What will the General Election mean for Making Tax Digital?

21 April 2017

With a snap election due to take place on 8 June, we’ve been giving a little thought to what the impact on Making Tax Digital (MTD) might be.

Most immediately, there’s the fact that Parliament will be dissolved for a period ahead of the general election. In 2015 that happened on 30 March, over five weeks before the 7 May election date. The current Parliament is anticipated to be dissolved on 3 May and any legislation in progress at that date will be lost.

Accordingly there is likely to follow a Parliamentary ‘wash-up’ procedure, which will see elements of the Finance Bill rushed through (some of the Bill is critical to the continuing function of the country’s tax system) and other elements dropped. The rushed through elements are likely to face only the most cursory scrutiny, with several levels of debate, reading and committee stages expected to be condensed into a single day. Amongst others, the Chartered Institute of Taxation have cautioned the Chancellor against rushing too much through and ending up with shoddy legislation.

The draft Finance Bill is only ‘enabling legislation’ and the detail of MTD is to be brought forward in secondary legislation (ie. by Statutory Instrument). It will become apparent in the next couple of weeks whether the enabling legislation will be rushed through or dropped.

If dropped, it would be incumbent on an incoming Government to re-table the legislation, probably following a post election Budget. With the Budget timetable already shifted to the Autumn, we could well once again have three Budgets in a single year. Such a re-tabling of the legislation might see the finer detail incorporated in the Finance Bill itself. This would deal with one of the criticisms of the House of Lords, which was that the vague and wide ranging nature of the primary legislation and the intention to enact many of the requirements in secondary legislation would not permit adequate Parliamentary scrutiny.

If the Conservatives are re-elected we might reasonably expect this re-tabling of the proposal, albeit that the form or timeframe may have to be altered due to lost time over the Summer. In any other outcome there must be significant doubt as to whether the proposal will be brought forward,  taken back to the drawing board or binned altogether.

Whatever happens next, there follows an opportunity for the universal criticism and feedback regarding the implementation timetable to be heeded, and a corresponding risk of all such criticism and feedback to date being washed away – for example, we wonder whether the House of Lords will now ever get a response from 10 Downing Street to their damning indictment of the policy?

So for now, we’re advising business owners to understand their commencement date based on the current timetable:


When?
Accounting periods starting after
Who?
5 April 2017 400,000 volunteers for the beta testing.
5 April 2018 Those with turnover in excess of £85,000 and liable for Income Tax, including:

·         Unincorporated businesses;

·         LLPs with individuals
amongst their members; and

·         Landlords who let out
property.

5 April 2019 Those with turnover in excess of £10,000 and liable for Income Tax, or those registered for VAT, including:

·         Unincorporated businesses;

·         LLPs with individuals
amongst their members; and

·         Landlords who let out
property.

5 April 2020
  • Those who pay Corporation Tax
  • Partnerships with turnover in excess of £10m

And, whilst there continue to be more questions than answers, we’re urging business owners to consider their obligations under MTD and to start making plans to be in a position to cope with them.

If you wish to discuss any of the issues brought up in this blog, please contact me or your local UHY tax expert for further guidance and advice. Alternatively, to read more of our tax blogs click here.

You can also register to attend our free upcoming Xero Workshops or our ‘Dealing with the elephants in the room’ seminar.