Making Tax Digital – will we see something in this week’s Budget?

Nov 20, 2017

Since the news broke in the summer that the Making Tax Digital for business (MTDfB) start date for automated reporting of quarterly accounts information for income tax is being deferred until at least April 2020, we haven’t had much to say about this project.  But will we hear more on the timetable for the project in this week’s Autumn Budget?

The Chief Executive of HMRC recently gave evidence to the Public accounts committee inquiry into HMRC’s performance in 2016/17.  According to that evidence, HMRC currently has 15 major programmes with a portfolio of 250 projects.

Mr Thompson told the Committee that HMRC is now in discussions with the Government about re-prioritising its transformation programme, a process which is likely to take ‘a few months’.  MTD is part of that programme.

He further commented “It’s not credible to continue with the transformation programme as it is and deliver all 250 projects at one time, not with the additional workload of 40 percent to 50 percent because of Brexit and responding to fiscal changes in the Budget.”

However when asked which of the major projects currently being run would cause the biggest impact on the Exchequer if it didn’t go to plan, his response was MTD “because clearly there are significant additional revenues from that programme.”  That could mean MTD either continues as it’s currently timetabled to or that the project/specific elements are further delayed to ensure it does go to plan.

Will we see further changes to the MTDfB timetable either later this week in the Autumn Budget or once the discussion process with the Government is completed?

Under the current MTDfB timetable:- 

  • From April 2019, only businesses with turnover above the VAT registration threshold (currently £85,000) will have to keep digital records, and only for VAT purposes;
  • Businesses will not be asked to keep digital records, or to update HMRC quarterly, for other taxes, until at least 2020.

MTD will be available on a voluntary basis for the smallest businesses and for other taxes. Businesses with turnover below the VAT threshold will not be required to use the system but can choose to do so if they wish.  Businesses will also be able opt in for other taxes.

HMRC are due to start piloting MTDfB for VAT by the end of this year, starting with small-scale, private testing, followed by a wider, live pilot starting in Spring 2018.  This should allow around a year of testing before any businesses are mandated to use the system.  The MTD legislation is also included in the Finance (No. 2) Act 2017 which has just received Royal Assent. 

In its various submissions on MTD, the Northern Ireland Tax Committee had advocated that the project timetable be revised and the start date pushed out to allow the changes to be better phased to assist business, HMRC and software providers in properly considering the scale and impact of the proposals.  

The Committee had also pushed for business below the VAT registration threshold to be completely exempted from the proposals. Both these recommendations have now been implemented.

Chartered Accountants Ireland recommends that firms and business continue their preparations based on the current timetable. The Institute is also currently developing a MTD hub which will be available in the coming months.