MTD delay may not be enough

Treasury Committee warning to Chancellor over Making Tax Digital

Whilst HMRC have agreed to delay the introduction of MTD (Making Tax Digital) until 2019 to provide further time for larger businesses to adjust, Andrew Tyrie, Chairman of the Treasury Committee, has said that this may not be enough.

Last month, HMRC published six consultations relating to various aspects of the implementation of MTD all of which close on 7th November. Tyrie warns that given the length of the consultation and the complexity of the issues, legislating in next year’s Finance Bill will leave little time for further development of the proposals. He has told the Chancellor of the Exchequer, Philip Hammond, that not only is the consultation crucial but it also needs to be meaningful. As such, the granting of another year’s grace for an unspecified group may not be sufficient.

In his recent letter to the Chancellor, Tyrie refers to the evidence the Treasury Committee has received from businesses who expressed great concern about MTD and which may grow over time once they have had the opportunity to fully consider the impact of the proposals. Some of the issues already expressed to the Committee include:

• Although many businesses already deal with HMRC digitally for VAT and corporation tax, the new requirement for digital record keeping and reporting goes beyond inputting a “handful of totals” into an online VAT return. HMRC are therefore, for the first time, dictating how accounting records have to be maintained.

• The proposal for free digital tools for small businesses with the simplest affairs is welcomed but more detail is required as to whom or for what type of level of income and for how long it will be freely available.

• Uncertainty remains as to how quarterly updates will co-ordinate with Universal Credit updates.

• Exemption for those businesses with a turnover of less than £10K is meaningless as the income level is below the Personal Allowance and therefore the concession only appears to be for those who are non-taxpayers. It would therefore be of no benefit to either HMRC or those businesses if they were to submit quarterly reports.

• Those businesses with a turnover of just over £10K and with profits of less than this amount, will be the hardest hit if they are forced to change their habits. Those that engage professional help in preparing their annual tax return may have to use a book-keeper, accountant etc, four times a year thereby quadrupling their costs.

Tyrie also suggests piloting MTD before making it mandatory which will allow lessons to be learnt and issues to be ironed out. These are major changes and it is far more sensible to focus on getting it right rather than being enslaved by a strict timetable.