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Budget 2017: HMRC pauses MTD for 3.1 million UK businesses

Chancellor of the Exchequer Philip Hammond yesterday announced a one year deferral from mandating Making Tax Digital (MTD) for unincorporated businesses, self-employed professionals and landlords with turnovers below the new VAT threshold of £85,000. This will see the number of businesses needing to comply with Making Tax Digital (MTD) from April 2018 fall from 3.5 million to approximately 450,000. The government stated the reason for the change is ‘businesses that are VAT registered already engage with HMRC on a quarterly basis online and so are better placed to make the transition to keeping digital records’. So, for those businesses under the VAT threshold HMRC is acknowledging that this digital transition will be difficult.

In December, an IRIS survey of more than 900 accountants showed the industry was calling for HMRC to slow down, consult more, share more information and look at the exception criteria. Just four per cent of accountants agreed with the initial threshold, while 89 per cent believed the smallest businesses which aren’t exempt should be given an additional year to prepare for Making Tax Digital (MTD).

This survey was a key talking point during the recent Finance Bill Sub Committee hearing and although it’s clear HMRC has listened to this feedback, it’s imperative it starts informing accountants and small businesses of the next steps. 98 per cent of UK accountants feel HMRC has not informed either them of their clients well of the changes required for Making Tax Digital (MTD) and this won’t change without clear communication.

Despite the Making Tax Digital (MTD) pause for those below the VAT threshold, it is still imperative accountants, small businesses and self-employed move to digital tax sooner rather than later. HMRC has stated that the goal of Making Tax Digital (MTD) is to alleviate pain and errors caused by poor paper record keeping, yet have just pushed this benefit of digital records out by a year to those who would benefit from it most. If digital records & tax goes out of sight, it will be out of mind; complacency will spread and before we know it, deadline panic will set in again.

For more online information about MTD, return to our Making Tax Digital Hub for a host of additional MTD news, insight, events (including our latest roadshows, held throughout the UK this March) and dedicated training solutions exclusive to accountants.

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