One part of the 2017 Budget announcement from Chancellor Philip Hammond that may have been missed in some quarters was the delay to introduction of the government’s Making Tax Digital programme by a year.
Though there were elements of the budget that may have caught the eye of contractors a little more (namely Hammond’s NIC hike, since retracted), the delay to the Making Tax Digital tool is important for PSCs who submit their own returns.
The tool is now currently set to be introduced in 2018, but there has been calls to move its introduction even further back to 2020 from members of the House of Lords.
There had been fears that the tool’s introduction was being rushed, and this has been echoed in a new report from the Finance Bill Sub-Committee of the House of Lords Select Committee on Economic Affairs.
This report, entitled ‘The Draft Finance Bill 2017: Making Tax Digital for Business’, indicates that small businesses, including PSCs, were facing an unnecessary burden from the introduction of the tool.
The move to 2020 would allow for more time for the government to carry out a full pilot of the tool, and for businesses to prepare and make the move to digital taxation.
The report also suggests making keeping digital records and quarterly reporting optional for businesses with a turnover below the VAT threshold, and says the government should look at whether some businesses, such as those with seasonal or highly irregular income, should be outside the scheme.
“The report should give the government the impetus to tap on the brakes on this juggernaut, to allow more time for full end-to-end testing, piloting and evaluation to avoid unnecessary logistical and financial risks for both HMRC and businesses,” said Yvette Nunn, Co-chair of the Association of Taxation Technicians’s Technical Steering Group. “We support concerns in the report that the Government's estimate of the 'tax gap' savings are fragile and not based on ‘adequate evidence’. Similarly, we are highly sceptical of HMRC’s assertion that the scheme will initially cost businesses on average just £280, a figure that does not reflect the reality of the initial expenses businesses will incur.”
Anthony Thomas, Chairman of LITRG, also reacted to the report by saying: “Like the committee, LITRG believes that a digital programme, implemented with care and sufficient regard for the needs of the taxpayer, can greatly improve the administration of tax. We welcome the Chancellor’s Budget announcement that businesses with a turnover below the VAT limit will have an extra year before being required to keep digital records and report to HMRC each quarter, but agree with the committee that this does not go far enough; the digital programme should be optional for businesses below the VAT threshold, for people will naturally gravitate towards systems that are good, intuitive and easily navigable, without the need for compulsion.”
Thomas added: “We also concur with the committee’s recommendation that HMRC urgently assess and make public how it intends to support the digitally assisted population, and business owners with disabilities that require the use of assistive technology.”