The House of Lords Committee thinks the introduction of MTD is being rushed
Committees of both Houses of Parliament have now expressed concern over the costs to business and the implementation timetable.
House of Lords – Economics Affairs Committee
The House of Lords publishes its report Finance Bill 2017: Making tax digital for business
Among the witnesses that gave evidence to the Committee were Rebecca Bennyworth, ICAEW Council Member and ex Chair of Tax Faculty, and David Lyford-Smith a Technical Manager in the ICAEW IT Faculty.
The report recommends four changes to the current proposals to ensure the effective implementation and operation of the government plans:
This delay will also allow the Government to test the underlying behavioural assumptions; to raise awareness of the scheme amongst sectors who remain unaware of the forthcoming changes; and put in place support systems for those who are digitally excluded. The latter are vital: HMRC’s own research reveals that 61 per cent of the self employed (which may be up to two million people) are either unable to, or require assistance, to interact with Government online.
The report also notes that
“when the Chancellor first announced this scheme in 2015 its purpose was to “make tax easier”.
But the report concludes that
“for many businesses the Making Tax Digital proposals no longer achieve this and will instead make taxation more burdensome.”
The House of Lords Committee is hopeful that its recommendations
“will help the Government bring the scheme back to its original aims”
The Committee’s Chair, Lord Hollick, sent a copy of the report to the Prime Minister and in his covering letter repeated the points raised in the report and also recommended that the government needs to raise awareness of the prospective changes via “a proactive, thorough public information campaign.”
House of Commons - Treasury Select Committee report
In January 2017 the Treasury Select Committee published its own report into Making Tax Digital and we reported on their findings which you can access by clicking here.
Other Tax Faculty material on MTD including a webinar on Wednesday 22 March
Tax Faculty has set up a dedicated part of its website to provide detailed information about Making Tax Digital.
On Wednesday 22 March Tax Faculty will hold a webinar with Anita Monteith, Sara Ghaffari and introductory remarks from Paul Aplin to bring listeners up to date with the latest developments in the Budget and in the Finance Bill published on Monday 20 March.
To sign up for the webinar click on Demystifying MTD.
I too operate in a similar environment to Julie and agree completely with her comments.
This new system will cost the average 'brown paper bag incomplete records 'client money . They are ' brown paper jobs' for a reason. They represent a major group in this country of hairdresser, nail technicians, builders, carpenters etc. They are unsophisticated users of the tax systems who utilize the services of accountants to meet their compliance needs with hmrc. They will not be doing this quarterly book keeping themselves and will need to seek the services of their accountant with an increase to their charges. Small practices such as mine serve the needs of these small businesses at a reasonable fee and in common with a lot of small practices are already operating as capacity. Having talked to many accountant many see the solution to this increased work load and a 'cull' on clients and increasing fees on those retained. Making compliance more complicated and more expensive will inevitably encourage the black economy as people are discouraged from interacting with the tax system. Personally, i see that change has no purpose but if it is pressed through regardless of the comments from the profession then the absolute lowest entry level should be the vat threshold or higher. Some of these clients don't have computers, emails ,online banking , some can hardly read and write. This proposal is too onerous on the unsophisticated client.
Both the Lords Economics Affairs Committee and the Commons Treasury Select Committee have produced reports which express grave reservations about the introduction of MTD. Both recommend far more time for reflection. For whatever reason HMRC just what to press on regardless. At this stage we must all continue to lobby MPs (and encourage others to do) to support the recommendations of the Lords and Commons as the Finance Act progresses.
The House of Lords seems to be the only sector of Government that actually understands some of the impact of these proposals.
ICAEW have been very ineffective in getting the message across to HMRC; a great many valid points were made in the ICAEW response, which were largely ignored by HMRC yet I see little evidence of ICAEW taking HMRC to task over that.
Have the ICAEW considered making joint representations with other interested parties such as ACCA etc to HMRC to ensure that their valid concerns are not ignored?