The Spring Statement was held on 13 March, and as expected (and as it should be), it was a bit of a non-event for tax compliance with no major announcements or tweaks to existing legislation.
However, within the Written Statement was a paragraph on Making Tax Digital that confirmed, hopefully unsurprisingly, that mandatory digital record-keeping for VAT commences on 1 April 2019 for certain businesses. However, the paragraph ended with the following sentence;
“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”
This is the first confirmation that MTD for income tax will not be mandated from April 2020. Previously, the official line was “no earlier than April 2020”.
Receiving confirmation of the deferral is not a surprise. Arguably, the low key way in which it was communicated was surprising, but the content of the message was not. In my Making Tax Digital – An Update blog post in December, I advised that HMRC had confirmed to software developers that there would be no development updates to the scope of MTDfB (MTD for Business) after May 2019, until at least 2020. If there are no development updates until 2020, it followed there could be no mandation in 2020. This confirms it.
This confirmation does not mean MTD is dead in the water as some may suggest. HMRC are still engaging heavily with software developers on MTDfB, with recent discussions focusing on the annual process for income tax, and the mechanics of how trading losses will be handled, as two examples.
It is still my view that MTD for income tax will be mandated, and my speculation would be April 2021 as a likely date. However, having recurring confirmation of dates it is not going to be only takes us so far.
We now need confirmation of the date we should all be planning for – it is a necessity. Software developers need certainty to plan and continue investment in MTD software. Accountants need certainty to plan with clients with confidence. Why should an accountant start engaging with clients about changes to processes and services when there is no certainty?
As I say, my money is on income tax being mandated from April 2021. For mandation in April 2021, HMRC will need to have evidence from a long running pilot which has scope equivalent to the areas to be mandated. If they need a full scope pilot (the current pilot is limited) to go live during 2020, then engagement with software developers throughout 2019, and commitment from those developers, are a necessity for the future success of MTD. Throughout 2019 therefore, we will start to build a picture on how realistic an April 2021 mandation is likely to be.
Regarding Corporate Tax? At this stage, I wouldn’t bet on what the start date may be, regardless of what odds were on offer.