MTD pilot ongoing as Brexit causes reprioritisation of HMRC’s projects

George Hay Chartered Accountants

HMRC’s plans for transformation could be beset by further delays as it prioritises preparations for the UK’s exit from the EU.

In a letter to the Public Accounts Committee Jon Thompson, HMRC’s chief executive, provides an update on the Customs Declaration Service (CDS) IT programme currently underway ahead of our withdrawal.

He explains that decisions are now being made about which of HMRC’s 267 projects should be stopped, which should not be started and which should have longer timescales applied to them, because of the need to focus on Brexit.

He goes on to say: ‘I hope that we can provide further transparency of the detail of this in due course.’

Meg Hillier, the Labour MP who chairs the Public Accounts Committee, has acknowledged that HMRC’s transformation programme was already a ‘precarious high-wire act’ without Brexit but now, with the extra demands it now faces, ‘catastrophic consequences’ could be on the cards.

So, what does this mean for MTD?

With some of HMRC’s biggest projects classified under the MTD programme and with the launch of digital VAT scheduled only a couple of days after Brexit, what will this reprioritisation mean for MTD going forward?

When it comes to MTD, the regime has seen its fair share of setbacks; most notably, the announcement of the snap general election which took place in June 2017.

Following the election and various concerns having been raised about the original timetable, the Government announced a new schedule for MTD, as follows:

  • From April 2019, only businesses with turnover above the VAT threshold (currently £85,000) will be required to keep digital records and only for VAT purposes;
  • businesses will not be required to keep digital records, or to update HMRC quarterly, for other taxes until at least 2020.

However, an HMRC spokesperson has now confirmed to AccountingWEB that there has been no change to MTD’s delivery timeline, stating that: “MTD will be mandated for VAT for those businesses with income above the VAT threshold from April 2019, as planned.”

This is a notion shared by Brian Palmer, tax policy adviser and Making Tax Digital (MTD) lead at the AAT who firmly states that MTD is still very much the ‘big show in town’ and expects the core services to be delivered as promised, with some secondary services perhaps arriving later than first anticipated.

The full impact of the reprioritisation is yet unknown, but we will be keeping an eye out for any further announcements.

Pilot opened to self-employed

Testament to the fact that MTD is still a top line priority, since March this year self-employed individuals have had the option of reporting their income digitally to HMRC, as part of a pilot of the Government’s Making Tax Digital (MTD) programme.

Those who choose to join the pilot will be able to start filing quarterly updates of their trading income and expenditure figures through the Making Tax Digital system.

It is expected that the trial will be opened to all unincorporated landlords as well at some point this month.

The VAT pilot is also due to commence this month. HMRC is seeking volunteers but will be inviting only a small number of businesses to join the pilot initially, before moving on to public beta during the summer.

There are currently just two packages supporting MTD for Income Tax, something that is likely to put off many self-employed individuals in the short term. It is not surprising that this is the case, since mandation was postponed for all except those who are VAT registered with a turnover of above £85,000.

Consequently, software providers switched their resource to ensure that their products will be able to file MTD-compliant VAT returns. Many providers say they feel confident that they will be able to offer products by the start of the VAT-MTD private testing phase.

It is thought that if the VAT MTD pilot is successful and its mandation goes well, then more self-employed individuals will gradually join the Income Tax pilot.

Next steps…

No one can deny that there is still a very long way to go with MTD, but businesses should not get complacent when it comes to preparations.

The fact that the pilots are ongoing and are expected to be extended to other demographics imminently should serve as an indicator that the implementation of the regime is still a top priority for HMRC.

Here at George Hay, we keep up to date with all the latest changes to tax and accounts legislation – including announcements relating to Making Tax Digital.

We support a number of online accounting and bookkeeping software packages, including KashFlow™ and Xero™. When it comes time to make the transition, our team of expert advisers will be on hand to provide you with as much or as little assistance as you require; from introducing you to your chosen platform, getting you set up and providing training to assisting you with incorporating the software into your usual accounts routine.

Our aim is to assist our clients with choosing and implementing a system to best suit their business, and to offer professional support and advice throughout the transition and beyond.

To speak to one of our experts about Making Tax Digital and what it means for your business, contact us today.

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