New Making Tax Digital for business timetable

Tablet
By Susan Cattell, Head of Tax England and Wales, ICAS

13 July 2017

ICAS welcomes the government’s announcement of a new timetable for Making Tax Digital for business.  

ICAS has consistently called for a more realistic timetable for the introduction of this major change – and for MTD for business to be voluntary for businesses with turnover below the VAT threshold.  

It is good news that the government has listened to concerns raised by ICAS, other professional bodies and parliamentary committees about the pace of change and the mandatory approach.

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.  Therefore, if the software works and genuinely delivers the promised benefits for businesses it will be possible for smaller businesses to choose to use it.  

Another advantage of the new timetable is that it should allow time for agent services and software to ‘catch up’. To date software for agents and agent access to client information has lagged behind, raising the possibility that if MTDfB had gone ahead as previously planned, businesses which wanted to use agents would have had difficulty complying.  

ICAS continues to support the overall objectives of MTD for businesses; the new timetable should help to ensure that they are deliverable. However, there remain concerns about Making Tax Digital for VAT, for which the implementation date remains April 2019.  

VAT concerns remain

Whilst most VAT returns are already submitted online, currently only 12% of returns are submitted direct from software.  Many large companies cannot submit returns direct from software because of the complex nature of their VAT calculations, particularly for partial exemption.  They therefore use spreadsheets.  Many smaller entities also use spreadsheets.

We understand that HMRC believe that it will be possible to integrate digital record keeping so that VAT quarterly updates can be generated and sent direct from the software the business (or agent) uses to keep their records. However, this will be difficult to achieve by April 2019.  

The announcement suggests that a pilot of MTDfB for VAT will only begin by the end of this year and will start with small-scale private testing, followed by a wider live pilot in Spring 2018.  Many large companies need 18 months to two years to make changes to their IT systems so are likely to find it challenging to switch to filing direct from software by April 2019.  

It will be interesting to see how HMRC intend to address this – and the VAT complexities which currently lead many businesses to use spreadsheets.

Topics

  • Tax

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