Treasury announces further delay in Making Tax Digital

Decision to give businesses more time to adapt follows complaints that previous timetable was too tight

HM Treasury has pushed back the deadline for the Making Tax Digital (MTD) programme by a year. This is the second change in the schedule and comes in response to widespread concerns that the original timetable was unrealistic.

Treasury building plaqueIt has confirmed a two-stage approach in the details of the Finance Bill to go before Parliament. The first will involve businesses with an annual turnover above the VAT threshold (currently £85,000) having to keep digital records from 2019 and only for VAT purposes.

The second involves all other businesses having to keep a digital record, or provide HM Revenue & Customs (HMRC) with quarterly updates, from 2020. It is notable that the Treasury statement said it would be “at least” from this date.

In addition, MTD will be voluntary for the smallest businesses and for other tax services.

The change in schedule follows an earlier announcement of a one-year delay from an original deadline of spring 2018.

The programme involves shifting businesses away from annual tax returns towards digital record keeping and quarterly updates. It has attracted criticisms from the accountancy business and Parliament’s Treasury Committee for having a timetable they describe as unrealistic, with smaller companies struggling to get the required software in place.

In April Chancellor Philip Hammond indicated that the Finance Bill would include a revised timetable.

Right direction

Financial Secretary to the Treasury and Paymaster General Mel Stride said: “Businesses agree that digitising the tax system is the right direction of travel. However, many have been worried about the scope and pace of reforms.

“We have listened very carefully to their concerns and are making changes so that we can bring the tax system into the digital age in a way that is right for all businesses.”

HMRC is due to begin a pilot for MTD by the end of the year with small scale, private testing, followed by a wider exercise beginning in spring 2018. This will allow for over a year of testing before any businesses are mandated to use the system.

The announcement prompted a positive response from professional body the Association of Accounting Technicians (AAT). Its head of public affairs and policy, Phil Hall, said: “Having a two-year implementation programme will greatly benefit all concerned, is a victory for common sense and indicates the Government’s willingness to take on board industry views.”

The AAT had called for a three-year phased implementation programme to make it easier for small businesses, the accounting profession and HMRC.

Image from GOV.UK, Open Government Licence v3.0