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The Treasury have just announced that MTD is to be deferred. They’ve not given many details as yet, and looking at what they have said, there are some grey areas.
The key points seem to be:
- MTD will become mandatory for VAT from April 2019 (as before), but only for businesses above the VAT threshold. This seems to be because it’s not much of a change for most businesses, who have to do online quarterly VAT returns anyway.
- I can find no mention of VAT-registered businesses below the threshold. It may be that no-one’s actually considered them, or it may be that the old system will continue and you need to file online, but your underlying records can be on paper. Running parallel MTD and non-MTD online filing systems sounds like a complication for HMRC, so I would expect that this will be a temporary situation and all VAT-registered businesses will eventually have to join MTD, regardless of turnover.
- Unincorporated businesses are going to be allowed to operate MTD voluntarily for income tax. The pilots are still going ahead, although they’ll have more time to test things. There’s no word on when businesses will be able to start this without being in the pilot – perhaps from April 2019, when the VAT system goes live.
The big question for me here is whether you can get the benefits of a digital tax account, and perhaps do away with the tax return, without having to do the quarterly reporting.
- MTD for income tax will become mandatory from April 2020, or possibly later. At present this seems to be only for businesses above the VAT threshold, so MTD may remain voluntary for smaller businesses indefinitely – but as with VAT, I would expect a broadening of the scope relatively soon after 2020.
- Companies are still not really mentioned. I imagine this means that they’ll follow along with other businesses, with MTD for corporation tax kicking in from April 2020 or later. The VAT obligations will still be there from April 2019, of course. If that’s the case, there’s no real change.
- There’s no more word on the digitally excluded. This seems to be quite a complex area for HMRC, so I wouldn’t be surprised if they keep quiet about it for a while and announce some last-minute exemptions as April 2019 looms.
Overall the delay is great news, allowing more time for software to be developed, tested, and rolled out to businesses, and for taxpayers and agents to adapt to the new processes that will be required.
About UK200 Group
Knill James are members of the UK200 Group, the UK’s leading membership organisation of chartered accountancy and law firms providing its members with support in business development, delivery and risk reduction. UK200 Group members represent around 150,000 SMEs across the UK.
About Andrew Jackson:
Andrew Jackson is a member of the UK200Group’s Digitalisation Taskforce and chairs the UK200Group Tax Panel.
For more information on the UK200Group and our Campaign for Clarity on MTD, click here UK200MTD Campaign for Clarity.