Lords recommend a delay to MTD

The House of Lords Economic Affairs Finance Bill sub-committee has called on the Government to delay the introduction of Making Tax Digital (MTD) for VAT by at least a year. This it believes will  give small businesses a reasonable chance to prepare.

In its latest report, the committee has accused HM Revenue & Customs (HMRC) of failing to provide adequate support to smaller businesses and listen to their concerns. Moreover, it also recommends delaying the extension of MTD to other taxes until at least April 2022.

The report concludes that HMRC has ‘neglected its responsibility to support small businesses’ and claims that many of the UK’s 1.2 million businesses will not be ready in time for next April, which is when MTD will come into effect.

The committee also criticised HMRC for giving some public sector organisations a six-month deferral to introduce the digital tax scheme, while smaller businesses, which the committee points out ‘have the fewest resources to manage the transition’, have received no such leeway.

The Lords found that the costs to businesses of introducing the next stage of MTD for VAT will be far higher than HMRC’s previous assessment and no free-to-use compliant software is currently available.

In response to the report, a spokesperson for HMRC said that the department was “disappointed” that the committee did not reflect its “wide and significant engagement” on MTD over the last three years, not the changes made as a result for small businesses.

The spokesperson added that HMRC has already written to 200,000 businesses and will be writing to every other mandated business in the coming weeks to ensure it knows about the changes to VAT and how to prepare for them.

Julian Borley, Director of VAT at Milsted Langdon, said: “These latest figures suggest that a large proportion of businesses are unprepared for Making Tax Digital.

“If you feel like your business is not ready for Making Tax Digital, it is important to seek specialist advice.”

For more information about how Milsted Langdon can help, please contact Julian by emailing jborley@milstedlangdon.co.uk or calling 0117 945 2500. 

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