Has Making Tax Digital Been Scrapped?

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Digital Tax Plan Dropped from Government Finance Bill

HMRC’s much-heralded digital tax plan has been pushed back by at least a year, and might be scrapped entirely following a backlash from taxpayers and politicians.

When the government announced plans to make tax digital in 2015, it was generally met with a note of cautious optimism. Many saw it as a long-overdue sign that HMRC was joining the rest of us in the 21st century, by creating a user-friendly online system that would make the annual tax return a simple, intuitive process.

However, as more details of the plans were unveiled, one company of Peterborough accountants has encountered an increasing number of taxpayers and small businesses expressing concern that the new system could create more of an administrative burden rather than less. They predict that the self employed could end up facing a different tax deadline practically every month of the year, instead of the single annual tax return they have to file under the current system.

Gone for good?

Some commentators are greeting the news as confirmation that this was an ill-conceived, unpopular plan that has received the treatment it deserves, particularly in view of the uncompromising comments from Chas Roy-Chowdhury, the Association of Chartered Certified Accountants’ Head of Tax.

When members of the Treasury Select Committee asked him about the plans, he replied that the Association had raised “serious concerns” in relation to the implementation and had recommended that it be delayed till after the General Election, to allow time for detailed and comprehensive debate. He further agreed with the decision to delay other controversial measures pending further debate.

A representative from the Institute of Chartered Accountants England and Wales also welcomed the fact that the plans will receive further scrutiny and debate, saying the government had made a sensible decision.

When the policy was first announced by George Osborne in the 2015 budget, it was predicted that an extra £2 billion would be generated in tax revenue every year. However, the scheme has always had influential and vocal critics, most notably the House of Lords Economic Affairs Committee, which warned that the roll out was placing unnecessary burdens on small businesses and was being rushed into place.

Or just a delay?

However, it might be an over reaction to suggest that we will all adopt an “as we were” posture and forget about making tax digital.

From the moment Theresa May announced that she would be calling a general election, it was a foregone conclusion that many forthcoming bills would be shelved or at least pushed down the priority list, so it should come as no surprise that this particularly controversial one was among them.

In fact, around 80 percent of the proposed Finance Bill was reduced, so in that context it would, perhaps, have been a bigger surprise if it had remained in.

In the event that May’s Conservative Government is returned with a good majority, it is reasonable to expect that all those clauses will be reinstated into the new Finance Bill, MTD included.

Even if it is not, it is hard to believe that digital tax will not become a reality in the near future. At the very least, politicians and software developers will now have some additional time to come up with a system that makes it a change for the better for all concerned.

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