MPs urge Chancellor not to 'rush' Making Tax Digital

3rd November 2016 | News

The Treasury Select Committee has called on Chancellor, Philip Hammond not to rush the Making Tax Digital proposals after hearing guidance from accountancy representative bodies and the Federation of Small Business (FSB).

Accountancy and small business experts divulged to the Treasury Select Committee of the potential financial burden that Making Tax Digital will inflict on small businesses and argued against mandation.

Mike Cherry, policy director, FSB, believes the Making Tax Digital proposals would cost businesses up to £2,770 a year.

Cherry added a more realistic timescale for the digital tax project would be 2025, “which would enable businesses to latch on to something that does work after being properly tested”.

“The idea that you should be bringing this in on sole traders and landlords as a tranche before testing it properly starting with larger businesses… [is] going about this the wrong way,” added Cherry.

“Many small businesses are not aware that this is coming down the track. It’s creating a perfect storm. We have had the national living wage, dividends changes, auto-enrolment, and now we seem to be tinkering around the edges.”

Frank Askew, head of tax faculty, Association of Chartered Certified Accountants (ACCA), reiterated that the professional bodies want to support the principle of Making Tax Digital but “the fundamental parameters have already been set and we are just consulting on the detail”.

In addition, Mr Cherry believes HMRC’s mandatory digital tax plans are influenced more by the Treasury’s heavy investment in its IT infrastructure than its desire for business compliance.

As a result of this feedback, Andrew Tyrie, chairman, Treasury Select Committee, wrote to the Chancellor to request details on: the cost of software – and the upskilling required to use it – the additional administrative burden; the cost of migrating to new accounting systems; the cost of employing tax agents and accounts; and the impact on business productivity.

Mr Tyrie also believes a measured approach to the Making Tax Digital implementation should be adopted by the Chancellor.

“Every effort should be made fully to pilot its introduction, perhaps over several years. Only after the lessons have been learned from the pilot should consideration be given to a mandatory scheme,” said Tyrie.

“Nothing like enough has been done, so far, to ensure that this proposal does not harm many of Britain’s small businesses.

“As things stand, it looks as if the effect will be to transfer part of the costs of HMRC’s IT investment in businesses, along with a heap of administration.”

Consultations on the Making Tax Digital proposals are running until 7th November, with HM Revenue and Customs (HMRC) keen to hear responses and ideas relating to the plan to make HMRC one of the most digitally advanced tax authorities in the world.




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