Making Tax Digital (MTD) – Where are we now?

Making tax digital was first proposed by the government in early 2016 as part of their plans to digitalise the tax system. Since these original proposals and consultations there have been numerous changes and understandably there is now a great amount of confusion surrounding MTD.


Demystifying MTD


  • Will MTD be scrapped by the government?


No. HMRC has an ambition of becoming the most technically advanced tax system in the world and the move to digitalised is widely accepted as a good one however it needs time for full consultations and considered implementation.


  • When does it start?


MTD starts for VAT in April 2019. If you are not currently registered for VAT MTD for VAT will only become relevant to you only if you become VAT registered.


MTD for income tax is currently scheduled to start in April 2020 and will apply to self-employed, partnerships, trusts and landlords who complete annual self-assessment tax returns.


MTD for corporation tax; the initial proposal was for this to become mandatory in April 2020 however it is widely expected for this to be pushed back.


  • What are the exemptions?


There are exemptions for those who are not able to engage digitally for religious reasons or due to factors such as age, disability or location (e.g. no availability or broadband).  Not owning a computer will not be classed as an exemption.


When MTD for income tax become mandatory there will be exemptions for businesses and landlords with a very small turnover; the level of this exemption has not been set.


  • What do I need to do now?


Speak to your adviser to discuss MTD. Although the dates for compliance with MTD may change there are advantages to digitalisation of your record keeping and the transition to MTD will be much smoother for those used to keeping records digitally.


Currently only 12% of VAT returns are filed directly from software. The majority of business use HMRC’s government gateway to file their VAT returns as historically the software has not been capable of making the necessary quarter end adjustments. Software is continually improving the functionality for VAT so please speak to your adviser if this is something you currently don’t use.


  • Will the budget bring more changes?


We do not expect to see any fundamental changes to the proposed regime of MTD. It is hoped that the budget might bring clarity to the start dates and exemptions from MTD.


If you would like to discuss this blog in more detail, or you would like to speak with a member of our team, please contact Victoria Dadswell or call 01772 821021 to be put in contact with a member of our Tax and VAT team.