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MPs urge HMRC to rethink MTD extension

20th October 2020

MPs on the Public Accounts Committee (PAC) have stated that they are “not convinced” by claims about the benefits that the Making Tax Digital (MTD) scheme will provide.

The committee called for another assessment of the MTD scheme, to consider whether the administrative burden it imposes on taxpayers is reasonable and affordable before proceeding with further national rollout.

HMRC’s primary objective for MTD is to help reduce the tax gap attributable to SMEs caused by error and failure to take reasonable care.

The scheme has been implemented for VAT payments made by companies with an annual turnover of more than £85,000 since April 2019, and is due to be expanded to all businesses, regardless of size, from April 2022.

The PAC report said:

“The Making Tax Digital programme is a logical plan in a world where more and more activity is carried out digitally, but it will impose extra, and possibly unreasonable, costs on some individual taxpayers and small businesses, and may be disproportionate to the gain to HMRC.

“Some of these businesses may be less able to afford the changes since COVID-19.”

The Chartered Institute of Taxation welcomed the PAC’s recommendation, saying it would be better to allow the digitalisation of the tax system to “grow organically”.

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