The Treasury select committee is pressing for HMRC to consider delaying the introduction of Making Tax Digital (MTD), arguing there is insufficient time to respond to the recent swathe of consultation documents and that key issues still need to be addressed
Andrew Tyrie, chair of the committee, said: ‘These proposals have already been in the making for nearly two years. The earliest that they could be implemented is 2018. This timetable, with draft Finance Bill clauses published around the time of the Autumn Statement, may make it difficult to respond adequately to the points made in the consultation.
‘Much depends on the consultation responses. They may require a delay. Getting this right matters a lot, particularly to the small businesses who could be hit hard by a mistake.’
In a letter to the Chancellor, Philip Hammond, Tyrie highlights a number of concerns, one of which is that the new requirement for digital record keeping and reporting is much more onerous than simply entering a handful of totals (which could come from paper or an Excel spreadsheet) into an online VAT return.
Tyrie said: ‘It is tantamount to prescription by HMRC, for the first time, of a particular form in which accounting records must be maintained.’
The letter says that while the proposal for free digital tools for the smallest businesses with the simplest affairs was welcome, there needed to be more detail on what will be available, to whom or for what type or level of income and for how long its free availability can be assured.
It also points out that the consultation papers do not make clear how the MTD updates, required quarterly, will align with Universal Credit monthly updates, which will also be needed from the low paid.
In addition, Tyrie says that while there will be an exemption for people whose income is less than £10,000, this is below the level of the personal allowance. On this basis, it appears that this concession will only be for those who do not pay tax, including new businesses who would otherwise be obliged by MTD to notify HMRC within four months of starting a business.
He argues that businesses with a turnover of just over £10,000 might find themselves having to employ a book-keeper four times a year in order to make MTD returns, which he describes as ‘very burdensome’.
Given the complexity of the requirements and the fact that the consultation period is short, Tyrie concludes by saying there may be a case for delaying the implementation of MTD, or in opting to pilot the systems before a full roll-out.
Ralph Pettengell , ATT President, said: ‘It is in no-one’s interest to rush the introduction of MTD and end up with a range of problems for both businesses and HMRC when proper consideration of suggestions and further detailed consultation could assist the achievement of making HMRC into one of the most digitally-advanced tax administrations in the world by 2020. For that reason, we welcome the very measured concluding comment in Andrew Tyrie’s letter to the Chancellor: “Better to get it right than to stick to a rigid timetable”.’
