Tax experts from the Low Incomes Tax Reform Group (LITRG) have voiced concerns over HMRC’s ambitious timescale for Making Tax Digital (MTD) reforms and call for them to be postponed to better prepare businesses and test out new software
LITRG argues that the success of voluntary online self assessments shows that digital administration can be achieved without forcing smaller businesses to maintain digital records and submit quarterly returns.
It has called the aim to introduce MTD by April 2018 ‘unrealistic and unachievable’ and says that it should be postponed to properly educate the public about the changes, prepare businesses for the practical impact and added costs and to allow full development and testing of the software which MTD will run on.
Robin Williamson, technical director of LITRG, said: ‘In our view a successful start to MTD in April 2018 is unrealistic and unachievable, with so much of the detail still to be considered and finalised and the software, such a vital component in the success of the project, still to be developed and fully tested.
‘A more relaxed introduction to a launch date will lessen the chances of the public quickly losing faith in a system that is found to have flaws and irritants and reduce the chance of compliant taxpayers making mistakes in their rush to acquaint themselves with unfamiliar systems.’
Williamson suggests that a better alternative would be to introduce a voluntary participation to MTD, saying that if digitisation is shown as a positive step for taxpayers then they will naturally choose to switch over.
He adds: ‘There is a risk that mandation will have the opposite effect to what HMRC intends: instead of increasing revenue, it may act as a disincentive to businesses to trade legitimately and encourage some into the hidden economy.’
LITRG also wants the exemption threshold of £10,000 to be equivalent to the current VAT threshold of £83,000 with the possibility for businesses below the threshold to join MTD voluntarily.
Many businesses will incur additional costs when adopting MTD, especially as HMRC will not be providing free software.
Williamson said: ‘If HMRC wants small businesses to comply digitally, it is up to HMRC, not the industry, to make free software available. We are concerned that free software provided by commercial concerns may not be sophisticated enough to protect every taxpayer from unintentional non-compliance with HMRC’s requirements.
‘Free software has to be paid for somehow, and there is a risk that this will be by the software houses bombarding their customers with adverts for expensive, and perhaps unnecessary, upgrades.’
