The House of Lords Economic Affairs Committee has criticised HM Revenue & Customs (HMRC) for its handling of Making Tax Digital (MTD) and called for a delay to some of the regime’s mandatory requirements.
The majority of VAT-registered businesses with taxable turnover above the VAT registration threshold of £85,000 will need to keep digital records and file their VAT returns using HMRC-compliant software or methods on a quarterly basis from April 2019.
However, having reviewed the requirements for MTD and its promotion by HMRC to businesses, the committee has recommended that the new rules for VAT should not be made mandatory next year and should instead allow businesses to ‘go digital’ at their own pace.
The Lords also recommended that the Government wait until April 2022 to apply MTD to other taxes to give HMRC time to learn lessons from the implementation of digital taxation on VAT.
Within its report, Making Tax Digital for VAT: Treating Small Businesses Fairly, the committee was also highly critical of HMRC’s public promotion of the new regime, which only began in any significant way several months ago.
Lord Forsyth of Drumlean, Chairman of the House of Lords’ Economic Affairs Committee that authored the report, said: “HMRC has neglected its responsibility to support small businesses with MTD for VAT.
“Small businesses will not be ready for this significant change to their practices, especially with Brexit taking place three days earlier,” he added.
The committee’s report has already gained the backing of a number of leading accountancy organisations, including the Institute of Chartered Accountants in England and Wales (ICAEW), the Chartered Institute of Taxation (CIOT) and the Association of Tax Technicians (ATT).