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On 17 th March, 2017, the Finance Bill Sub-Committee published a report which underlined the need for the government to postpone the implementation of Making Tax Digital (MTD) for businesses.
Ever since it was first proposed in the March Budget of 2015, MTD has been the topic of much debate, and in some cases, confusion. Initially, businesses and individuals were worried about whether they might have to post Tax Returns updated quarterly, and that they might have to maintain both physical and digital records. However, the government’s response to these concerns published on the 31 st of January, 2017 appeased these apprehensions. It also included revisions related to the timeline of implementation and updates, and in The Spring Budget, the estimates of the timeline were further revised.
Because the major concerns were related to businesses, HMRC adopted the term Making Tax Digital for Businesses (MTDfB) when referring to the changes specific for businesses.
Now that Theresa May has triggered Article 50, the government has the pressing concerns of the Brexit negotiations to consider. Britain might have to take the shorter end of the stick in the negotiations with the EU, as Chancellor Philip Hammond hinted in this statement:
“We understand that we can’t cherry-pick, we can’t have our cake and eat it – that by deciding to leave the EU and negotiate a future relationship with the EU as an independent nation, there will be certain consequences of that and we accept those.”
Brexit is a huge change, and the implementation of yet another huge change during this sensitive time might not be in the best interest of Britain, no matter how productive and state-of- the-art the digitisation of tax could be.
The Sub-Committee examined the clauses in the draft Finance Bill that regulated the digitisation of tax for entrepreneurs and small businesses. These changes are set to change the life of 2.4 million self- employed persons, 1.6 million businesses, and 900,000 residential landlords.
In the report, the Committee welcomes Making Tax Digital and acknowledges its importance as a huge step into the future. But it concludes that the implementation is being rushed—an action that will have a negative and unproductive effect on small businesses, as they will be burdened excessively. The report further mentions that this severe impact would provide the government little benefit from the digitisation , as opposed to if the implementation is delayed and undergone in slowly, the right way.
The report proposes certain modifications to the implementation of the digitisation of tax in the United Kingdom, the major suggestion being to delay the execution of the change until 2020.
The Chairman of the Sub-Committee, Lord Hollick, said:
“We welcome the Government’s announcement in the Spring Budget that the scheme would not apply to businesses with a turnover below the VAT threshold until April 2019. However, this does not go nearly far enough and it needs to further delay the scheme’s implementation, and take a more incremental and gradual approach based upon the evidence from the pilot.”
At this moment, we can only speculate about what would happen in the case that the government follows through the suggestions provided by the Sub-Committee, or not. While the better route seems to be the delay of MTD until 2020—when the Brexit situation will be done and dusted, and when people would be more inclined to embrace a positive change in the forward direction.
If you have any queries about MTD and how it will affect you, please reach out to us and our experts will be happy to answer your questions.
Topics: Blog
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