The much awaited Treasury Select Committee report on Making Tax Digital (MTD) was published last week, and it makes interesting reading. It should be noted that this report focuses on the digital record keeping and ‘quarterly’ update aspects of MTD – there will be further hearings on the other aspects of MTD (Cash Basis, revised GAAP etc.) in due course.
The accounting profession has collectively expressed concern over MTD since its initial announcement in Spring 2015, but until now, these concerns have, in the main, been unanswered. The Treasury Select Committee report then, will make welcome reading to those who feel MTD is a freight train travelling too fast, with minimal control. The full report is worthy of time and attention, as there are a number of considered arguments included. However, the key conclusions in the report are:
- Agreement that digitisation will offer efficiencies for tax collection, but that changes need to take account of the needs of the millions of affected taxpayers, not just HMRC
- April 2018 is too soon for a mandatory deadline
- Even moving to April 2019 successfully is questioned, “…on the evidence that the Committee has seen so far, this also looks unlikely.”
- An exemption limit of £10,000 is too low, and the VAT threshold would alleviate a lot of concerns (“We heard no strong evidence for setting it at a lower level”)
- Learn lesson from the introduction of online filing – there is merit (to both the consumer and HMRC) to a phased roll-out
- Digital Record keeping – committee has yet to see evidence to support the view that the benefits would out way the cost
- Do not exclude spreadsheets!
- A key part of the drive for MTD is to reduce the tax gap – this may or may not be achieved.
On the face of it then, the Treasury Select Committee agree with a large number of the concerns expressed by the profession, but this does leave one final question – what happens next?
With the Government due to publish their consultation response any day now, will this have any impact? The HMRC project is well funded, with a remit to modernise the tax system, and a fast approaching deadline – you have to wonder whether the recommendations of the Treasury Select Committee may get lost in the momentum. The Government’s consultation response will give an indication of whether they are open to this feedback, and so an advisory “watch this space” may be appropriate.