Making Tax Digital (MTD) was initially scheduled to be rolled out nationwide from April 2018 for the majority of unincorporated businesses and landlords, however on 13 July 2017, the Government announced that it would be delaying the introduction of MTD amid concerns about the pace and scale of the changes that have been raised.
The announcement also stated that businesses will not be required to use the Making Tax Digital for Business system until 1 April 2019 and then only to meet their VAT obligations.
Since this announcement, HMRC have issued a consultation document on 13 September 2017, outlining their proposals. The deadline for responses was 10 November 2017. A very brief summary of the consultation document is below:
- Applies to any VAT registered businesses with turnover over the VAT registration threshold (currently £85,000).
- Digital records will only be required initially for VAT purposes, and only from April 2019.
- HMRC will not widen the scope of MTD beyond VAT (e.g. for income tax and corporation tax) before the system has been shown to work well and not before April 2020 at the earliest.
- MTD will be available on a voluntary basis for businesses below the VAT threshold and for other taxes.
- The exemptions that already apply to electronic VAT returns will be extended to cover digital record keeping requirements.
It is clear therefore that VAT registered businesses with turnover above the VAT registration threshold, will need to adopt some form of compatible (with HMRC systems) digital software, no later than 1 April 2019. It is less clear however, what exactly constitutes “compatible” software.
HMRC state that “functional compatible software means a software program or set of compatible software programs which can connect to HMRC systems via an Application Programming Interface (API)”. Technical stuff which effectively puts businesses at the mercy of the software companies who are developing the compliant software.
It is also unclear whether older versions of existing accounting software will be supported for MTD. Businesses who already maintain computerised bookkeeping records may need to upgrade their systems to the newer cloud based software.
If you would like any further information regarding Making Tax Digital for VAT and how you may be affected, please do not hesitate to contact us.
