HMRC warned over "rigid timetable" for digital tax shake-up

HMRC may need to delay digital tax plans, Treasury committee chair Andrew Tyrie tells new chancellor Philip Hammond

By Suzannah Brecknell

21 Sep 2016

Andrew Tyrie, chair of the Treasury Select Committee, has urged chancellor Phillip Hammond to consider delaying implementation of HMRC's Making Tax Digial (MTD) plans.

MTD aims to move a fully-digital tax system by 2020. Most businesses will be required to provide quarterly updates to HMRC from 2018, and keep their records up-to-date with free online tools and apps created by the tax authority.

But, in a letter published on the Treasury Committee website, Tyrie said: “HMRC's proposals are major changes. There remains considerable cause for concern with the proposals. Better to get it right than to stick to a rigid timetable.”

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The Conservative MP acknowledged that MTD “may improve the customer experience for a growing number of people who are able to engage digitally”.

For example, it could allow businesses to explore the consequences of tax decisions by providing “what if” modelling through the online system.

“Implemented carefully, it could do some good,” Tyrie writes. “But it could also do much harm. The consultation is therefore crucial. It needs to be meaningful. There may be a case for delaying the implementation of MTD.”

"Better to get it right than to stick to a rigid timetable" - Treasury Committee chair Andrew Tyrie

HMRC's roadmap for the policy, published last year, says that implementation will be phased from April 2018 to 2020.

The department published six separate consultations on the plans in August, each dealing with the impact of different groups of businesses and taxpayers. Tyrie writes that despite “initial relief” from business about the publication of the “much-trailled consultation papers,” his committee had heard many concerns about details in the consultations.

For example, Tyrie says details about how much information will be needed in digital records is “tantamount to prescription by HMRC, for the first time, of a particular form in which accounting records must be maintained”.

He also notes that although businesses with a turnover of under £10,000 will be exempted, those with a turnover just above this threshold will be hardest-hit if they are obliged to change their working practices — for example by hiring a bookkeeper to submit returns four times a year rather than once a year.

“More [concerns] may emerge over the coming weeks, as businesses digest the huge amount of detail in the consultation papers,” he writes.

The chancellor has asked HMRC to provide legislation for the plans in next year's Finance Bill. This means draft proposals for the legislation would be expected at the end of November this year. 

But Tyrie warned that this would leave little time to consider responses, and subsequently amend proposals if needed, after the consultation closes on 7 November.

After suggesting that a delay may be needed, Tyrie says “a year's extension for an unspecified group of businesses may not be enough” and suggests piloting systems and allowing time for customer experiences to be taken into account “well before digital reporting is made mandatory”.

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