UK government pushes back Making Tax Digital deadline

The UK Government’s plan for a digital transformation of how businesses report to HMRC has been pushed back after businesses complained the changes were coming in too quickly.

HMRC’s ‘Making Tax Digital’ project was scheduled to be introduced in spring 2018, introducing quarterly online reporting of profits for unincorporated businesses (sole traders and some partnerships) and landlords; digital VAT reporting from 2019 and companies together with large partnerships would have had an additional two years to make the changes from 2020.

Today’s announcement sets out a new timetable as follows:

Smaller businesses can move to digital reporting on a voluntary basis.

Susie Walker, Partner and Head of Tax at accountancy firm Johnston Carmichael, said: “We’re pleased to see the Government has listened to and acted on the feedback from businesses, who were nervous about the initial timetables laid out last year.

“There’s a definite recognition that digital reporting is a good idea, but smaller businesses have plenty of other things to worry about at the moment. The planned pilots that were to run from earlier in 2017 didn’t happen because of the General Election purdah and this revised timetable will be good news for all.

“The new timetable, and allowing smaller businesses to make the change voluntarily, is a sensible move and will remove an unnecessary distraction from what’s likely to be a challenging few years for lots of businesses”.

These measures and the other measures which were dropped from the draft Finance Bill pre-election will be legislated for as soon as possible after summer recess.

The Association of Chartered Certified Accountants also welcomed HMRC’s announcement.

ACCA head of taxation, Chas Roy-Chowdhury, said: “Today’s announcement be warmly welcomed by millions of small businesses who were concerned about, or simply unaware, of MTD’s introduction and will give them and their tax advisers time to prepare. HMRC will also benefit from more time to ensure their systems are in place.

“This announcement demonstrates that HMRC have listened to and sincerely engaged with concerns raised by ACCA along with a range of tax bodies and professionals.

“We would like to thank ACCA members for the time they have taken to present evidence and engage with ministers on this issue.’

Mr Roy-Chowdhury added, however, that there are issues with the new proposals.

He added: “For voluntary MTD to be available we will still need to have all the legislation in place from the beginning. This suggests we may still have the highly compressed initial timetable, although the scope to amend and adjust before it becomes mandatory will be there (provided Parliamentary time can be found).

“There is also still a worry about the timing of VAT reporting, as many of the largest businesses have a 2 year lead in time for their software systems to cope with a change of this nature, but we are now well past that cut-off date to start development and we do not even have a consultation document, let alone draft legislation.

“We must not forget the wider landscape – Brexit may fundamentally change the nature of VAT as well, meaning two major changes to VAT systems in short order.”