The House of Lords’ report on Making Tax Digital expresses doubts over HMRC’s plans. What effect, if any, is this likely to have on you and your business?
Lords’ review: The House of Lords has, reviewed major changes put forward in each year’s Finance Bill to head off trouble that might arise in turning contentious proposals into legislation. The Lords’ overall view of Making Tax Digital (MTD) was that it’s being rushed. It will cause small businesses major headaches while only resulting in a fraction of the benefits the government claims for it.
Not ready: The report refers to a lack of readiness right across the board, including HMRC’s internal systems, commercial software (largely due to insufficient information from HMRC) and businesses. HMRC’s research shows that over 60% of self-employed individuals need help with existing online tax services and so are unlikely to be able to cope with MTD arriving in April 2018 (2019 for businesses with a turnover below the VAT reg threshold of £85,000).
The cost: The Lords’ doubted HMRC’s view that moving to MTD will cost each business on average £280. This figure could well be an under-estimate. The Lords made a number of recommendations, including deferring MTD until 2020 for all businesses. Currently this only applies to businesses which pay corporation tax ; o making MTD optional for businesses with a turnover below the VAT threshold; and o making some types of business, e.g. those with seasonal or very irregular income, exempt from MTD.
Conclusion: In our view the government is unlikely to concede to the Lords’ main suggestions, but some concessions are likely. Our advice is therefore to work to the existing deadlines of April 2018 or April 2019 and watch this space for more news.