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The House of Lords Finance Bill Sub-Committee has called on HMRC to put the brakes on Making Tax Digital (MTD) for business amidst widespread fears that MTD won't make any savings for government and is being rushed.

The Sub-Committee has been taking evidence and examing the MTD clauses in the draft Finance Bill 2017. 

It welcomes digitalisation of tax yet concludes that the roll-out of the scheme is being rushed, imposing unnecessary burdens on small businesses, and will yield little benefit to the Government.

The Sub-Committee recommends a series of modifications to ensure the policy is implemented successfully:

Chairman's comments

Chairman of the Sub-Committee, Lord Hollick, said:

"Many small businesses and landlords are simply unaware of or not ready to cope with the additional administrative and financial burdens that will be imposed by digital taxation.

"We welcome the Government's announcement in the Spring Budget that the scheme would not apply to businesses with a turnover below the VAT threshold until April 2019. However, this does not go nearly far enough and it needs to further delay the scheme's implementation, and take a more incremental and gradual approach based upon the evidence from the pilot.

"This scheme coincides with changes to business rates and dividend taxation, all of which will impact some small businesses.

"A full pilot will ensure the software works and provide hard evidence of the additional financial and administrative burdens on businesses. It will also provide evidence in place of the widely disbelieved assessment of costs and benefits of the introduction of Making Tax Digital.

"We are sceptical of the benefits to small businesses of regular digital reporting. We recommend that the scheme remains optional for businesses with a turnover below the VAT threshold."

Notes

MTD will affect just under 5.5 million businesses: including 1.6 million companies, 2.4 million self-employed individuals, and 900,000 residential landlords.