Parliament’s Treasury Select Committee says government plans to move to a fully national digital tax system are on the right lines, but more pilots and testing need to happen – and the overall benefits of making online record keeping and reporting each quarter for UK business is “yet to be proven”.
In its latest assessment of the government’s so-called ‘Making Tax Digital’ (MTD) proposals, the influential committee says that if “carefully” introduced, the digitisation of tax records and reporting could be an opportunity greatly to improve the administration of the tax system for the long term.
The problem: if there’s a rushed introduction and without long transitional arrangements where necessary, the economy and the overall tax yield for the nation could suffer.
Care needs to be taken, say the MPs, for two reasons – potential costs and administrative burdens for very small businesses, and the speed with which MTD is being implemented.
The former could threaten the extra £625m the government says MTD could raise, while the latter has been dogged by “insufficient engagement and consultation with the business community”.
The report recommends that the proposed MTD timetable for implementation in April 2018 looks “unachievable” and it should be pushed back instead to at least 2019/20, even “possibly later”.
A delay should also be accompanied by more piloting and testing, while a critical missing element is the emergence of what the reports calls a “fully functioning market in appropriate software”, which will .need to include adequate free software for smaller and less complex businesses – which it claims the government still has to set out how this may be accomplished.
Welcoming the report, the UK200Group, which represents smaller accountancy firms, claiming that, “The Treasury Committee’s report appears to be a lot more pragmatic than the documents put together by HMRC, and seems much more aligned with the consensus within the tax and accountancy professions.”
Making Tax Digital is one of the most significant proposed changes to the UK’s system of taxation in many years, it points out,