Sports and leisure: what if Making Tax Digital gets delayed?
Paying taxes is one of those inevitable parts of doing business – and for businesses that earn over £85,000 per year, there is an additional burden in the form of value-added tax (or VAT). With the introduction of Her Majesty’s Revenue and Customs’ (HMRC’s) Making Tax Digital (MTD) scheme, there are now extra burdens. Even those VAT-paying sports and social clubs that aren’t profit-making will be affected, as MTD covers all those over the threshold. With the deadline just a few weeks away, some organisations are still panicking about how to get compliant in time. But what would happen if things changed and the scheme was pushed back?
Immediate effects
If MTD was suspended, the only obvious consequence in the first few days would be that no VAT-paying business would be breaking the law. This, in turn, means that the need to hire legal assistance to defend or deal with any non-compliance claim would not exist. In practice, even if MTD goes ahead – which it almost certainly will – there are already plans for a “soft landing” period in which one of the main pain points of the regime, the unacceptability of copying data from spreadsheets, will still be permitted.
The long term
It’s likely that the more potent effects of a delay to the MTD scheme would be felt in the longer term rather than right away. According to the UK government’s own statistics, it’s the case that over £9bn in tax revenues is lost each year thanks to errors in filing returns – and with the UK government borrowing currently at £1.8tn, the wider economic effects of more periods of low revenues could be profound. It could also mean less investment in the sports and leisure industry.
For businesses in the sector, it would most likely give those who are in the firing line for the as-yet undated next phase of MTD – such as those who pay income and corporation tax – an extra chance to prepare. Everyone from tennis court operators to self-employed swimming teachers who take under £85,000 a year will be affected at some point – and a delay next month could mean a lifeline for them.
The Brexit effect
It won’t have escaped the notice of anyone who follows the news, meanwhile, that MTD is due to kick in just a couple of days after the UK is supposed to be leaving the EU. The EU exit date is also one that could be delayed, though it mirrors the MTD implementation date in that it’s not a highly likely scenario. There’s no clear and obvious knock-on effect for MTD if Brexit gets delayed, although in the event that HMRC agents find themselves with no spare staffing resources to deal with the MTD implementation, there is a possibility that it will have to get pushed back.
MTD is highly unlikely to be suspended now that the first phase in its implementation has progressed this far. However, by thinking about hypothetical scenarios, it’s possible for finance leaders in the sports and leisure industry to get their own compliance strategy in order.
