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

Neil Merrett Published 01 February 2017

MP Andrew Tyrie calls for more clarity on free software commitments to support smaller businesses affected by digital tax reforms, commits to further reviews of project’s costs and intended savings

Parliament’s Treasury Select Committee Chairman Andrew Tyrie says HM Revenue and Custom’s (HMRC’s) response to a series of consultations for its digital tax service reforms is a small, but welcome step in trying to address concerns around implementing the plans.

Under the scope of its Making Tax Digital (MTD) strategy, the department aims to create one of the world’s most digitally advanced tax administrations, by implementing a personalised service to allow taxpayers to send and receive information online.  At present, the reforms are intended to be in place by 2020 to support mandatory digital reporting as a direct replacement for the annual tax return.  

HMRC has this week pledged to support small businesses affected by its reforms by providing free software to some organisations, as well more extensive tests of the technology before legislating for a mandatory switch over to reporting tax digitally.

In committing to undertake further scrutiny of the potential costs and savings from the digital tax strategy, as well as revised revenue estimates, Tyrie said that updated details around implementing MTD and supporting small businesses showed HMRC was working to address some of the issues the committee has raised over the reforms. These include the committee’s calls for a potential delay in rolling out the technology.

“The proof of the pudding will be in the eating. For example, not much has yet been divulged about the software,” Tyrie noted.

“The fact that ministers are reflecting carefully on both the threshold and the possible deferral of the implementation date for some small businesses is very welcome. They certainly need to do so, even if that brings an extra month of uncertainty for the smallest businesses. All the evidence suggests that proceeding at the rate originally proposed would have led to detriment to millions of small businesses.”

Earlier this week, HMRC said that all customers would be provided with at least 12 months preparation time to familiarise themselves with MTD requirements before starting to issue penalty charges.  

Further consultations are also scheduled for the spring, alongside implementing pilot trials of technology among hundreds of thousands of businesses

In findings published last month on the MTD plans, the Treasury Select Committee called for a shift in approach by HMRC in introducing the new systems.  Key concerns raised included fears of “insufficient engagement” with the wider businesses community reliant on the system that could leave key stakeholders ill equipped to handle mandatory reporting requirements when introduced.

Related articles:

HMRC commits to extended digital tax pilots and penalty reviews

Treasury committee urges more extensive digital tax pilots

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