On 1 May 2018 HMRC contacted the professional accountancy bodies and software developers, saying it would have to pause or delay certain key projects in order to free up resources to deliver changes required by Brexit. One of those projects was MTD for individuals. This was interpreted by some news outlets as “MTD is cancelled”, but that is certainly not the case.
The pilots to test the implementation of MTD for VAT, and MTD for business (income tax), have started and will continue. Reporting VAT figures under the MTD regime is still due to commence for VAT periods beginning on and after 1 April 2019. Reporting business expenses and sale figures for income tax will be drawn into MTD sometime after 2020, when the VAT reporting regime has been shown to “work well”.
What has been paused is the rollout of Simple Assessments to a larger range of taxpayers, and the expansion of dynamic PAYE coding. These projects were not considered to be part of what most accountants thought of as MTD, but they are part of the general digitisation of information flows to taxpayers from HMRC.
We outlined the Simple Assessment procedure in our newsletter on 28 September 2017, and the limited groups this would apply to. There have been problems with the quality of the information reflected back to taxpayers in their simple assessments, so it is good news that this project has been paused.
There have also been problems with dynamic PAYE coding (see our newsletter 27 April 2017), which commenced in July 2017. For example, where an employee receives a bonus this may be interpreted as a permanent pay rise, and results in the employee suffering too much tax by deduction.
Written by the Tax Advice Network