The CIOT and ATT share many of the doubts about the potential increase in the tax take and business readiness for Making Tax Digital that are expressed in a House of Lords Economic Affairs Committee report titled Making Tax Digital for VAT: Treating Small Businesses Fairly, published today – and back the report’s call for a delay to the scheme.
Making Tax Digital for VAT (MTD for VAT) will require VAT registered businesses with taxable turnover above the VAT registration threshold to keep records in digital form and file their VAT Returns using software.
Among the report’s findings and recommendations are the Committee suggesting the Government’s introduction of mandatory MTD for VAT should be delayed by at least one year from its current 1 April 2019 start date. The Government should wait until at least April 2022 before Making Tax Digital is extended to other taxes in order for lessons to be learnt from the implementation of MTD for VAT, the report adds.
Adrian Rudd, Chair of the CIOT / ATT Digitalisation and Agent Strategy Working Group (DASWG), said:
“Many businesses still have little or no awareness of HMRC’s Making Tax Digital project. This widespread lack of awareness is a concern with the start date for MTD for VAT less than 150 days away. MTD for VAT will be the biggest overhaul in VAT obligations in decades. With just a few months to go before it kicks in, these knowledge gaps could mean normally compliant firms fail to fulfil their new obligations.
“If properly implemented, digitisation could lead to efficiencies for taxpayers, agents and tax authorities. But many businesses will really struggle to get ready in time, and we support the Committee’s recommendation of a delay for MTD for VAT. Pushing back the start date for Making Tax Digital for other taxes to 2022 at the earliest, is something we support, but it is more important that there is sufficient time set aside for a full review and evaluation of MTD for VAT before this programme is extended.
“The use of software can bring many advantages but it should be something which businesses choose because it delivers those benefits, and not be something they are forced to adopt. This is particularly important because we remain sceptical about HMRC’s assumption that Making Tax Digital for VAT will indeed reduce the tax gap and it is likely to cost businesses far more to implement than HMRC have estimated.
“With Brexit in March next year and MTD for VAT coming in just days later it promises to be a spring of change and challenge for businesses."
Notes to editors
1.. The House of Lords Economic Affairs Committee’s Making Tax Digital for VAT: Treating Small Businesses Fairly report can be found here. Commenting on the report, Lord Forsyth of Drumlean, Chairman of the House of Lords Economic Affairs Committee, said: “HMRC has neglected its responsibility to support small businesses with Making Tax Digital for VAT. 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 Government has failed to listen to the warnings in our previous report. It must slow down its Making Tax Digital programme and listen carefully to the concerns raised by this Committee, small businesses and accountants.”
2. Under Making Tax Digital (MTD) for VAT, all businesses with a taxable turnover above the VAT threshold (currently £85,000) will have to keep digital records for VAT purposes. For the vast majority of these businesses, this requirement starts from the first VAT return that starts on or after 1 April 2019. For the time being businesses will not be required to keep digital records or update HMRC quarterly for other taxes, such as income tax, but this is expected to be introduced sometime after 2020. If your business is required to keep digital records for MTD then the date this requirement starts will depend on its VAT quarter. Unless one of the few businesses deferred until October 2019, those with March quarter ends will be required to keep digital records from the June quarter which starts on 1 April 2019, those with a May quarter start on the 1 June 2019.
Some of those who annually account who are deferred until October 2019, include trusts, ‘not for profit’ organisations that are not set up as a company, VAT divisions, VAT groups, various public sector entities, local authorities, public corporations, traders based overseas and those required to make payments on account.
3. House of Lord Economic Affairs Finance Bill Sub-committee: Inquiry on the draft Finance Bill 2018 - CIOT comments can be found here.
4. The Chartered Institute of Taxation (CIOT)
The CIOT is the leading professional body in the United Kingdom concerned solely with taxation. The CIOT is an educational charity, promoting education and study of the administration and practice of taxation. One of our key aims is to work for a better, more efficient, tax system for all affected by it – taxpayers, their advisers and the authorities. The CIOT’s work covers all aspects of taxation, including direct and indirect taxes and duties. Through our Low Incomes Tax Reform Group (LITRG), the CIOT has a particular focus on improving the tax system, including tax credits and benefits, for the unrepresented taxpayer.
The CIOT draws on our members’ experience in private practice, commerce and industry, government and academia to improve tax administration and propose and explain how tax policy objectives can most effectively be achieved. We also link to, and draw on, similar leading professional tax bodies in other countries. The CIOT’s comments and recommendations on tax issues are made in line with our charitable objectives: we are politically neutral in our work.
The CIOT’s 18,000 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’, to represent the leading tax qualification.
The Association of Taxation Technicians (ATT)
The Association is a charity and the leading professional body for those providing UK tax compliance services. Our primary charitable objective is to promote education and the study of tax administration and practice. One of our key aims is to provide an appropriate qualification for individuals who undertake tax compliance work. Drawing on our members' practical experience and knowledge, we contribute to consultations on the development of the UK tax system and seek to ensure that, for the general public, it is workable and as fair as possible.
Our members are qualified by examination and practical experience. They commit to the highest standards of professional conduct and ensure that their tax knowledge is constantly kept up to date. Members may be found in private practice, commerce and industry, government and academia.
The Association has over 8,000 members and Fellows together with over 5,600 students. Members and Fellows use the practising title of 'Taxation Technician' or ‘Taxation Technician (Fellow)’ and the designatory letters 'ATT' and 'ATT (Fellow)' respectively.