Apr 08 2019
UK's Making Tax Digital Initiative To Cover Only VAT Until 2021
British businesses have welcomed confirmation from the UK Government that Making Tax Digital will not be rolled out to other taxes and more businesses in 2020.
Under MTD, from April 1, 2019, businesses with a turnover above the VAT threshold (currently GBP85,000, or about USD110,000) will have to: keep their records digitally (for VAT purposes only), and provide their VAT return information to HM Revenue and Customs (HMRC) through MTD-compatible software. HMRC launched a limited pilot of MTD in 2018 but has now opened the pilot to all businesses affected by the change. In addition, in October 2018, HM Revenue and Customs announced a six-month delay, until October 2019, for certain businesses with complex affairs.
Earlier the UK Government committed to only broadening the initiative to cover digital record-keeping and quarterly reporting for small businesses and landlords for income tax purposes from at least April 2020.
Given the burden on businesses of responding to the UK's departure from the European Union, the UK's Chancellor, Philip Hammond, has said there will be a light touch approach to penalties in the first year of implementation. Specifically, he said "where businesses are doing their best to comply, no filing or record keeping penalties will be issued."
He announced: "The focus will be on supporting businesses to transition and the government will therefore not be mandating MTD for any new taxes or businesses in 2020."
It is expected that Making Tax Digital will now be expanded to cover companies' income tax affairs from April 2021 at the earliest.