Welcome new plan for Making Tax Digital

The government has announced a new timetable and plans for Making Tax Digital (MTD), which means MTD is not going to be forced onto businesses in the immediate future.

The new timetable, announced in a written statement by Mel Stride MP, Financial Secretary to the Treasury and Paymaster General, means that businesses will not be mandated to use the MTD system until April 2019, and even then, they will only have to use it to meet their VAT obligations. This will apply to businesses with turnover above the VAT threshold.

This is welcome news: the government has listened to both business and the profession. ICAEW has said all along that we support the move to digital in principle, but it 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.

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.

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 2019; and
  • businesses will not be asked to keep digital records, or 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. We note 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.

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.

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.

Following the huge amount of work ICAEW has put into our representations on MTD, we are 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.

The MTD legislation will be included in Finance Bill (No 2) 2017, due to be introduced in the autumn.

The ICAEW MTD hub will be updated to reflect these announcements in the coming days.

  • Dear Sir

    Whilst I and my clients are pleased that deferral of MTD has been made, there remains concern with enforcement of MTD

    I represent many businesses. My system is MANUAL it is clear, concise, reflects my client's MANUAL systems, with PEN & PAPER. We are being DISCRIMINATED against if we are forced to use computerized systems.

    I have major health issue when I am in the presence of computers, let alone using them. I must limit my time to a bare minimum and I can never be near a desk top computer. My clients are not computer literate, and a pen and paper is far more accurate. Many accountants who use computers, reply on the computer and I have witnessed, on more than one occasion, corporate accounts with an insolvent balance sheet showing dividend distributions! Such accounts and corporation tax returns have even been sent to HMRC! Such practice is in my opinion incorrect and I would never entertain such a practice, but then I use my own brain and I am of the "old school", those who are being DISCRIMINATED against.

    HMRC must accept an alternative so they are "all inclusive" and none discriminatory, even if this includes excel type spread sheets to support relevant accounts/vat return figures.

    Please reply to me and confirm you have highlighted these DISCRIMINATORY issues with HMRC

    Incidentally as I am in a very rural area, computer communication is very unreliable and unlikely to ever improve. Between October and the end of February EVERY year when there is rain, the systems go down due to poor connections from service suppliers.

    I await your specific reply

    Yours faithfully

    Jelks ref;no 5896381

    Email; suejelks***

    Mobile; 07801227483

  • It is good news to read that the Government may have at last listened, although it may be more to do with their own selfish needs where they are not able to cope with even the present system.

    My concern is how do persons who may be voluntarily registered for Vat, but whose turnover is well below the £85000 threshold, file their Vat Returns.  Is HMRC going to retain the existing system is yet another "new" method to be used.

  • Phil is busy with Remaining...

  • A big step forward but we should not celebrate too early. Those with turnover above the VAT threshold will still be compelled to computerise their accounts. At that level it includes the corner sweet shop.

  • Rodney, we understand that in 2019, VAT registered businesses which are registered voluntarily, will not be brought into MTD for VAT. At that time, they will therefore not be required to keep their records digitally, and they will continue to file their VAT returns using the existing 9 boxes system. This may of course change, but not before 2020 per the announcement we have at the moment.

  • Ronald, we have made strong representations to HMRC on the need to make provision for those businesses which are digitally excluded. We understand that these have been understood, but have no further information at this time.