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Making Tax Digital

Making Tax Digital (MTD) will fundamentally change the administration of the UK tax system. On 13 July 2017 the government announced a new timetable and changes to the implementation, which mean that MTD will not take effect until April 2019 and will only be mandatory at that time for businesses over the VAT threshold.

Making Tax Digital

New timetable and focus on VAT

Mel Stride MP, Financial Secretary to the Treasury and Paymaster General, issued a written statement on 13 July that outlined a new timetable for the implementation of MTD.

Under the new timetable:

  • only businesses with turnover above the VAT threshold (currently £85,000) will have to keep digital records, and only for VAT purposes;
  • they will only need to do so from April 2019; and
  • 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

ICAEW welcomed the announcements. The institute's position on MTD has been supportive of the move to digital in principle, but that MTD should not be mandatory or impose unreasonable admin burdens, and its introduction should allow enough time to ensure the system works. Removing mandation for the smallest businesses is a welcome step forward and one less regulatory burden for SMEs to worry about.

Following the huge amount of work ICAEW has put into our representations on MTD, the team is very pleased that the concerns of business and agents have been listened to. We look forward to working with HMRC towards a new and better digital tax system in the months ahead.

Guidance from ICAEW

As a result of the significant changes in the announcement, the content of our MTD hub is being reviewed and will be updated in the coming months as we learn more about the revised plans.

Voluntary participation

Making Tax Digital 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.

We will need to see what this means in practice, but for now this is a great step forward, which means that businesses and landlords with a turnover below the VAT threshold will be 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 mandation.

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.

Guidance from ICAEW

The MTD legislation will be included in Finance Bill (No 2) 2017, due to be introduced in the autumn, and ICAEW will publish new guidance for practitioners in due course. 

July TaxTalk

Tune in at 12.30pm on Wednesday 19 July to listen to the Tax Faculty team discussing the implications of the announcements on MTD and the Finance Bill. The team will also consider the tax aspects of the Taylor report on modern working practices.