The Treasury Select Committee has called for a delay in implementation, warning that ”without sufficient care MTD could be a disaster’.
The Treasury Select Committee (TSC) is currently undertaking a wide-ranging inquiry into UK tax policy and the tax base, of which Making Tax Digital (MTD) is a crucial but small part. In an unusual but welcome step, the TSC has decided to release an MTD specific report after hearing evidence about stakeholders’ concerns about the proposals.
Although broadly supportive of a digitised tax system, the report urges caution on several fronts:
We welcome the main recommendations of the report which echo the points we made in our response to the consultation documents at the end of 2016. MTD is the future but the transition needs to be carefully managed.
The report teases out some very interesting statistics, especially around digital exclusion: an Institute of Chartered Accountants in England and Wales survey in 2015 is quoted as concluding that “over half of the self-employed were either digitally excluded or assisted digitally” - this alone poses an enormous challenge to implementing MTD.
There are also some interesting figures quoted around costs to taxpayers and benefits to the Exchequer.
In terms of the former, the TSC heard evidence from the Federation of Small Business that they expected the likely cost to be £2,770 per business per year. If borne out, this would mean that the cost to business would exceed the additional expected tax yield, a negative return to the whole economy. And that is assuming the expected yield arises, something that the TSC seemed to think was “unlikely to materialise”.
We now await HMRC’s consultation response which is scheduled to be published this month. We may have confirmation that MTD is to be delayed for a year at least and that mandation is to be dropped - after all, if MTD is as good as promised, taxpayers will migrate naturally.
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