Making Tax Digital for Business Has Emerged (partially) From HMRCs Income Tax Pilot

HMRC has today announced the opening out of their Making Tax Digital for Business (MTDfB) Income Tax pilot, from its near year-long limited invitation-only testing phase to allow all-comers to join. You can find out more on HMRCs site

Soft launch

This is obviously good news and particularly encouraging given the VAT - MTD Pilot is projected to start next month. However, at this stage, what has just been announced can best be described as a soft launch.

Only the self-employed will be able to on-board (join) the MTDfB Income Tax Pilot and commence filing quarterly updates of their trading income and expenditure figures.

It is anticipated that unincorporated landlords will be able follow next month.

List of Software Developers

To coincide with the announcement HMRC has published a list of software providers with ready-to-go MTD-compliant products capable of filing the quarterly updates required for Income Tax purposes.

There are only two names on it, Rhino and IRIS.

HMRC is confident that that they will soon be joined by others

No real surprise

Given last July’s Ministerial Announcement postponing mandation for all except the VAT registered with turnover above £85K, it is hardly surprising there are so few Income Tax MTD-compliant products available.  As a direct consequence of it software providers switched their resource to the ensuring their products will be capable of filing MTD-compliant VAT returns well in advance of April 2019.

Indeed, many are now confident that they have products ready to coincide with the start of the private testing phase for VAT-MTD in April this year.

What does this all mean

Given that there are only two Income Tax update filing solutions available and mandation places the emphasis squarely on VAT, I hardly expect a headlong rush by the Self-employed to on-board for income tax purposes.

Although, I do anticipate that if the VAT MTD-pilot is a successful and the subsequent mandation phase goes well there will be a slow but steady stream of self-employed businesses joining the income tax pilot.

Of course, my observation is predicated on a greater range and depth of Income Tax MTD-compliant software becoming available to the self-employed.

As confidence grows

Indeed, as confidence grows accountants / tax advisers may decide on-boarding self-employed start-ups straight into MTD to avoid the need to transition from the current regime to MTD when mandation comes back on the table.

Where does this leave MTD

Ultimately, the announcement leaves MTD in pretty much the same place as before, but it does give observers a greater degree of confidence that things are starting to move in the right direction.

About the author:

Brian Palmer is CEO of Tax Policy Advice is a UK-leading authority on Making Tax Digital who advises, blogs and lectured extensively on this important area of taxation.