HMRC has recently announced that as a result of Brexit and related 'resourcing implications' they are postponing some Making Tax Digital (MTD) developments for individuals and businesses – including 'real-time tax code changes' (referred to as 'dynamic coding') and 'simple assessments.'
HMRC is already testing MTD with various pilots; including testing digital VAT and Income Tax Self-Assessments. The results of both pilots are due in coming months, and we think that they will prove to be highly informative for both individuals and businesses.
For most, the MTD initiative is an unknown, as little has been released about the results of pilots to the general public or businesses. To help address this issue, we have explored the main differences and expected timings of what is to come.
MTD VAT changes
MTD VAT change is expected to coincide with the UK leaving the EU to avoid the uncertainty of the VAT treatment on EU and UK transactions.
Given the complexity of Brexit negotiations uncertainty surrounding the VAT treatment is still likely to arise. For instance, UK businesses will need to understand both the technical tax changes to make sure that systems account for VAT are correct - a tall order when time is also required for MTD software trials
Record keeping for MTD
Businesses and individuals will still be able to use 'paper' records – like receipts when MTD is introduced, but they will need to make sure they are recorded and stored digitally. HMRC will not be developing future digital tax systems themselves – instead, they will be approving externally created software and making able to connect to their specially developed API.
VAT Returns under MTD
The objective under MTD is that VAT Returns should be lodged with HMRC using digital systems which connects to their specially developed API.
The current VAT Returns MTD pilot scheme will highlight any problems and solutions of the system which is due to be in place and ready to use by April 2019. HMRC has committed to supporting all businesses during the first year of MTD and Vat Returns, as errors are likely to happen as the new system faces 'teething issues.'
Business finance guidance
At HaesCooper we understand that MTD is unchartered territory for most individuals and businesses; but you needn't worry, our industry experts are here to answer any questions you may have. For further information related to MTD or indeed broader topics surrounding accounting, please don't hesitate to contact us.