Making Tax Digital for Businesses – an update

Making Tax Digital for Businesses

Over the past few months we have published a lot of information about Making Tax Digital (MTD) and how it might affect businesses and individuals.  Following speculation, a budget, a general election and more speculation new proposals have now been issued.

The government has announced a revised timetable for the introduction of MTD. Unincorporated businesses, including landlords, were expected to be the first to see significant changes in the recording and submission of business transactions but the government has announced a delay to the implementation of the new rules.

Under the new timetable:

  • Businesses will not now be mandated to use MTD until April 2019 and then only to meet their VAT obligations. This will apply to businesses who have a turnover above the VAT threshold.
  • These businesses will be able to provide quarterly updates for other taxes too, but there will be no mandatory requirement to do so. Similarly, businesses that are not VAT registered and those below the VAT threshold who have voluntarily registered for VAT can opt to use the system.
  • 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.

VAT quarterly returns

The government line is that as the affected businesses already submit quarterly VAT returns there will no additional reporting requirements.  However this ignores the fact that many of these businesses will keep their records either manually or on a spreadsheet.  Under MTD manual records will not comply with the requirements to maintain digital records and spreadsheets will not be able to upload directly to MTD, meaning additional third party software will need to be used.

The system will be piloted and should be well tested by the time it becomes mandatory.