Earlier this week, the controversial “Making Tax Digital” scheme was omitted from the Finance Bill. Philip Hammond has decided to delay the scheme after it had been heavily criticised by business owners. This comes soon after ICAEW, ACCA and the Federation of Small Businesses joined forces to call for the scheme to be removed from the Finance Bill.

Originally announced by George Osbourne in November 2015, Making Tax Digital was designed to make the tax system similar to online banking. It will require business owners, the self-Making Tax Digital Schemeemployed and landlords to produce quarterly digital tax returns. Currently they’re only expected to do this once a year, either online or through the post. Making Tax Digital was expected to bring an extra £2bn in tax revenue a year.

Making Tax Digital was due to be rolled out to large businesses from 2018 and then small businesses from 2019. However, it has now been delayed by at least one year which could signal that the government intends to scrap the plans altogether. Though this delay is welcome news to some, others argue that it “doesn’t go far enough”, as Lord Hollick, chairman of the House of Lords economic affairs committee said.

 

Difficulties for small businesses

It has been the source of a lot of controversy because of the short time frame that businesses will have to change the way they do tax in.

It’s thought to be affecting smaller businesses more who may struggle to make the investments needed to transfer their tax process into a digital format.

Businesses could be expected to fork out for new accounting software or to train staff to deal with submitting returns online. It would also mean that businesses would be forced to file several tax returns over the year rather than just one which will cost more in working hours of staff.

According to the Treasury, the scheme is expected to save SMEs £240m by 2021-22. However, the total transitional cost is likely to be £870m.

Chas Roy Chowdhury, head of tax at the Association of Chartered Accountants said: “We have raised some serious concerns about the implementation plan for Making Tax Digital, and we advised at last week’s Treasury Select Committee hearing that it be delayed until after the General Election to ensure that there is time for full and comprehensive debate.”

“We also welcome the decision to delay other measures considered ‘controversial’—such as interest restriction, loss relief carry forward, an end to permanent ‘non-dom’ status and the dividend allowance reduction—so that they can be subject to the necessary scrutiny before being passed into law,” he added.

Anita Monteith, tax manager at ICAEW called the decision to delay the scheme as a “sensible move”.

She said: “Making Tax Digital plans remain controversial and need more scrutiny by those who will be affected, and most importantly proper parliamentary debate – a clear roadmap as to how MTD will work in practice is needed.

“These seminal clauses and schedule can be reintroduced after the election which will allow more time for proper scrutiny,” she added.

 

What do you think of this news? Do you think MTD should be delayed or scrapped altogether? Let us know what you think in the comments.