MPs are hoping that Chancellor Philip Hammond’s background in business will make him see reason when it comes to Making Tax Digital (MTD). MPs and several others from the world of accountancy and business have called on Hammond to postpone the introduction of MTD.
MPs in the Treasury Select Committee stated that the quarterly tax payment should be deferred to 2019/2020, or even later if possible. The committee has made five recommendations and supports the opinions of the Chartered Institute of Taxation (CIOT), the Association of Tax Technicians (ATT) and the Administrative Burdens Advisory Board (ABAB). The three organisations have either criticised MTD or called for it to be postponed.
PwC has aired its concerns about introducing MTD in April 2018, and the Institute of Chartered Accountants in England and Wales (ICAEW) believes that MTD for IT contractors and other contractors should be voluntary.
Some cloud accountancy firms have stated that the VAT threshold of £83,000 should be introduced to give smaller PSCs and contractors deferral for a year. This suggestion has been welcomed by the Treasury Select Committee, though just in part.
The committee has suggested that the threshold should be used as a starting point for MTD. If a PSC or contractor has an annual turnover of less than £84,000, they should be exempted from MTD. In fact, this was first suggested by CIOT.
The committee has also called for more comprehensive pilots, and these tests should be more than just digital testing, while ensuring that contractors have access to completely functioning accounting software.
CIOT stated that there are many providers of accounting software, and invariably each software is developed for a particular industry and/or trade. Currently, there is no concrete data to provide information on how many of these will be tested and prepared in time to meet the MTD introduction deadline.
ATT’s Yvette Nunn stated that MTD could be disastrous for smaller businesses. She said that these businesses may cease to trade or shift to a hidden economy if they are forced to adopt an expensive and tedious record-keeping system.