Taxpayers heave a sigh of relief over MTD update
The Making Tax Digital concept is postponed for some and shelved for others…
Making Tax Digital (MTD) is the government’s latest attempt to fully digitise the process of collecting data from taxpayers so they can extract the tax you owe more regularly. The faster that HMRC can relieve you of your tax the better, as far as they are concerned.
Until last week, we were facing radical changes to the tax system to accommodate this objective. Businesses (including landlords) were to be compelled to upload summarised accounts data to HMRC on a quarterly basis. This information was to be loaded into each taxpayer’s personal tax account and used to calculate their tax liabilities on the fly.
The whole implementation exercise was timed to commence next April (2018) and be completed April 2020.
The accountancy profession was united in its opposition to this rushed implementation timetable and the fact that all small businesses with turnover above £10,000 would need to invest in compatible accounts software and then make quarterly uploads.
It would seem the government has listened. Last week Mel Stride, Financial Secretary to the Treasury and Paymaster General announced:-
“Businesses agree that digitising the tax system is the right direction of travel. However, many have been worried about the scope and pace of reforms.
We have listened very carefully to their concerns and are making changes so that we can bring the tax system into the digital age in a way that is right for all businesses.
Under the revised timetable:
- Only businesses with a turnover above the VAT threshold (currently £85,000) will have to keep digital records and then only for VAT purposes
- They will only be required to do so from 2019
- Businesses will not be asked to keep digital recordsor to update HMRC quarterly for other taxes until at least 2020
Making Tax Digital will be available on a voluntary basis for the smallest businesses and for other taxes.
This means that businesses and landlords with a turnover below the VAT threshold will be able to choose when to move over to the new digital system.
As VAT registration already requires submission of quarterly returns, no business will need to provide information to HMRC more regularly during this initial phase than they do now”
It seems clear from this announcement that at this point in time the intention remains that MTD will still go ahead but at a much more sensible pace. However as we have found many times in the past, these goalposts could be moved again at any time before the go live date of April 2019.
Assuming no further changes are made, VAT registered traders will need to have MTD compatible software in place by April 2019 and all businesses including property businesses with turnover above the VAT registration threshold (currently £85,000), will need to be ready to make the quarterly uploads of accounts data by April 2020.
Businesses with turnover below the VAT threshold will be under no obligation to use the MTD process, but can join in on a voluntary basis. Hoorah!
THP Chartered Accountants – here to help
Here at THP Chartered Accountants, we will continue to work with affected clients to ensure they are ready but it is a relief to see the pace of change in this area has been slowed down. This will give business owners and their advisors more time to implement the changes required and make more considered decisions about any software they will need, to successfully implement HMRC’s MTD system in due course.
If you are a business or landlord looking for assistance with the new Making Tax Digital system, get in touch with us on 0800 6520 025.