The government’s controversial Making Tax Digital scheme looks to be delayed by at least a year after it was left out of the new Finance Bill. Making Tax Digital had been one of the most controversial parts of the Finance Bill which was slowly working its way through parliament. Committees in both the House of Commons and the House of Lords had been highly critical of the scheme and had wanted the Making Tax Digital scheme delayed until it a range of issued could be sorted out.
The criticism from parliamentary committees echoed the criticism from accountancy bodies and small business groups. All of these groups questioned the government’s calculations of how much Making Tax Digital would cost small businesses and how much tax it would save. The government had originally sold Making Tax Digital as being the end of the tax return for small businesses and claimed the scheme would only cost small businesses about £280 to implement. It has since become clear that small businesses would have to do an extra 5 tax returns a year under Making Tax Digital and that it would cost them thousands of pounds.
Is this the end of Making Tax Digital?
Making Tax Digital was being introduced as part of a larger Finance Bill. The calling of a snap general election has forced a slimmed down version of the Finance Bill to be rushed through before Parliament is dissolved. The bill itself has been reduced from over 760 pages to just 140. Alongside Making Tax Digital other tax changes have had to be dropped including a change to dividend tax rates which would have reduced the tax free dividend allowance from £5000 to £2000.
If the conservatives win the general election in June they may choose to bring back many of the measures that have been left out of the Finance Bill. Philip Hammond had shown a desire to scale back Making Tax Digital by delaying it’s introduction for the smallest businesses in the last budget but he did not take the chance to get rid of it entirely.
If the conservatives win the election it may even be easier for them to get Making Tax Digital through Parliament. Andrew Tyrie MP who was the head of the select committee examining Making Tax Digital has announced he is not standing for re-election. Tyrie had made his objections to Making Tax Digital well known, and had written open letters to both Theresa May and Philip Hammond asking for the scheme to be delayed.
However, the government and the accountancy industry have already spent a considerable amount of money on Making Tax Digital. HMRC are already running pilots of the scheme and a lot of accountancy companies have been working on the software needed to make the scheme work. Whether a new government will be willing to abandon a scheme that so much money and time has already been invested in, we will have to wait and see. With the Making Tax Digital scheme delayed by at least a
Alongside many other online accountants and accountancy companies we have wanted the Making Tax Digital scheme delayed or abandoned. It has been badly thought out, badly costed and sold to small businesses on misleading promises. With the Making Tax Digital scheme delayed by at least a year HMRC may at least have a chance to get their sums right and get the software in place.