Calls mount to shelve Making Tax Digital

The business background of Philip Hammond is what MPs hope will make him receptive to their calls at the weekend -- and the calls of many others before -- to shelve Making Tax Digital.

Sitting on the Treasury Select Committee, the MPs said on Saturday that the ‘at least’ quarterly tax accounts for PSCs should be put back until “at least 2019/20, possibly later.”

It is one of five key recommendations from the committee, and supports the stance of the ATT, the CIOT and the ABAB, which have all criticised MTD or called to postpone it.

Concern about the April 2018 commencement date has also been expressed by PwC; the ICAEW, which says MTD should be voluntary, and cloud accountancy firm FreeAgent.

The cloud firm’s wish that the VAT threshold (£83,000) should be used to give the smallest of firms a year’s deferral appears to have struck a chord with the committee, at least in part.

In fact, the MPs want the threshold to be the starting point for MTD, meaning all PSCs with turnover below £84,000 would be exempt. The argument was first put by the CIOT.

For their third, fourth and fifth recommendations, the committee calls for more extensive pilots of MTD; pilots that go beyond digital testing, and a fully functioning software market.

“There are hundreds of different providers of accounting software,” said the Chartered Institute of Taxation (CIOT), welcoming the recommendation.

“In many cases, [it is] adapted for specific industries and trades. Right now; we have no idea how many of these will be ready and tested in time.”

Timing appears to be what concerns Treasury Select Committee chair Andrew Tyrie the most; so much so that he took the unusual step of writing to Mr Hammond before his committee reported.

“Without sufficient care, MTD could be a disaster,” Mr Tyrie said on Saturday. “The long term future can, and probably should, be digital. Better to take care on the road to it than to have a road accident.”

As to the collisions foreseen, the consensus seems to be that the main one will be between HMRC and less-resourced enterprises.

“Smaller businesses could cease to trade or move into the hidden economy,” warns Yvette Nunn of the Association of Tax Technicians (ATT).

She explained: “The mandatory imposition of an unfamiliar, expensive and burdensome system of record keeping could reduce rather than encourage good business record keeping and result in reduced tax compliance.”

It is not the only blow envisioned for the exchequer. According to the Financial Times, the MP committee regards the £625million in extra revenue that MTD is projected to raise as “perhaps not…realistic,” on the basis that some small firms are likely to undercount their expenses.

This morning, Making Tax Digital is highlighted in a new report as an example of starting consultations at too late a stage; another criticism of the scheme.

The Better Budgets report states of MTD: “In this case, two major decisions had already been taken before consultation started -- to require all businesses to maintain accounts online and to make quarterly online returns to HMRC.

“Those pre-emptive decisions were felt to have big implications for many small businesses -- but were made without consultation and without them being able to challenge the assessment of compliance costs.”