The government’s plans for Making Tax Digital for Business (MTDfB) have dramatically shifted course and businesses will have more time to prepare for the changes.
In our Summer 17 newsletter we provided you with an update on the progress of MTDfB which was expected to start for some types of businesses in April 2018.
The entire plan has raised questions from many areas of the business community. The additional cost and red tape – along with the very rushed timescales – have been of particular concern for SMEs. MTDfB will require businesses to submit mandatory quarterly updates to HMRC, and digital accounting records will also be compulsory. The proposed date for some unincorporated businesses, including landlords, to comply with MTDfB was April 2018.
Many will be relieved to hear that there is now an extended period to prepare. Initially, MTDfB will also be limited to VAT registered businesses only.
The revised timeline for MTDfB
MTDfB is now set to become mandatory for businesses with turnover over the VAT threshold (£85,000 at present) from April 2019. The affected businesses will be required to keep digital records but only for VAT purposes. Such businesses will be able to provide quarterly updates for other taxes but this will be voluntary. Businesses with a turnover below the VAT threshold can also choose to make quarterly updates if they wish.
The next big date in the MTDfB calendar after that is 2020. According to HMRC, this is the earliest that businesses and landlords will be required to keep digital accounting records and make quarterly updates for taxes other than VAT.
Good news but potential new problems
The longer timeline has to be good news for business. It means there will be more time to carry out more robust trials of HMRC systems and for the developers to release the necessary software.
But we do anticipate some problem areas. There are many special VAT schemes with partial exemption being one particularly complex area. Although HMRC receive online quarterly information for VAT, at the current time, many businesses still use spreadsheets. They do not submit VAT returns direct from software. HMRC will begin trialling MTDfB for VAT later this year on a very limited basis and a wider pilot will go live in Spring 2018. This timeline may still see VAT-registered businesses having to make a sprint for the finish.
If your business is affected by these changes, we are always on hand to guide and support you. To discuss any aspects of VAT or for a trial of our cloud accounting software, contact one of our offices or enquire online.