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House of Lords calls for delay to Making Tax Digital

The House of Lords Economic Affairs Finance Bill sub-committee has in a report issued on 17 March 2017 called for a delay to the Making Tax Digital proposals. 

To ensure the effective implementation and operation of the Making Tax Digital proposals, the sub-committee recommended the following four changes, which they consider would alleviate many of the problems raised before them in evidence:

  1. Delay the timetable for implementation until 2020

    The scheme is not ready for roll out in 2018 for larger businesses and 2019 for businesses with a turnover above £10,000. The pilot of the software will not be completed before the scheme is launched. Therefore there will be no opportunity to review the policy in the light of the findings of the pilot.

  2. Improve the analysis of the costs and benefits drawing on the findings of a full pilot

    The claims by HMRC that the policy will close the tax gap are based on fragile foundations which do not, we conclude, justify the compulsory measures contained in the proposals. The claims of the cost businesses will incur - in particular the initial cost of £280 – were also almost universally disbelieved by witnesses to the Sub-Committee.

  3. Align the threshold for inclusion in the scheme with the VAT threshold

    In the light of the difficulties with the evidence base, we consider that the case for extending the scheme to the smallest businesses is not made. We recommend that those businesses with a turnover above the VAT threshold are required to enter the scheme from 2020, but no such requirement is imposed on smaller businesses.

  4. Raise taxpayer awareness

    One witness told us that many businesses are "blissfully unaware" of these changes. A change on this scale requires, we recommend, a proactive, thorough public information campaign.

In the detail of the report, the NFU’s voice has been noted and the sub-committee go on to recommend that “the Government consider whether businesses with diverse and seasonal affairs, such as agricultural businesses, should be exempt from the quarterly reporting requirements”.

The sub-committee concluded by noting that when the Chancellor first announced this scheme in 2015, its purpose was to “make tax easier”, but that for many businesses the Making Tax Digital proposals no longer achieve this and will instead make taxation more burdensome.

The Chancellor has only currently proposed that the Making Tax Digital proposals be deferred by one year for those businesses below the VAT registration threshold.

Given HMRC’s lack of modification to their original proposals despite the significant negative feedback provided by business organisations and professional bodies to the consultations last year, it would be a brave man who would suggest that Government will listen to business.

But I know some of my clients have already written to their MPs, and if sufficient other businesses contact their MPs, then perhaps the Government will listen.

For our most recent update regarding Making Tax Digital please click here.

If you have any queries, please contact your usual consultant or Carlton Collister on 01993 886418 or carlton@landtax.co.uk

March 2017