Making Tax Digital: delay and redesign

21 July 2017

It came as quite a surprise when HMRC announced on 13 July 2017 that the roll out of Making Tax Digital for Business (MTDfB) is to be pushed back to April 2019. In an extract from their website, HMRC state: ‘There is widespread agreement that Making Tax Digital for Business is the right approach for the future. However a number of concerns about the pace and scale of change have been raised. As a result the government has announced that the roll out for Making Tax Digital for Business has been amended to ensure businesses have plenty of time to adapt to the changes.’

It’s been a tumultuous journey, with the course and design of MTD changing frequently since the concept was introduced almost two years ago. What we need from HMRC now is a plan and timetable that they commit to and do not deviate from. The new measures are positive, but there’s still a lot we need clarity on.

The message still stands - all businesses need to move with the times. Taking bookkeeping onto a digital platform has never been about MTD, but about firms maintaining their ability to compete in an increasingly competitive market. Achieving this is in part about having up to date financial information to ensure opportunities that arise can be exploited in a timely manner, and executed in a way suitable to businesses’ financial position.

The new measures will significantly alter digital plans for firms as it is now VAT registered businesses that will be affected first, rather than self-employed tax payers and landlords. This is positive news as it means that the transition should be a lot smoother given that VAT returns are already filed quarterly. There is less of a culture shift in beginning with VAT rather than Income Tax. The only difference will be that businesses will have to submit VAT returns through software and apps from April 2019, so the effect will only be felt by those that do not already record transactions digitally.

The self-employed and landlords will have two extra years before they have to implement digital systems for income tax purposes. This is good news as some tax payers were relying on HMRC’s free software to make their submissions, which is more cost effective than paying for monthly licences to software companies. As we well know, this free software was promised but has not materialised and this was a concern under the original timetable of an April 2018 commencement.

For companies and their corporation tax reporting obligations, 2020 has always been the scheduled commencement date. It was a surprise, and still is, why they are being brought in last as many companies already use software and logically it would have been easiest for them to be brought into the regime first.

We now await the release of the Finance Bill after summer recess to gage a better understanding of this new MTD roadmap.

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