Government has no plans to defer its Making Tax Digital | KPMG | UK
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Government has no plans to defer its Making Tax Digital reforms

Government has no plans to defer its Making Tax Digital

The Government has confirmed that Making Tax Digital will go live from 6 April 2018.


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In late 2016 the Government ran six consultations on various aspects of its Making Tax Digital (MTD) reforms. It has now published a summary of the responses and, more importantly, confirmed what changes, if any, it intends to make to its proposals as a result. Like many, we are fully supportive of a digital tax system; without doubt this is the future. But also like many, including the Treasury Select Committee, we were concerned that the proposed timetable for implementation was too tight, that the exemption threshold was too low and that adoption would be by mandation.

While the Government has announced several helpful relaxations that will ease the transition, unfortunately there has been no movement on either the timetable or the mandation of MTD. From April 2018, quarterly reporting will be mandatory for sole traders, partnerships (see below) and landlords over the threshold.

And what of the threshold? The decision on the appropriate exemption threshold has been deferred for now, although we have been told that the final decision will be made in 2017.

The relaxations announced alongside the summary of responses include the following:

  • Businesses will be able to continue to use spreadsheets for record keeping, albeit some modification to interact with software will be required;
  • Businesses currently eligible for three line accounts i.e. income, expenses and profit, will be able to submit three line quarterly updates;
  • Free software will be available to businesses with the most straightforward of affairs;
  • Businesses will not be required to store invoices and receipts digitally;
  • The end of year update must be completed by 10 months after the last day of the period of account, or 31 January, whichever is soonest;
  • Charities (but not their trading subsidiaries) will be exempt from MTD; and
  • Large partnerships with turnover above £10 million will not have to comply with MTD until 2020.

The relaxations above are positive and to be welcomed, as is news that HMRC intend to run a full year pilot from April 2017 to April 2018. We hope that this will be sufficient time to iron out any ‘teething problems’ but we should not lose sight of the fact that when MTD comes into effect in April 2018, the first cycle of the pilot will still not have concluded (a full cycle of reporting will take from April 2017 to January 2019).

Most taxpayers affected by MTD will not yet have taken any action due to a lack of detail. Unfortunately, it is questionable whether the recent announcements give enough certainty for taxpayers to start planning now, particularly given the uncertainty over the threshold. What is not in doubt however, is the scale of the task that remains. At the heart of MTD is the software – taxpayers and agents alike will soon need to start considering what software they will require, the merits of each, the cost, installation and training. Some larger businesses will need to re-think their administration processes.

And that, of course, assumes that businesses are aware of the impending changes. Anecdotal evidence suggests that many of those who will come within MTD from next year are unaware of MTD. Expect to see a large media campaign from HMRC in the near future.


For further information please contact :

Seamus Murphy

Patrick Martin

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