What’s happened to Making Tax Digital (MTD)?

In short, a large dose of common sense. Under MTD, businesses with sales over £10k p.a. were to be obliged to hold accounting records digitally and to report quarterly to HMRC. This was hailed as the ‘death of the tax return’, but would have led to five returns a year instead of one.

Why was MTD being rolled out?

Firstly, HMRC thought the simple fact of holding records digitally would improve efficiency and offset any cost of rollout. Tell that to the c. 3 million businesses which don’t hold digital records! Going digital without improving process only leads to a more rapid collation of nonsense.

Secondly, HMRC believed errors & lack of care cost UK PLC £8bn p.a in lost revenue. But error (as opposed to fraud) is inherently random, so statistically, it is hard to see why ‘error’ was so heavily weighted in HMRC’s favour. Commons and Lords finance committees cautioned HMRC about their plans, telling them they were ‘heading for an almighty row with their customers’.

But it has taken the recent election results to knock sense into the whole process. Smaller businesses (with sales below £85k) are now out of scope, and deadlines have been extended for the rest.

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