Making Tax Digital - Pause or Plunge, the Country awaits…

18 January 2017

While January is still set to be the month that we anticipate further news regarding HMRC's MTD agenda, and this should still be the case given the comments in the Autumn Statement, they were pipped to the post by The Treasury Committee who unexpectedly released a 50 page report on Monday calling the current MTD proposals 'over ambitious'.

The Treasury Committee is a powerful select committee of the House of Commons whose remit is to examine the expenditure, administration and policy of HM Treasury, with all of its agencies and associated bodies including HMRC.

Most of the comments made in the report do not come as a surprise. Much is in support of statements already made by the professional bodies, advisers and tax payers. Indeed, we made similar comments in our representations to HMRC in the autumn.

The most striking comment made, however, was the Committee's recommendation that full MTD implementation be delayed until 2019/20 - a two year delay from its current proposed implementation date. This suggestion was strongly supported by sound arguments. The Committee highlighted that there were significant flaws in the Government's digitalisation plans concerning the speed of implementation, the lack of evidence regarding the free software that would be available, the need for substantive cost-benefit analysis and the gung-ho mandation approach to bringing in MTD.

They suggested that the increased costs businesses would suffer from compliance would reduce the business' taxable profits which would reduce the tax intake for HMRC. Given that the Government believes tax digitalisation will work towards plugging the tax gap, it would seem that the Committee have made a sound argument against this.

A link was also made to Brexit and the implications of a potential change in domestic VAT rules and how the timing of the introduction of MTD should, wisely, coincide with any changes resulting from any Brexit deal. This will minimise the number of system-based changes businesses would need to deal with.

Interestingly, the report also highlighted that there may be benefits to introducing MTD on a voluntary rather than mandatory basis which would allow room for greater tax payer buy in. However, we must be aware that whilst the report contained much which we consider to be sensible, we must now await the definitive view of the Government who may decide that plugging the tax gap will become even more important as inflation increases and interest rates start to rise increasing the cost of government debt. As with many government initiatives, a fudge maybe the most likely outcome with delays for many but some still caught by the original timescale. We await HMRC’s response.

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If you would like a consultation to discuss how Making Tax Digital could impact you or your business please contact Androulla Soteri, speak to your local MHA MacIntyre Hudson advisor or send enquiry.