We’ve been getting ready for Making Tax Digital for ages. Announced by the Government in March 2015 and set to go live next year, it was due to have a massive impact on accounts and tax for businesses and individuals.
The pilot started on 1 April 2017, with Making Tax Digital due to go live in April 2018. But then, overnight, it disappeared.
So, what’s happened and what’s the impact on you?
What is Making Tax Digital?
At the March 2015 Budget, the government announced they were going to invest £1.3 billion on transforming the tax system with digital technology. This tied into plans to end the need for annual tax returns by 2020.
This was christened Making Tax Digital or MTD (not to be confused with MOTD – Match of the Day).
As details emerged, this would lead to everyone submitting information to HMRC digitally and, in many cases, on a more frequent basis – it would rely on quarterly submissions instead of waiting until a year-end.
The implementation timetable is:
- April 2018 – unincorporated businesses and landlords with turnover above the VAT threshold (currently £85,000)
- April 2019 – unincorporated businesses and landlords with turnover below the VAT threshold but above £10,000
- April 2019 – VAT registered businesses
- April 2020 – Businesses paying Corporation Tax
The advantages include:
- You’ll be able to see your HMRC accounts in one place online
- Quarterly returns keep you up to date with your taxes
- HMRC can prepopulate some figures for you as it already has them, eg your salary has already been supplied by your employer
However, it also added more time and cost for many people – having to report quarterly and needing to buy software to meet the requirements.
The pilot started on 1 April 2017, all ready for the full roll-out next year. However, without a word of warning or explanation, it was dropped from the Finance Bill 2017 that was enacted by Parliament on 27 April 2017.
All references to MTD disappeared and, to date, the Government hasn’t mentioned what’s happening next.
So, what is next and how does it affect you?
Well, for the moment, MTD isn’t happening so we can all carry on as normal.
However, the Government and HMRC have invested millions of pounds, and a few years, into MTD so it’s unlikely to go away. Having said that, they also know that it’s proved unpopular with most business owners due to the additional time and cost involved.
Our gut feeling is that MTD will be back. The final Finance Bill 2017 was drastically slimmed down from the draft version due to the recently announced election – there just wouldn’t be time to do everything by 8 June.
It could even be back as soon as the Autumn, with the implementation timetable unaffected. After all, it’s expected that all business owners should have online software in the next couple of years anyway, irrespective of MTD.
Therefore, we’re continuing to work with our clients to get them ready. Using Xero and Receipt Bank will make sure that they’re all fully compliant……and also saves lots of time as well.
For the moment, though, like Match of the Day, MTD is taking a break over the summer but will probably be back in the new parliamentary season. Either way, we’ll keep you updated.
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Added by Jon Davies
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