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.

  • This is great news thank you ICAEW and all those who spoke up. This was potentially going to wreck SME productivity. I can feel a discussion coming on about what digital records mean and having to keep records in digital format. I always tell my clients to set up a reliable system that works for them. This usually involves a computer but not always some parts may nbot involve a computer. I have found Excel Sheets that don't add up and so there is no one proofed system. I think it is best people work a system that works for them and back up and check accuracy and completeness. Digital records do not guarantee this. for exmple I have a client who is a peripatetic part time music teacher who uses a challenge notebook very reliably.

    One of my two  big anxieties is put to bed. Phew! Now to my other big anxiety  let's hope we stay in the single market and dont Brexit and become Little England, out of it all, and stay Great Britain. Here's to peace and prosperity!

  • 1. Congratulations to the Tax Faculty for this result

    2. Even though I may have wasted my time on the sorting of Clients to find who started when - I am well impressed with the help given by the Tax Faculty in this regard, and for the webinars.

    3. Many years ago I actually tried to move my membership from the ICAEW to the Scottish institute because the ICAEW staff were so arrogant, rude and unhelpful, and the Scottish staff were good.  It has taken half a lifetime but ... what a difference now.  Congratulations again.

    Yn ddiffuant,

    Angharad E. M. Jones

  • I've been watching the developments with MTD for a while now. I spend most of my time in the USA, but still have a few clients in the UK. RTI increased their costs about 40 fold (yes, seriously). MTD will only increase their compliance costs further. Post-auto enrolment this is not what they need. Over here, the IRS online taxpayer account system was shut down last year owing to persistent hacking. In many cases, it is cheaper and easier to revert to paper filing. Do HMRC think that the online security situation is going to improve over the next few years? How many incidents of HMRC hacking have occurred recently? No information is released about this. I had a client in the UK who was recently scammed by someone posing as HMRC. They had all her business details for 20 years or so. Where did they get this information from? HMRC's rush to do everything online produces complications (and expense) for the taxpayer/agent. There should still be a paper filing option to fall back on when the online systems fail.

  • 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.

  • 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.