The inevitable MTD delay

    It had to happen. A constrictive timetable, a largely ignorant business population and an unexpected election result all contributed to MTD being postponed.

    When the news became public I received a telephone call from a white goods retailer.

    The figurehead of an established family run business, he had been conscientiously preparing for the proposed introduction of Making Tax Digital in April 2018 and had bought some tax software ready to convert his paper only record keeping process into a digitised system.

    In our conversation he expressed a combination of frustration and relief. Frustrated with the amount of time he had spent away from the shop floor preparing for MTD, the detailed research he had undertaken to make sure he had bought the right software for his business and the effort he had made to bring his staff up to speed. The frustration was tempered by the relief he felt, being allowed more time to gradually change from paper to digital. Whilst leading from the front, his granddaughter was proving to be a godsend, I was told, helping him move from old school to academy status, teaching him new tricks for a bit of extra pocket money.

    Days before the announcement was made, I had a completely different call. The owner of a barbershop rang up to complain his accountant was warning him his professional fees were going to increase because of something digital happening. What was his accountant talking about? "I can’t afford this jump in fees…I’ll have to go somewhere else…"

    And there’s the rub.

    For all the loud exhaling of respite and solace to the announcement that:

    • Only businesses with a turnover above the VAT threshold of £85,000 will have to keep digital records and only for VAT purposes from April 2019
    • Businesses and landlords will not be expected to keep digital records, or to update HMRC quarterly, for other taxes until at least 2020
    • All businesses and landlords will have at least two years to adapt to the changes before being asked to keep digital records

    There will have been businesses like Mr White Goods who had been diligently preparing to co-operate with the mandation of MTD, whilst there would undoubtedly have been many in the same situation to Mr Barber, not really grasping what MTD involved but horrified at the announcement of a forthcoming hike in his accountancy fees.

    Whilst the headlines have focused on the delay for MTD for Business, it should be remembered there has been no such let-up in the rollout for MTD for Individuals.

    Some 9.4m people now hold Personal Tax Accounts and, from 2 July 2017, HMRC has moved to a system of ‘dynamic coding’. No longer will PAYE underpayments be calculated at the tax year end and coded out in a future year. Moving forward, more regular coding changes will be made in the year as soon as HMRC becomes aware of a change in circumstances. A company car benefit, for example, will be coded out straightaway rather than actioned on receipt of a P11D. HMRC can also code out other tax debts now, subject to limits.

    Dynamic coding is expected to see a sharp reduction in the number of people underpaid at the year end, but should also mean repayments are made faster.

    For more information contact Guy Smith on 0345 223 2727.