Making Tax Digital

Timetable for Making Tax Digital

In response to concerns raised by MPs, businesses and professional bodies such as the ATT, on 13 July 2017 the Government announced that it would be delaying the introduction of Making Tax Digital (MTD).

MTD will now not be mandatory until April 2019, and then only for VAT purposes.

Under this 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.

The Government have stated that they will not widen the scope of MTD beyond VAT before the system has been shown to work. 

HMRC have indicated that they will consult on MTD for Corporation Tax at some point in 2018.

 

Detailed VAT Timetable

The exact date that businesses who will be subject to MTD for VAT from 1 April 2019 will come into the new rules will depend on their quarterly return date.  The rules will apply to the first ‘prescribed accounting period’ from 1 April 2019.  The commencement dates will be a follows:

Quarterly filing dates Start of first return subject to MTD
March/June/Sept/Dec

1 April 2019

Feb/May/Aug/Nov 1 June 2019
Jan/April/July/Oct

1 May 2019

 

Those on the annual accounting scheme will come into MTD on the start of the first annual accounting period starting after 1 April 2019. 

ATT have pointed out the practical issues of the interaction between start date and accounting periods for other tax purposes here

 

HMRC pilots

MTD for VAT pilot

The MTD for VAT pilot started in early April 2018, initially with a very small number of simple businesses, and grow from there. More complex businesses are unlikely to join the pilot until October 2018, and public bodies will not join until November or December 2018.

More information on this pilot can be found here.

MTD for Income Tax pilot

MTD for Income Tax trials entered their public beta testing phase on 15 March 2018. You can access the service here. Initially, taxpayers will be eligible for the public beta if they are a sole trader with income from one business and their current accounting period ends after 5 April 2018. The next planned stage is to expand eligibility to taxpayers with income from property.

To take part in the pilot, businesses will need to record their income and expenses in a MTD compliant software package which lets them send quarterly income tax updates to HMRC.  At the end of the accounting period they will need to send a final report to confirm their income and expenses for the year. If they need to claim allowances and reliefs, they can do this within that final report. They will then be able to see a tax calculation for the year in their business tax account as well as through their software.

Likewise, agents that sign clients up to the pilot (including clients whose digital records are being kept by the agent and clients that keep their own digital records) will need a software package that lets them send the updates to HMRC on their clients’ behalf.

If you and your clients are already using software to keep records, you should check with your supplier when it will be ready to allow you to send MTD updates to HMRC. 

The current list of MTD for Income Tax compatible software products is set out on GOV.UK here. We understand that there are a number of other products at various stages of development and HMRC have said that they will continue to add to this page as new products become available. An MTD compatible software product includes an API (application programming interface) enabled spreadsheet.  There are no API enabled spreadsheets on the market at present although we anticipate that they will be added to HMRC’s list as they become available.

 

Agent Services Account

In order to access the new MTD services and to supply updates on behalf of clients, agents will need a new Agent Services Account (ASA).  This is in effect a new Government Gateway to access the new service.  Each agency will have just one account per firm, and will be able to set up staff with administrator or delegate access to the account.  Many firms may already have created an ASA in order to submit Trust Registration Service returns. 

A basic outline of the ASA and how to set one up can be found here.

 

Legislation

Enabling primary legislation for MTD for businesses for both Income Tax and VAT is included in Sections 60 to 62 and Schedule 14 of Finance (No.2) Act 2017 which received Royal Assent on 16 November 2017.  The explanatory notes to the original Bill can be found here.

In September 2017, the Government launched a consultation on draft secondary and tertiary legislation for MTD for Income Tax. The response submitted by the ATT can be found here.

In December 2017, draft MTD for VAT Regulations, a draft VAT Notice and Addendum were published for consultation.  These draft documents can be found here, and the response submitted by the ATT here.

The final MTD for VAT Regulations SI 2018/261 were laid before Parliament on 28 February 2018 and will come into force on 1 April 2019.  No significant changes were made to the Regulations from the draft that was consulted on.  We understand that some of the detailed comments made by stakeholders, including ATT, during the consultation exercise might be taken into consideration in the directions and notices, which are expected to be published in May / June 2018. 

 

Further information and guidance

Making Tax Digital webinar – 7 June 2018

The ATT will be running a webinar on the morning of 7 June 2018. The webinar will start at 9:30am and will run until no later than 11am. The webinar can be accessed from the following link (at the moment you will just see a holding slide providing details of content / speakers). You do not need to register to attend – just take part on the day. Feel free to pass on this link to colleagues or clients who might be interested, too. If you have any particular aspects of MTD that you would like to be covered on the webinar please email atttechnical [at] att.org.uk

An article in which the ATT takes a look at the challenges faced by businesses, advisers (and HMRC) with respect to MTD for VAT can be found here.

The current list of MTD for Income Tax compatible software products is set out on gov.uk here.

 

Making Tax Digital: ATT and ICAS roadshow

In 2017 the ATT took part in a successful MTD roadshow with ICAS (Institute of Chartered Accountants of Scotland) and Intuit QuickBooks. The session on MTD for Business presented by ATT Technical Officer, Helen Thornley can be viewed below: