If this makes tax too taxing, tough.
The government’s Making Tax Digital plans are to go ahead, despite calls from opposition MPs to delay its rollout. Speaking in Parliament, Mel Stride, the Financial Secretary to the Treasury, made a clear declaration about the importance of this legislation:
“It has never been more important for businesses to be able to seize the opportunities that digital technology offers. Making Tax Digital help to do just that.”
Since April 2018, HMRC has been running a trial of the MTD VAT service, which was opened to the public in October of that year. Now, Stride announced, more than 16,500 businesses are signed up with this service.
As impressive as that might seem at first glance, Labour MP Peter Dowd pointed out that only, “A total of 0.5% of eligible businesses – one in 200 – have signed up to Making Tax Digital.” With the 1st April 2019 deadline fast approaching, many businesses simply aren't ready for the changes that are coming. Speaking for the opposition, Dowd said, “… the stakeholders to whom we have spoken in the business sector and the tax community continue to raise deep concerns about their ability to be ready for digital VAT reporting.”
Furthermore, Labour don’t believe that HMRC itself will be ready for MTD.
“To the best of my knowledge, it has the same problems as many of the businesses that will be required to begin digital reporting in 2019. Those concerns are echoed by tax professionals, who emphasise that the current timetable is unrealistic and unworkable for HMRC and the business community.”
Labour called for MTD’s introduction to be delayed until 2022 (not the first time someone has suggested this), but Stride made it clear that the government would be proceeding as planned. He was keen to point out, however, that there would be “no cliff edge on 1st April”, and that the government would “take a proportionate, light-touch approach to penalties”.
That should at least provide some reassurance to business owners who are unclear about the new rules. But there are also concerns about the timing of MTD, which comes just as HMRC is neck deep in the mire of Brexit preparations.
Ultimately, though, the future of MTD depends on how well the full roll-out of the VAT system goes, because it’s intended to act as a testbed for the full MTD system, which will include income and corporation tax submissions.
If it works as intended, the taxman could claw back as much as £9.2 billion of payments lost through human error. If doesn't work as planned, who knows?