As all practitioners will be aware, the MTD for VAT regulations as they apply to VAT registered traders – with turnover above £85,000 – became law on 1 April 2019.
In practical terms this means that any VAT return filed with a commencement date from 1 April 2019, will need to file using MTD connectivity. For most registered traders affected this will be for the quarter ending 30 June 2019 or later depending on your stagger period for filing purposes.
If we assume there will be a smooth transition to the new filing processes, what next for HMRC’s MTD agenda?
When MTD was first mooted the quarterly filing of summarised accounting data was included. The backlash this received from software suppliers and the accountancy profession was sufficient to encourage HMRC to delay this particular application of MTD until April 2020 at the earliest.
It is worth speculating if this proposed date, just one year hence, will be confirmed with yet more development activity by the accounting software industry required and yet more accommodation by an already over-stretched accountancy profession.
Yet again, the redoubtable Brexit crisis may play its part in delaying the introduction of MTD for Income Tax and Corporation Tax. When it does arrive, MTD for business taxes (Income and Corporation Tax) will provide a real time estimate of traders’ profitability to HMRC and it will be a short step for this data to be used to calculate real-time liability.
At present, HMRC seek payment of Income Tax via the self-assessment process based initially, on profits earned in the previous tax year. Payments are collected at six month intervals with a balancing payment sometime after the relevant tax year end. In a similar vein, Corporation Tax is collected nine months after the relevant accounting year has expired.
Imagine the gleeful look on Treasury officials’ faces if it could start to collect tax from both these sources on a pay-as-you-go basis.
This would require planning as the forward shift in tax payments would not only bolster Treasury resources but would severely stretch the liquidity of British self-employed and incorporated traders.