In a scathing report published today by the House of Lords Economic Affairs Committee not only should the Government delay Making Tax Digital by at least one year but must wait until at least April 2022 before Making Tax Digital is extended to other taxes.
The key finding of the report state that Small businesses could pay a heavy price for Making Tax Digital for VAT.
Lord Forsyth of Drumlean, Chairman of the House of Lords 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 Government has failed to listen to the warnings in our previous report. It must slow down its Making Tax Digital programme and listen carefully to the concerns raised by this Committee, small businesses and accountants.”
The report also includes the following key findings and recommendations:
- HMRC is alone in its confidence that all one million businesses will be ready for Making Tax Digital for VAT in April 2019
- The costs to businesses of MTD for VAT will be far more than HMRC’s impact assessment
- HMRC must publish how its communication and support systems will meet the needs of taxpayers and agents across different levels of digital capability and skills
- A small number of organisations have been given a six-month deferral, but not the smaller businesses who have the fewest resources to devote to implementation
- So far, no free software products have been offered by the software industry. The smallest businesses will struggle unless HMRC provides a basic free software option
- The Government should publish its plan for the long-term development of MTD, including milestones and when key decisions will be made
- The penalties regime could be fairer and encourage taxpayers to remedy defaults promptly by giving taxpayers a longer grace period before penalties for late payment are applied
- The Government’s claim that MTD for VAT will increase the amount of tax collected remains unconvincing. They should revisit their assumptions and publish another revised impact assessment
- Neither Treasury nor HMRC are taking the risks to implementation of Making Tax Digital seriously enough.
Frankly this is the most common sense I’ve seen written about Making Tax Digital although it is unclear as to whether or not there will be any changes to the aggressively run Making Tax Digital implementation programme as a result of this report.
With such a damning vote of no confidence in HMRC’s Making Tax Digital project one can only be left amazed that the implementation continues at such full throttle.
Dare I say that someone is going to end up with rather a lot of egg on their face if they don’t take heed of the findings ….. quickly.