Making Tax Digital (MTD) is set to expand to all VAT-registered businesses from April 2022, the Treasury has announced.
Since April 2019, VAT-registered traders with annual taxable turnover above £85,000 have been submitting VAT returns through MTD, while other firms have been able to submit VAT returns voluntarily.
From April 2023, the Treasury expects MTD to cover all unincorporated businesses and landlords turning over more than £10,000.
Around four million unincorporated businesses and landlords with annual turnover exceeding £10,000 a year stand to be drawn into MTD, should the rollout go according to plan.
This new urgency has been driven by the difficulty of implementing support measures for business during COVID-19 without comprehensive data.
Jessie Norman, Financial Secretary to the Treasury, said:
“The COVID-19 pandemic has highlighted the need for a more flexible, resilient and responsive tax system that provides businesses and HMRC with more up-to-date information on businesses and their finances, and enables easier identification and better targeting of taxpayer support.”
A consultation will begin in the autumn about rolling out MTD for limited companies that pay corporation tax.
Norman added:
“This timetable allows businesses, landlords and agents time to plan, and gives software providers enough notice to bring new MTD products to market, including free software for businesses with the simplest tax affairs.”
Though it might be convenient for the Government to have centralised information, business bodies seem less convinced by the timing of this announcement.
Mike Cherry, chairman at the Federation of Small Businesses, said:
“At a time when the Government should be backing small businesses and the self-employed to drive recovery from a severe recession, the last thing we need is wholesale expansion of MTD without the right support in place.
“Done wrong, this would mean more costs and paperwork for small firms at a critical time.”
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