Making Tax Digital - Where are we now?

New Timetable Announced

On 13 July 2017 the Government announced that it would be delaying the introduction of Making Tax Digital (MTD).

In response to concerns raised by MPs, businesses and professional bodies such as the ATT, MTD will now not be mandatory until April 2019, and then only for VAT purposes.

Under the new timetable:

  • Only businesses over the VAT threshold (currently £85,000) will have to keep digital records.
  • Digital records will only be required initially for VAT purposes, and only from April 2019.
  • Business will not have to keep digital records or report quarterly for other taxes (e.g. income tax and corporation tax) until April 2020 at the earliest.
  • MTD will be available on a voluntary basis for businesses below the VAT threshold, and for other taxes.

HMRC will begin to pilot MTD for VAT by the end of 2017, starting with small-scale, private testing, followed by a wider, live pilot in Spring 2018.  The Government have stated that they will not widen the scope of MTD beyond VAT before the system has been shown to work. 

Legislation for MTD will be included in the next Finance Bill, which is expected to be introduced as soon as possible after Parliament returns from its summer recess on 5 September. 

Consultation on MTD Submission Penalties and Penalty Interest

Prior to the July timetable changes, HMRC consulted on the potential penalty regime for late MTD submissions and late payment of tax.   It is possible that changes to the penalty regime will go ahead despite the delayed wider introduction of MTD as HMRC envisaged the updated regime applying to non-MTD situations as well as MTD. It will also be necessary to have a penalty structure in place before MTD for VAT starts in April 2019. 

Cyber Security

The importance of cyber-security for MTD was highlighted following a recent cyber-attack in Ukraine.  The attack is also reported to have brought down computer software in other countries, preventing business operations.  It is alleged that the attack was brought about through corrupted updates to tax software.