A critical report that calls for a far more cautious approach to the roll-out of Making Tax Digital (MTD) has been welcomed by a trio of tax organisations.
The Association of Taxation Technicians (ATT), the Chartered Institute of Taxation (CIOT) and the Low Incomes Tax Reform Group (LITRG) have all responded positively to the report, ‘The Draft Finance Bill 2017: Making Tax Digital for Business’, published by the House of Lords Select Committee on Economic Affairs, Finance Bill Sub-Committee.
In it, the Lords conclude that the roll-out of the scheme is being rushed, imposing unnecessary burdens on small businesses and landlords, and will yield little benefit to the government. The call for a delay to the scheme until 2020 to allow for a full pilot is in keeping with the tax bodies’ calls for the government to move at a more judicious pace on the compulsory requirements of MTD.
Yvette Nunn, co-chair of ATT’s technical steering group, said: “The report should give the government the impetus to tap on the brakes on this juggernaut, to allow more time for full end-to-end testing, piloting and evaluation to avoid unnecessary logistical and financial risks for both HMRC and businesses.
“We support concerns in the report that the government’s estimate of the ‘tax gap’ savings are fragile and not based on ‘adequate evidence’. Similarly, we are highly sceptical of HMRC’s assertion that the scheme will initially cost businesses on average just £280, a figure that does not reflect the reality of the initial expenses businesses will incur.
“We welcome the committee highlighting that the difference between the rules for choosing to apply the cash basis to trading income and to property income, is a potential source of confusion and error for many businesses, especially those with income from both sources.”
Adrian Rudd, chairman of the joint CIOT and ATT digitalisation and agent strategy group, said: “We welcome the committee’s recognition of the unprecedented technological and logistical challenges which will be faced by the many small businesses and landlords which are not currently maintaining digital records or interacting with HMRC on a frequent basis.
“The timetable for MTD remains extremely challenging and a delay would enable the diverse nature of businesses affected to be addressed and a little more consideration of how their tax agents and accountants can support them. A full pilot would ensure the software is ready and works.”
Anthony Thomas, chairman of LITRG, said: “Like the committee, LITRG believes that a digital programme, implemented with care and sufficient regard for the needs of the taxpayer, can greatly improve the administration of tax.
“We welcome the chancellor’s Budget announcement that businesses with a turnover below the VAT limit will have an extra year before being required to keep digital records and report to HMRC each quarter, but agree with the committee that this does not go far enough; the digital programme should be optional for businesses below the VAT threshold, for people will naturally gravitate towards systems that are good, intuitive and easily navigable, without the need for compulsion.
“We also concur with the committee’s recommendation that HMRC urgently assess and make public how it intends to support the digitally assisted population, and business owners with disabilities that require the use of assistive technology.”