Hurrah for the House of Lords

Quarterly data as part of Making Tax Digital (MTD) is a bit like the Emperor's New Clothes. It appears to serve absolutely no purpose, creates huge additional costs and administration burdens and yet no-one seems to be saying no.

However, can the House of Lords make HMRC see sense? In a scathing report the Finance Bill Sub-Committee agreed that the digitalisation of tax is to be welcomed but concluded 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:

• Revise and improve its assessment of MTD's benefits and costs. The Government's estimate of the 'tax gap' savings are fragile and not based on adequate evidence. The assertion that the scheme will initially cost businesses £280 does not reflect the reality of the initial expenses businesses will incur.
• Delay the scheme until 2020 to allow a full pilot. This delay will allow the Government to test whether Making Tax Digital does reduce taxpayer errors, assess the actual costs to business, and receive feedback from business users.
• Make keeping digital records and quarterly reporting optional for businesses with a turnover below the VAT threshold. For smaller businesses the requirement to report quarterly to HMRC will impose an unnecessary burden and will be of limited use.
• Look again at which businesses are included in the scheme. The Government should examine whether some kinds of businesses, such as those with seasonal or highly irregular income, should be outside the scheme.

So we can but hope common sense will prevail.