Making Tax Digital delayed until 2020
Late last week Paymaster General, Mel Stride, issued a written statement confirming that Finance Bill 2017 will be introduced as soon as possible after the parliamentary summer recess, containing provisions that had to be withdrawn before the General Election.
One of those withdrawn provisions was the Making Tax Digital (MTD) programme. Having listened carefully to the concerns raised by the Treasury Select Committee, parliamentarians, businesses and professional bodies, particularly about the pace of change, MTD will not come into force until at least April 2020. The only exception to this is VAT.
Changes to VAT reporting will come into effect from 1st April 2019. From that date, all VAT registered businesses will have to provide their VAT information to HMRC through MTD software.
Previously all unincorporated business and landlords with an annual turnover exceeding £85,000 were due to enter MTD from 6th April 2018. They will now have at least two years to adapt to the changes before being asked to keep digital records for other taxes.
MTD will be available on a voluntary basis for the smallest of businesses, ie with an annual turnover between £10,000 – £85,000 from at least April 2020, enabling them to choose when to enter the new digital system.
All companies will join MTD for corporation tax from at least April 2020.
HMRC say that they are fully committed to supporting businesses in this transition. They have already begun piloting the MTD services and will continue to do so, testing the system extensively with businesses. MTD for VAT will go into a public beta test in spring 2018.
Progress has not been particularly rapid on the software development side, no doubt not particularly helped by a reportedly 75% of contractors deserting the MTD programme following HMRC’s decision to classify all freelancers as being inside of IR35 following the introduction of the public sector ‘off-payroll’ rules in April of this year.
Those software companies that were developing free software for the millions of businesses about to be compelled to digitise their accounting will presumably abandon the work.
HMRC’s business case, already based on stretched assumptions to make it look viable, must now be completely flawed.
How long before this is dropped?
NB the cynic in me says this is less to do with HMRC listening than with realistic assessment of the chances of getting controversial policies through with a slim majority in parliament.