Chartered Institute of Taxation Welcomes Call for MTD Delay

By Sam Thomas | 17th January 2017 | 14 min read

Recent calls for a delay in the implementation of Making Tax Digital have been welcomed by the CIOT.

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Beginning in April 2018, the Government intends to change the way income is reported for all taxpayers by switching the frequency of reporting from annual to quarterly. Two years later, by April 2020, this new ruling will be extended to include limited companies. The House of Commons is now looking at more extensive piloting of the reforms before they’re fully implemented, meaning the proposed dates in 2018 and 2020 may be pushed back.

CIOT president Bill Dodwell commented: “digitalisation and quarterly reporting will be a huge change affecting millions of taxpayers. With a change this big it is more important to do it right than to do it quickly.

“So the committee is right to call for a delay in the project’s implementation. Rushing it through to deliver by April 2018 is just too short a timescale. There are hundreds of different providers of accounting software – in many cases adapted for specific industries and trades. Right now we have no idea how many of these will be ready and tested in time.

“The introduction of Making Tax Digital should be deferred for at least a year to allow a smoother and more effective transition to digital record keeping, giving businesses sufficient time to prepare for the significant administrative, technological and financial implications associated with the move to digital accounting.

Dodwell added: “The committee is right to call for comprehensive pilots of the proposed system. There has been some limited piloting to date, but they need to be more extensive, with a range of taxpayers and tax advisers, and especially with those who naturally struggle with IT and firms with complex systems that need to be adapted. The pilots need to cover the whole reporting cycle and address behavioural issues rather than simply digital functioning. Pilots will need to build up gradually, bringing in a wider range of users.

“We are also pleased that the committee agrees with us that the threshold for Making Tax Digital and quarterly reporting should be raised substantially from the proposed £10,000. A consensus is growing that the VAT threshold of £83,000 would be a more sensible cut-off point.

“We think HMRC will need to consult thoroughly with businesses, their tax advisers and professional bodies and relevant charities in the period up to full implementation to ensure it works for HMRC, taxpayers and their representatives.”

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