HMRC concessions on record keeping and penalties under the Making Tax Digital (MTD) project have been welcomed by the Chartered Institute of Taxation (CIOT).
HMRC recently announced that businesses will be able to continue to use spreadsheets for record keeping under the new quarterly reporting regime, and that no penalties will be levied for late submissions in the new regime’s first year.
However, the CIOT is warning that the announcements, made in HMRC’s response to the six Making Tax Digital consultations which ran last year, make the case for delaying the introduction of the new regime even stronger.
The institute has also noted that an increase in the time allowed for submitting an end-of-year declaration from nine months after the end of a business’s accounting period to ten months after will mean that, for the many businesses with a 31 March year end, the 31 January deadline will remain in place.
CIOT president, Bill Dodwell, said:
“Businesses and tax professionals across the UK will be poring over the announcements to see what they mean for them and their clients and customers. The fact that there were more than 3,000 submissions to these consultations shows the level of concern about the proposals and the impact they will have.
“The good news is that the government has clearly listened to some of the concerns expressed by respondents. The ‘soft landing’ on penalties for late submissions is a sensible proposal. An exemption for charities and a deferral for large partnerships are both pragmatic moves. The announcement that businesses will be able to continue to use spreadsheets for record keeping is positive, though we note the statement that this ‘is likely to involve combining the spreadsheet with software’. The devil will be in the detail.
“However the announcements highlight how much is still to be settled. On both the exemption threshold and deferring the changes for small businesses the government is still thinking.
“Put alongside the truncated timetable for consultation on the draft legislation – just three and a half weeks – and the fact that most of the draft legislation has not yet been published, as well as the launch of two new consultations on aspects of the proposals, this strongly suggests that the whole Making Tax Digital project should be delayed by at least a year. Getting this done quickly is less important than getting it done right.”