The House of Lords Economic Affairs Finance Bill sub-committee has called on the government to delay the introduction of making tax digital (MTD) for VAT by at least a year, to give small businesses in particular a reasonable chance to prepare.
In its new report, Making tax digital for VAT: treating small businesses fairly, the committee accuses HMRC of failing adequately to support smaller businesses, or to listen to their concerns. The report also recommends delaying the extension of MTD to other taxes until at least April 2022.
Looking at HMRC’s progress on the MTD programme since the committee’s March 2017 report on the subject, the committee takes issue with the six-month deferral given to ‘complex’ businesses, including some public sector organisations, while no such help has been extended to small businesses with fewer resources to manage the transition. The key findings of the report include:
many businesses will not be ready for the introduction of MTD for VAT in April 2019;
the costs to businesses of will be far more than HMRC’s impact assessment;
the government’s claim that MTD for VAT will increase the amount of tax collected remains unconvincing;
the government should publish its plan for the long-term development of MTD;
the penalties regime should encourage taxpayers to remedy defaults by giving them a longer grace period before applying late payment penalties;
HMRC must publish how it will communicate with and support taxpayers and agents across different levels of digital capability and skills; and
the software industry has so far offered no free software products.
Lord Forsyth of Drumlean, chairman of the Economic Affairs committee, said: ‘HMRC has neglected its responsibility to support small businesses with Making Tax Digital for VAT. HMRC are not listening to small businesses, while offering a six-month deferral to many in the public sector. Small businesses will not be ready for this significant change to their practices if it is introduced on 1 April, particularly with Brexit taking place three days earlier. The government must delay its introduction.’
The CIOT and ATT share many of the committee’s doubts about the potential increase in the tax take and business readiness for MTD. The professional bodies urge the government to allow time for a full evaluation of MTD for VAT before extending mandatory digital reporting to other taxes.
Adrian Rudd, Chair of the CIOT/ATT digitalisation and agent strategy working group said: ‘if properly implemented, digitisation could lead to efficiencies for taxpayers, agents and tax authorities. But many businesses will really struggle to get ready in time, and we support the committee’s recommendation of a delay’.
‘The use of software can bring many advantages, but it should be something which businesses choose because it delivers those benefits, and not be something they are forced to adopt’, Rudd added.
The House of Lords Economic Affairs Finance Bill sub-committee has called on the government to delay the introduction of making tax digital (MTD) for VAT by at least a year, to give small businesses in particular a reasonable chance to prepare.
In its new report, Making tax digital for VAT: treating small businesses fairly, the committee accuses HMRC of failing adequately to support smaller businesses, or to listen to their concerns. The report also recommends delaying the extension of MTD to other taxes until at least April 2022.
Looking at HMRC’s progress on the MTD programme since the committee’s March 2017 report on the subject, the committee takes issue with the six-month deferral given to ‘complex’ businesses, including some public sector organisations, while no such help has been extended to small businesses with fewer resources to manage the transition. The key findings of the report include:
many businesses will not be ready for the introduction of MTD for VAT in April 2019;
the costs to businesses of will be far more than HMRC’s impact assessment;
the government’s claim that MTD for VAT will increase the amount of tax collected remains unconvincing;
the government should publish its plan for the long-term development of MTD;
the penalties regime should encourage taxpayers to remedy defaults by giving them a longer grace period before applying late payment penalties;
HMRC must publish how it will communicate with and support taxpayers and agents across different levels of digital capability and skills; and
the software industry has so far offered no free software products.
Lord Forsyth of Drumlean, chairman of the Economic Affairs committee, said: ‘HMRC has neglected its responsibility to support small businesses with Making Tax Digital for VAT. HMRC are not listening to small businesses, while offering a six-month deferral to many in the public sector. Small businesses will not be ready for this significant change to their practices if it is introduced on 1 April, particularly with Brexit taking place three days earlier. The government must delay its introduction.’
The CIOT and ATT share many of the committee’s doubts about the potential increase in the tax take and business readiness for MTD. The professional bodies urge the government to allow time for a full evaluation of MTD for VAT before extending mandatory digital reporting to other taxes.
Adrian Rudd, Chair of the CIOT/ATT digitalisation and agent strategy working group said: ‘if properly implemented, digitisation could lead to efficiencies for taxpayers, agents and tax authorities. But many businesses will really struggle to get ready in time, and we support the committee’s recommendation of a delay’.
‘The use of software can bring many advantages, but it should be something which businesses choose because it delivers those benefits, and not be something they are forced to adopt’, Rudd added.
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