ACS has welcomed a report from the House of Lords Economic Affairs Finance Bill Sub-Committee, which urges HMRC to delay the mandatory introduction of Making Tax Digital (MTD) for VAT from April 2019 until at least 2020.
MTD is changing the way retailers submit their VAT returns, requiring them to keep their VAT records digitally and use software to submit returns. The policy reforms aim to reduce the tax gap and help businesses have a more accurate overview of their tax affairs.
ACS has previously given evidence to the Committee on MTD calling for a delay in the rollout before MTD was delayed from 2017 to 2018. The Committee report published today highlights evidence from ACS raising concerns on the lateness of the pilot process for retailers, scepticism about HMRC’s cost assessments of the policy and evidence that MTD will cause higher agency costs for retailers.
Findings from the report include:
- MTD for VAT should be delayed by at least a year until 2020.
- MTD for other taxes (Corporation Tax and Income Tax Self-Assessment) should not be introduced until 2022 at the earliest to allow lessons from MTD for VAT to bed in.
- The costs to businesses of MTD for VAT will be far more than HMRC's impact assessment.
- HMRC is over-optimistic in its confidence that all one million businesses will be ready for Making Tax Digital for VAT in April 2019.
- HMRC’s dependence on agents to ensure businesses understand their MTD for VAT obligations does not recognise the needs of unrepresented businesses.
- HMRC should publish a revised impact assessment – the Government’s claim that MTD for VAT will increase tax collection is unconvincing.
- The Government should publish its plan for the long-term development of MTD, including milestones and when key decisions will be made.
ACS chief executive James Lowman said: “In the long-term we are supportive of the Government’s intention to make tax affairs digital for all business, but would urge policy makers to listen to the Lords Committee’s conclusions about how to make the policy a success. “
"MTD for VAT is set to be introduced in less than six months for convenience retailers, yet huge questions remain over costs for retailers, how HMRC has communicated the reforms to business and understanding of the needs of small businesses without a tax agent.
“ACS will continue to support retailers during the transition period and work closely with HMRC to ensure that the introduction is as smooth as possible.”
ACS has produced guidance for retailers to help them prepare for submitting quarterly tax updates under MTD. The guide is available here.
