Making Tax Digital for Business: plans delayed

The government’s much-publicised plans for Making Tax Digital for Business (MTDfB) have taken a radical new direction, giving businesses longer to get ready for change.

MTDfB involves not just mandatory quarterly updates to HMRC, but also makes digital accounting records compulsory. For some unincorporated businesses, including landlords, April 2018 was the proposed start date. There has been much concern about the entire plan, particularly for SMEs, in terms of additional cost and red tape – and also the very rushed timescale.

There is now a lengthier period to prepare and initially, MTDfB will be limited just to the VAT regime.

New timeline

The timeline now proposed makes MTDfB mandatory from April 2019 for businesses with turnover over the VAT threshold (£85,000 at present). They will have to keep digital records, but only for VAT purposes. Such businesses will be able to provide quarterly updates for other taxes if they wish. Similarly, businesses with a turnover below the VAT threshold can choose to make quarterly updates voluntarily.

2020 is the next date in the MTDfB calendar: HMRC say this is the earliest that businesses and landlords will be required to keep digital accounting records and make quarterly updates for taxes other than VAT.

New problems?

The government announcement has to be good news for business. It allows more robust trials of HMRC systems, particularly as regards our access as agents to client information, and it gives time for the software houses to release the necessary software.

But there may be problem areas. There are many special VAT schemes. Partial exemption is one particularly tricky area. So although HMRC are getting online quarterly information for VAT, many businesses do not submit VAT returns direct from software but use spreadsheets. HMRC will start testing MTDfB for VAT later in the year, though only on a very limited basis, with a wider live pilot in Spring 2018. It’s still possible that this timeline will involve VAT-registered businesses in quite a sprint for the finish.

Please be assured that if your business is affected by these changes, we will do all that we can to support and advise you through the transition.