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  • Paul Clifton

Delay to mandatory implementation of Making Tax Digital

Updated: Jul 23, 2020

We welcomed HMRC’s announcement on 13 July 2017 that the mandatory introduction of Making Tax Digital (MTD) will be deferred until 2020.

In a written statement made by Mel Stride, Financial Secretary to the Treasury, she said that “The Government 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.”

The latest timetable is still quite vague, but the written statement makes it clear that compliance with MTD reporting will be voluntary for non-VAT taxes, i.e. Income Tax and Corporation Tax, until at least April 2020.

New filing dates under Making Tax Digital

The MTD project needs to be changed into something that businesses wish to use, rather than compelling them to use the system with the threat of penalties.

Following the announcement, MTD will only become mandatory from April 2019 but for VAT purposes only. The requirement to keep digital records and report quarterly for other taxes will not become mandatory until at least April 2020, although MTD will be available on a voluntary basis during that time should those smaller businesses and landlords choose to use it.

From April 2019, businesses with turnover above the VAT threshold, of £85,000, “will have to file their VAT returns with MTD-compatible software”.

Does this mean you will need ‘digital software’? Will the current Government Gateway still be available to file VAT returns? probably not. Can you still use Excel spreadsheets. We have no idea what this gobbledygook means in real, practical terms.

MTD compliant VAT return software should send details of ALL transactions to HMRC, not just summary information as now.

I will not be pushing any of my clients towards using MTD software until it becomes compulsory. In my opinion, the costs and extra work required of using MTD-compliant software will not be outweighed by the benefits (for HMRC rather than my clients). Many businesses already keep excellent records in spreadsheets or other perfectly acceptable (non-digital) forms.

It is clear that voluntary MTD reporting will mean the current online and paper methods of filing tax returns will have to run in parallel to MTD reporting for some years.

Under the original MTD plan, free software would be available to allow the smallest businesses to comply with their MTD reporting obligations. As MTD reporting will be voluntary for businesses, which are not VAT registered, the need for this free software disappears, especially for the smallest of businesses who have turnover less than £85,000.

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