Government Urged To Push Back Tax Digitisation Plans

Parliament’s Treasury Committee has concluded that the government’s timetable for introducing mandatory digital tax recording and filing in April of next year is “unachievable” and should be pushed back at least a year.

The plan, called Making Tax Digital (MTD), would require businesses from a threshhold of £10,000 in revenues to keep digital tax records and file digitally four times a year with a reconciliation at year-end.

Unrealistic demands

But in a new report the committee found the scheme in its current form would place unreasonable cost and administrative burden upon very small businesses and has so far insufficiently consulted with the business community to identify other concerns.

As a result the programme risks discrediting the government’s approach to going digital and threatens the “culture of mutual trust and goodwill between HMRC and the vast majority of taxpayers”, stated committee chair Andrew Tyrie MP.

The government should abandon its plans to implement MTD for businesses under the VAT threshhold of £83,000 and should carry out more extensive pilots, Tyrie said.

He said a “fully functioning market” for the needed software is essential, including adequate free software for smaller and less complex businesses, but the government “has yet to set out how this may be accomplished”.

The committee acknowledged that a transition to digital taxation was possible and could benefit the UK, but needed to be implemented carefully.

‘Rushed’

“Implemented carefully… Making Tax Digital could be designed for the benefit both of the economy and of the tax yield. But with a rushed introduction, it will benefit neither,” Tyrie stated.

He said the committee plans to take evidence from ministers once the government has considered and responded to the report.

The Chartered Institute of Taxation (CIOT) said the committee was right to call for a delay, in part because of concerns about the availability of the required software.

“There are hundreds of different providers of accounting software – in many cases adapted for specific industries and trades,” said CIOT president Bill Dodwell in a statement. “Right now we have no idea how many of these will be ready and tested in time.”

‘Losing digital confidence’

The National Audit Office (NAO) previously criticised HMRC for being over-hasty in cutting staff in expectation of benefits from moving to digital processes, which resulted in a service collapse in the first seven months of the 2015-16 tax year.

During that period average call waiting times tripled, costing taxpayers an estimated total of £97m as they waited on hold, the NAO said.

In 2015 HMRC announced ambitious plans to close 137 of its 170 offices, consolidating its workforce around digital processes and more online interactions with taxpayers, as part of a ten-year modernisation programme that unions described as “devastating”.

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