Making Tax Digital (MTD) has been the talk of the industry for quite some time now, questions about how the scheme will work and the impact it will have, has been the topic of discussion since it was first announced. Recently though, HMRC announced that the controversial ‘Making Tax Digital’ scheme will be delayed until 2020 at the earliest – except for VAT.
As mentioned in some of our previous blogs, the original plan for MTD was to include those below the VAT threshold, i.e. small businesses, sole traders and landlords to start reporting on a quarterly basis from April 2017. However, this measure has been put on ice to allow the government time to reassess the plans.
Those businesses with a turnover above the current VAT threshold are not immune from the delay either though and will experience a one-year delay. Businesses will need to start keeping digital records for VAT purposes from April 2019, but full-scale quarterly reporting will not begin before 2020, according to current information.
Many will agree that this delay was necessary, the government was behind on plans and inevitably caved under the pressure. However, Making Tax Digital will be available to the smallest businesses on a voluntary basis. While not mandatory until ‘at least’ 2020, both businesses and landlords that fall below the current VAT threshold can opt-in to the scheme at any time.
Make no mistake though, the government still fully supports MTD and it will be implemented eventually, it has just been postponed for the time being. The government tried to do too much too soon, so going forward MTD will be working on a much more relaxed timescale.
HMRC will start to trial MTD for VAT as early as this year, starting with small-scale, private testing. Later in spring 2018, wider-reaching, live testing will begin. This will mean that there will be a full year of testing before any business is required to use the system.