the CIOT, MTD will now not be mandatory until April 2019, and then only for VAT purposes.
Under the new timetable:
- Only businesses over the VAT threshold (currently £85,000) will have to keep digital records.
- Digital records will only be required initially for VAT purposes, and only from April 2019.
- Business will not have to keep digital records or report quarterly for other taxes (e.g. income tax and corporation tax) until April 2020 at the earliest.
- MTD will be available on a voluntary basis for businesses below the VAT threshold, and for other taxes.
The Government have stated that they will not widen the scope of MTD beyond VAT before the system has been shown to work.
The enabling primary legislation for MTD for businesses for both Income Tax and VAT is in sections 60, 61 and 62 and Schedule 14 Finance (No 2 ) Act 2017.
The MTD for VAT Regulations SI 2018/261 were laid before Parliament on 28 February 2018 and will come into force on 1 April 2019. No significant changes were made to the Regulations from the draft regulations that were consulted on between 18 December 2017 and 9 February 2018. We understand that some of the detailed comments made by stakeholders, including CIOT, during the consultation exercise might be taken into consideration in the directions and notices, which are expected to be published in May / June 2018.
HMRC will consult on MTD for Corporation Tax at some point in 2018.
MTD for Income Tax Self Assessment trials entered their public beta testing phase on 15 March 2018. You can access the service here. Initially, taxpayers will be eligible for the public beta if they are a sole trader with income from one business and their current accounting period ends after 5 April 2018. The next planned stage is to expand eligibility to taxpayers with income from property.
To take part in the pilot, businesses will need to record their income and expenses in a MTD compliant software package which lets them send quarterly income tax updates to HMRC. At the end of the accounting period they will need to send a final report to confirm their income and expenses for the year. If they need to claim allowances and reliefs, they can do this within that final report. They will then be able to see a tax calculation for the year in their business tax account as well as through their software.
Likewise, agents that sign clients up to the pilot (including clients whose digital records are being kept by the agent and clients that keep their own digital records) will need a software package that lets them send the updates to HMRC on their clients’ behalf.
If you and your clients are already using software to keep records, you should check with your supplier when it will be ready to allow you to send MTD updates to HMRC.
The current list of MTD compatible software products is set out on gov.uk here. We understand that there are a number of other products at various stages of development and HMRC have said that they will continue to add to this page as new products become available. A MTD compatible software product includes an API (application programming interface) enabled spreadsheet. There are no API enabled spreadsheets on the market at present although we anticipate that they will be added to HMRC’s list as they become available.
The MTD for VAT pilot is scheduled to start on 3 April 2018, initially with a very small number of simple businesses, and grow from there. More complex businesses are unlikely to join the pilot until October 2018, and public bodies until November or December 2018.
The remainder of the MTD pages should be read with the above in mind.