Making Tax Digital for VAT will not be extended to any other taxes or businesses in 2020 as previously planned, it has been revealed.
Announcing the move in this month’s Spring Statement, the Chancellor Philip Hammond said the scheme – which will see the majority of VAT-registered businesses record and send VAT returns digitally from April – will not be broadened until at least 2021 in order to give businesses more time to prepare.
Under Making Tax Digital, almost all VAT-registered businesses earning above the VAT threshold (currently £85,000) will be required to keep their records digitally and submit their VAT returns using compatible accounting software.
However, despite announcing the scheme more than two years ago, HM Revenue & Customs (HMRC) has confirmed that it will operate a “light touch” approach to penalties and non-compliance in the first year of Making Tax Digital.
Commenting on the Chancellor’s announcement earlier this month, Caroline Miskin, a Tax Manager at the Institute of Chartered Accountants in England and Wales (ICAEW), said: “We are encouraged that HMRC is adopting a very light touch approach – one of encouragement rather than compulsion – for at least the first year of MTD and that penalties will not be issued for late filing.
“It is crucial that HMRC is not heavy handed with businesses during this period of immense change and it has acknowledged the pressures that businesses are under by not extending MTD to include both more taxes or businesses.
“MTD for VAT is a major change in tax administration and it is important for the UK tax system that it is a success: this is too important to be rushed.”
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