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Digital tax regulations delayed until next parliament

Neil Merrett Published 26 April 2017

Government agrees to omit clauses on digital tax services from proposed legislation; fresh finance bill expected as early as possible after General Election


The government remains committed to passing regulations for digital tax systems, but will wait until the next parliament to do so after omitting key provisions of the intended reforms from the Finance Bill that is currently undergoing scrutiny in parliament in order to be passed before June's General Election.

Speaking before parliament during a debate yesterday (June 25), Treasury financial secretary Jane Ellison said there had been no change to its Making Tax Digital (MTD) policy that aims to create one of the world’s most advanced administrations for taxation.

However, following consultations with opposition parties, a number of clauses around the digital future of the tax system, which has been the subject of parliamentary scrutiny with regards to deadlines and testing, had been omitted from the drafting of the bill.  Citing time pressures before the election on June 8, an alternative Finance Bill setting out digital taxation rules will then be published over the course of the next parliament.

“These provisions will make a significant contribution to the public finances, and the government will legislate for the remaining provisions at the earliest opportunity, at the start of the new parliament,” she said. “The government remain committed to the digital future of the tax system, a principle widely accepted on both sides of the House."

Ellison said that the government recognised parliamentary calls for further considerations of MTD implementation plans, particularly for small businesses, citing ongoing concerns raised by the Treasury Committee and its chair, MP Andrew Tyrie.  Tyrie, a vocal critic in regards to the testing and the readiness of wider industry for digital tax reporting, announced this week he would not be standing for re-election.

Labour MP Peter Dowd was among those to welcome the government’s position on removing digital tax provisions from the current bill.

“It will be a great relief to many small businesses given the onerous requirements for quarterly reporting,” he said.

HM Revenue and Customs (HMRC) earlier this year committed to extended MTD pilots for the proposed new digital systems.

Following on from a series of consultations on tax digitisation, the department committed to provide free software to smaller companies, while also undertaking more extensive reviews of its systems before introducing a mandatory requirement for businesses to switch to electronic tax record management.

Parliament’s Treasury Committee has continued to back more detailed testing of the digital tax systems, while calling for a prolonged rollout of all new technology beyond the current 2020 introduction target to ensure industry and business owners are not adversely affected by the reforms.

A report from the committee backed changing the existing government approach to implementing digital tax services citing what it called “insufficient engagement” with UK businesses that will have to rely on the digital systems.

“At present, many of those on whom demands from MTD will be made – millions of small businesses up and down the country: the backbone of the economy - are ill equipped to handle the reporting requirements,” noted the findings at the time.

Related articles:

HMRC launches digital tax pilots for businesses

Treasury committee: HMRC digital tax pledges “small” step in right direction

Treasury committee urges more extensive digital tax pilots

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