Cease the rollout of Making Tax Digital for the smallest companies and urge MPs
The rollout of Making Tax Digital, HMRC’s ongoing system that allows companies to self-report taxes owed, should be stopped before it reaches the smallest company.
This is what the bipartisan public finance committee says in its report on bridging the £ 31 billion tax gap between taxes owed and what actually ends up in the Treasury’s coffers.
MPs warned it was unclear whether the controversial rules had achieved their stated goal of reducing tax errors.
> See also: Making Tax Digital Bridging Software: What Is It And How Much Does It Cost?
As of April 2019, VAT businesses and self-employed with sales in excess of £ 85,000 in VAT have been forced to use accounting software when filing their tax returns.
From April 2022, HMRC would like all companies subject to VAT to comply with Making Tax Digital. Self-employed and landlords with a turnover in excess of £ 10,000 will face the additional requirements from 2023.
Critics say the cost of applying the new rules was unreasonably high. A report from the Association of Taxation Technicians trade organization found that some small businesses were forced to spend more than £ 5,000 on software and training.
> See also: Five Steps for Small Businesses Making Tax Digital
Extending the system to the smallest business “will impose additional and potentially unreasonable costs on some individual taxpayers and small businesses,” warned MPs, “… at a time when individual taxpayers and small businesses are under significant pressure”.
The committee asked HMRC to consider whether the system was “appropriate and affordable” before expanding its scope.
Labor MP Meg Hillier chairs the Public Finance Committee. Other high-profile MPs on the committee include former shadow trade secretary Barry Gardiner and loyal Brexiteer Sir Bernard Jenkin.
During the last election, Labor promised to scrap making Tax Digital for all small businesses as part of its business manifesto.
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