VAT news

Government delays Making Tax Digital plans – but not for VAT

Gareth Bevan 17 July 2017 No comments

The government is delaying the roll out of its Making Tax Digital for business (MTDfB) plans. The government has taken on board concerns previously raised by the Treasury Select Committee, parliamentarians and stakeholders about the pace and scale of change under its original plans.

New timetable

Announcing the changes, Mel Stride, Financial Secretary to the Treasury and Paymaster General said:

“Businesses agree that digitising the tax system is the right direction of travel. However, many have been worried about the scope and pace of reforms.”

“We have listened very carefully to their concerns and are making changes so that we can bring the tax system into the digital age in a way that is right for all businesses.”

Under the new timetable:

  • only businesses with a 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
  • 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.

This 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.

Making Tax Digital for VAT

Over 98% of VAT registered businesses already file electronic VAT returns. Making Tax Digital will build on this by integrating digital record-keeping to provide a single, seamless process with quarterly updates generated and sent direct from the software the business uses to keep their records.

The scope of Making Tax Digital for Business will not be widened 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 government will start to pilot Making Tax Digital 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 over a year of testing before any businesses are mandated to use the system. No business will be mandated before 2019.

From April 2019 businesses above the VAT threshold will be required to keep their records digitally and provide quarterly VAT information to HMRC through Making Tax Digital software.

The Finance Bill to be introduced after the Parliament summer recess will include legislation for the revised Making Tax Digital (MTD) programme.

The full announcement is available here.