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UK lawmakers have called on the Government to delay the implementation of its Making Tax Digital (MTD) project, saying the initiative "could be a disaster" if rushed.
The aim of MTD is for most businesses, self-employed people, and landlords to "keep track of their tax affairs digitally and update HM Revenue and Customs (HMRC) at least quarterly via their digital account."
The Treasury Committee released its report on the project on January 10. Andrew Tyrie, the Chairman of the Committee, said: "Carefully introduced, the digitization of tax records and reporting can be an opportunity greatly to improve the administration of the tax system for the long term. Without sufficient care, MTD could be a disaster. Implemented carefully, with long transitional arrangements where necessary, and, having drawn on information from fully inclusive pilots, Making Tax Digital could be designed for the benefit both of the economy and of the tax yield. But with a rushed introduction, it will benefit neither."
"The Committee has identified a number of serious shortcomings with current plans. In a nutshell, these are twofold."
"First, there are the costs and administrative burdens for very small businesses - with the consequent risk that many may go out of business or move into the hidden economy. This may undermine the extra revenue that the Government is expecting to raise from MTD, scored in the August consultation document at GBP625m (USD773.5m)..."
"Second, there is the speed with which MTD is being implemented. So far, there has been insufficient engagement and consultation with the business community. At present, many of those on whom demands from MTD will be made – millions of small businesses up and down the country: the backbone of the economy - are ill equipped to handle the reporting requirements."
"Taken together, these could undermine the Government's objectives – for the yield and for the economy - and discredit the approach. The collateral damage could be large," Tyrie said.
The committee said that the timetable for implementation should be extended from April 2018 to the fiscal year 2019/20 at the earliest. It also called for an increase to the threshold for having to submit digital accounts from GBP10,000 (USD12,311) to at least the level of the VAT threshold at GBP83,000.
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