Members of a House of Lords committee have called for a delay in HMRC’s Making Tax Digital.
The report undertaken by the House of Lords’ Economic Affairs Committee, has found that ‘many businesses will not be ready for the introduction of Making Tax Digital for VAT in 2019’, and has recommended waiting ‘at least’ one year for the changes to be brought in.
Making Tax Digital (MTD) was originally announced in March 2015 Budget by George Osborne, it is HMRC’s plan to modernise the tax system.
Every taxpayer has an online digital tax account where HMRC will collect and process information affecting tax in as close to real time as possible.
Taxpayers will be presented with a complete financial picture of their tax affairs in their digital tax account.
The current timetable, which has been revised already, will see Making Tax Digital for VAT introduced this coming April (2019).
This will apply to businesses with turnover above the VAT registration threshold; businesses who voluntarily registered for VAT with turnover below the threshold are exempt, but can opt-in.
Although the committee says it welcomes ‘attempts to modernise HMRC’s systems’ the report blasts HMRC and the Government for not ‘listening’ or ‘supporting’ small businesses who are not ready for the change.
"HMRC has neglected its responsibility to support small businesses with Making Tax Digital for VAT,” said Lord Forsyth of Drumlean, chairman of the Economic Affairs Committee.
“HMRC are not listening to small businesses, while offering a six-month deferral to many in the public sector.
“Small businesses will not be ready for this significant change to their practices if it is introduced on 1 April, particularly with Brexit taking place three days earlier.
“The Government must delay its introduction.”
The report also recommended ‘transitioning in stages’ to allow businesses to join the programme when ‘they are ready’, as well as postponing the next stage of Making Tax Digital to 2022.
"The Government has failed to listen to the warnings in our previous report,” added Lord Forsyth.
“It must slow down its Making Tax Digital programme and listen carefully to the concerns raised by this Committee, small businesses and accountants."
John Moorhouse, accounts senior at Ellis & Co Chartered Accountants added: “Since the plans for Making Tax Digital were announced, the time table and scope have changed considerably.
“However, once Making Tax Digital is finally implemented there will be no turning back and businesses will have to get on board.
“My advice to all our clients is to get set up with an accountancy software package as soon as possible.”
Ellis & Co is offering three hours of free set up and training for all its clients.
For further information, or to sign up call 01244 343504.