News of MTD’s future from 2020 onwards emerges after Spring Statement

By James Nadal | 13th March 2019 | 15 min read

Making Tax Digital will not become mandatory for any new taxes or businesses in 2020, the Government revealed this afternoon.

Despite failing to mention MTD or, indeed, other tax related measures in his oral Spring Statement in the House of Commons, Chancellor Philip Hammond published the news in official papers released immediately afterwards.

In a section headed ‘Maintaining the tax system - Making Tax Digital’, his Written Ministerial Statement said: “The focus will be on supporting businesses to transition and the government will therefore not be mandating MTD for any new taxes or businesses in 2020.”

It also had significant news on the policing of MTD, saying: “The government can confirm a light touch approach to penalties in the first year of implementation. Where businesses are doing their best to comply, no filing or record keeping penalties will be issued.”

The oral statement to Parliament was laden with Brexit-related content, burying this key detail and relegating it to a side note in the Treasury’s long list of documents. But accountants may see this as the more significant bit of news to emerge from today’s address.

The written statement also reiterated that MTD for VAT is coming into force on 1 April and stressed it was “an important first step in this modernisation of the tax system to which the government remains committed”.

Overall, a huge Brexit shaped shadow hovered over the Commons today as Mr Hammond delivered his speech in the aftermath of another massive defeat for the Government, as it failed again to pass the EU Withdrawal Agreement last night. The biggest developments in Parliament today are expected later when MPs vote on supporting a ‘no deal’ Brexit. Sandwiched, as it was, between these hugely significant votes, the timing of the statement, therefore, felt rather strange.

Faced with increased uncertainty over how to find a way through the seemingly unbreachable impasse, the Commons heard the latest growth forecasts from the Office of Budget Responsibility. And Mr Hammond made various announcements predicated on an “orderly exit” from the EU, as he stated his belief that an agreement can and will still be ratified.

Despite Parliament being embroiled in the increasingly troubling and messy Brexit crisis, Mr Hammond struck a distinctly positive note about the British economy in general.

He described it as “remarkably robust”, pointing to the fact it has grown nine years in a row and telling MPs that this was “the longest current unbroken quarterly growth run of any G7 economy” – more than France, Italy and Japan.

The OBR “expects Britain to continue to grow in every year of the forecast”, he said.

Forecast GDP growth has been revised downwards for this year, however, standing now at 1.2%, compared to the 1.6% laid out in the November Budget. The forecast is then 1.4% in 2020 and 1.6% in each of the final three years.

Mr Hammond also noted that over 3.5m net new jobs had been created since 2010, saying that the economy had defied expectations and provided a solid foundation that the UK needs. A new forecast expects 600,000 new jobs by 2023.

Public finances continue to improve, with borrowing this year at 1.1% of GDP - £3 billion lower than forecast at the Autumn Budget - while wage growth has been revised up to 3% or more each year, he explained.

He did not attempt to entirely ignore the elephant in the room though, admitting that a no deal Brexit would inflict a short to mid-term hit to the economy. He stressed that there is “no quick fix” for no deal but insisted he was confident the UK will still achieve and pass a deal.

With Brexit continuing to swallow up the resources and, crucially, the time of the House of Commons, it is likely that little else will pass in the coming months – perhaps longer.

That could mean that Making Tax Digital – or indeed tax related legislation of any sort – could continue to be consigned to the shelf, or at least simply become a neglected sub-plot.

Have you seen how IRIS is preparing for all Brexit outcomes? Check out our blog on Companies House and IRIS Company Secretarial here.