UK MPs Join Calls For Making Tax Digital Rethink

by Jason Gorringe, Tax-News.com, London

02 November 2020

The UK's Public Accounts Committee (PAC) has recommended that the UK tax authority first review the potential administrative burden and cost on taxpayers before further expanding its Making Tax Digital initiative.

The recommendation is in the PAC's 20th report on tackling the tax gap, released on October 16, 2020.

Making Tax Digital introduced new reporting obligations on value-added tax registered persons, requiring them to keep their records digitally (for VAT purposes only) and provide their VAT return information to HM Revenue and Customs (HMRC) through MTD-compatible software. The regime was introduced from April 1, 2019.

In July, the UK Government announced that VAT-registered businesses with a taxable turnover below GBP85,000 (those who have voluntarily registered) will be required to follow Making Tax digital rules for their first return starting on or after April 2022.

The Government has also announced plans to roll out MTD for income tax for accounting periods starting on or after April 6, 2023. This will impact businesses, self-employed people, and landlords.

The recommendation that the impact of these plans be first reviewed thoroughly before implementation was welcomed by the Chartered Institute of Taxation (CIOT), which has expressed doubts about the reforms' potential to reduce the tax gap and about the government's estimates regarding the administrative burden on taxpayers.

John Cullinane, CIOT Tax Policy Director, said: "We warmly welcome the recommendation that HMRC should assess whether the administrative burden that MTD is imposing on businesspeople is reasonable and affordable before they expand it further."

"The theory behind digitalization of the tax system is sound – and experience during the coronavirus has shown its merits. But it would be best to allow it to grow organically, with systems created that are attractive enough that businesses choose to migrate to them, as has happened with online filing more widely."

"We expect that the impact of COVID-19 – and the resources which have had to go into HMRC's swift and helpful responses – might anyway lead them to rethink or reschedule aspects of their roll out of MTD."

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