background image
UK House of Lords Committee Recommends Delay in Making Tax Digital for VAT — Orbitax Tax News & Alerts

The UK House of Lords Economic Affairs Committee published a report on 22 November 2018 calling for the government to delay the implementation of Making Tax Digital for VAT.

The Making Tax Digital initiative is meant to improve compliance and collections and requires VAT-registered business with a taxable turnover above the VAT registration threshold (currently 85,000) to keep digital VAT business records and send returns using Making Tax Digital (MTD)-compatible software for VAT periods starting on or after 1 April 2019. The Economic Affairs Committee, however, is unconvinced that the MTD initiative will yield the intended results and is of the view that it will only make life more difficult for smaller businesses. Based on this, the Committee recommends that the government:

  • Defers the introduction of mandatory Making Tax Digital for VAT by at least one year, while encouraging businesses to join voluntarily;
  • Plans a staged transition for businesses to join Making Tax Digital for VAT and future stages of Making Tax Digital which allows for businesses, not just HMRC, to be fully ready;
  • Waits until at least April 2022 to implement the next stages of Making Tax Digital, to allow time to learn lessons from the implementation of Making Tax Digital for VAT; and
  • Publishes its plan for the long-term development of Making Tax Digital, to encourage businesses to choose digitalisation for productivity, efficiency and modernisation reasons rather than just tax compliance.

Click the following link for the full text of the report, Making Tax Digital for VAT: Treating Small Businesses Fairly.