16 January 2017
The Treasury Committee, chaired by Conservative MP Andrew Tyrie, has suggested a delay in the implementation of Making Tax Digital (MTD) “until at least 2019/20, possibly later”. MTD is planned to be introduced from 6 April 2018 for landlords and the self- employed, with micro businesses next.
The Committee sees issues around the threshold for reporting; the range and depth of the pilot schemes and the lack of a “fully functioning market” in appropriate software.
At the moment the proposed threshold for reporting is £10,000 which appears to be an arbitrary choice, as this is even below the current personal allowance. Calls are being made for this threshold to be at least set at the VAT threshold, which currently sits at £83,000.
The Committee is concerned that the information arising from the pilot scheme is very limited as the participants of the scheme are by HMRC invitation only. This could potentially undermine the value and integrity of the results as businesses could decline to enter the pilot scheme, if it was felt it was going to have an adverse effect on that business.
Finally, whilst software developers have been invited to partake in the pilots, the Committee was concerned that the Government are yet to outline how such a market would be achieved, as HMRC are reluctant to receive information via Excel and want software providers to provide free software for those who do not purchase accounting software.
The Committee feels that if the Government get this wrong, the trust and the goodwill of the tax paying public could be easily lost, thus meaning that all the savings that MTD is designed to make could be very easily dissipated.
All of these concerns have been echoed by the Institute of Taxation and the Institute of Chartered Accountants in England and Wales (ICAEW), with the ICAEW even suggesting that MTD should be voluntary for at least the smaller businesses, and that HMRC should instead look to incentivise businesses to use MTD.
But will they listen?
We shall just have to wait and see but we are certainly heading for interesting times. If you need more advice or information about MTD, then please contact our tax specialist Brian Carey.