HMRC said that it would publish responses to the Making Tax Digital (MTD) consultation by 31 January and clearly the department has followed the approach of many taxpayers by leaving things to the last moment. Next week will give a considered response to the document, but today we wanted to share our immediate observations.
The first is that, despite all of the concerns raised during the consultation, there is no real change to the timetable. The self-employed will still start to be dealt with under MTD from 2018. However, HMRC has said that there will be no penalties for late submission in the first year of operation. The message seems to be 'we're not changing the timetable, but realistically you will get an easy ride in the first year, so 2019 will the year in which we expect you to comply'.
The second is that HMRC has accepted the overwhelming feedback from taxpayers and advisers that any businesses who currently keep records on spreadsheets will be able to continue this process. This is an important change, although it should be noted that there will still be a need to take the data from the spreadsheet into some form of digital app in order to meet the filing requirements. So existing spreadsheet users will have to make some changes to the way in which they file their tax returns.
Finally we note that there are still large areas of the MTD revolution which are still to be worked out. HMRC has promised further consultation on such matters, including the threshold for entry into MTD and the penalty model. This is of course welcome, though it does mean that important parts of the regime will not be in place until just before it comes into operation adding to the complexity (and stress levels!) of businesses implementing any last minutes changes.
Those who were expecting HMRC to rethink the whole MTD project will be disappointed; but there was never any realistic prospect that this would happen. HMRC has probably done just about enough to say that it has listened to the unprecedented concerns expressed during the consultation, but in the end MTD is going to look pretty similar to how it was originally proposed by HMRC.
For more information please get in touch with Andrew Hubbard, or your usual RSM contact.