Following initial testing and feedback, HMRC have slipped the timescale for Making Tax Digital, and reduced the scope. Here's the main changes


The original plan from the government and HMRC would have forced the smallest businesses and sole traders to start quarterly reporting from April 2017, but those below the VAT threshold (currently £85,000) will now be exempt from requirements to quarterly report until the government can reassess the plans.

There will also be a one-year delay for the wider rollout, with an April 2019 start date for businesses with a turnover above the VAT threshold (currently £85,000) to start keeping digital records but only for VAT purposes.

Full-blown quarterly reporting will not start before ‘at least 2020’ according to the ministerial statement.

It is likely that at least until 2020 Making Tax Digital will not be mandatory, and nearer the time (2020) the Treasury plans to reassess the situation and review mandatory requirements.

The deferral will give more time for testing the system and HMRC will start the pilot for Making Tax Digital for VAT by the end of this year - this will give the tax profession time to test run a year's worth of reporting before the VAT system goes live.

In terms of quarterly reporting for incorporated businesses and large partnerships, 'larger businesses will have to use Making Tax Digital for VAT only, regardless of the type of business, but not before at least 2020. Larger businesses will not have use Making Tax Digital for corporation tax reporting before at least 2020, although it is still not wholly clear whether they will ever have to enter the system due to the complexity of their tax compliance requirements.

Making Tax Digital will be available on a voluntary basis for the smallest businesses, and for other taxes. Businesses and landlords with a turnover below the VAT threshold will be able to opt to use the new digital reporting system but it will not be mandatory until 'at least' 2020.

The Treasury document states that under the new timetable:

  • only businesses with a turnover above the VAT threshold (currently £85,000) will have to keep digital records and only for VAT purposes;
  • they will only need to do so from 2019; and
  • businesses will not be asked to keep digital records, or to update HMRC quarterly, for other taxes until at least 2020.

As VAT already requires quarterly returns, no business will need to provide information to HMRC more regularly during this initial phase than they do now.

HMRC will start to pilot Making Tax Digital for VAT by the end of this year, starting with small-scale, private testing, followed by a wider, live pilot starting in spring 2018. This will allow for over a year of testing before any businesses are mandated to use the system.

Finally, here's a great little table summarising the changes;

MTD timetable