The government’s controversial ‘Make Tax Digital’ plans have hit more roadblocks this week, after MPs proposed delaying the introduction until the initiative has been ironed out somewhat.

A committee of MPs has released a new report, which is adequately and imaginatively entitled ‘Making Tax Digital Report’.

While this report has examined the positive ramifications of digitising tax processes and information, but has warned against making wholesale changes prematurely as problems could arise.

"Carefully introduced, the digitisation of tax records and reporting (MTD) can be an opportunity greatly to improve the administration of the tax system for the long term,” said Rt Hon. Andrew Tyrie MP, Chairman of the Treasury Committee. “Without sufficient care, MTD could be a disaster. Implemented carefully, with long transitional arrangements where necessary, and, having drawn on information from fully inclusive pilots, Making Tax Digital could be designed for the benefit both of the economy and of the tax yield. But with a rushed introduction, it will benefit neither.”

A number of key areas were highlighted by the committee as to why some problems may arise.

The first is around cost and administrative burdens, as some businesses may find the new methods somewhat burdensome. Contractors working on a PSC basis that do not use accountants are likely to feel the strain too.

A second area was around engagement, as the committee felt that not enough has been done to date to engage and consult those who will have to report their taxes digitally.

"Taken together, these could undermine the government's objectives – for the yield and for the economy – and discredit the approach,” said Tyrie. “The collateral damage could be large. If the government gets it wrong, the culture of mutual trust and goodwill between HMRC and the vast majority of taxpayers - which still exists in the UK and which helps to keep the tax gap down – could be jeopardised.”

Tyrie went on to stress the importance of an initiative which will ‘affect millions of taxpayers’, and suggested that the government change its current approach.

“The government's proposed timetable for implementation in April 2018 looks unachievable,” Tyrie said. “The government should accept that there needs to be a delay of the start until at least 2019/20, possibly later. Comprehensive pilots of the proposed system are essential, with full protection from anything that may go wrong for those required to participate. I understand that HMRC have already undertaken a number of pilots, although little public information is, so far, available about them. Apparently, the businesses participating do so by invitation of HMRC. Clearly, those who might be worst affected by MTD are the most likely to decline the offer, greatly reducing the value of the information collected.”

According to Tyrie, these pilots ‘need to be designed to gather information over the entire reporting cycle – four quarterly updates and an end of year reconciliation.’

Tyrie concluded that while the ‘long term future can, and probably should, be digital’, it would be better ‘to take care on the road to it than to have a road accident.’

From a contractor and PSC perspective, anybody who files there own taxes will likely be reassured by Tyrie’s words and the report in general, which is available here. The danger of introducing such an initiative before it is ready could lead to numerous headaches and frustration. It seems that the government is beginning to realise that rushing into digital taxation leaves room for problems, and that so doing would be an error.