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Government removes Making Tax Digital from Finance Bill

Real Business takes a brief look at how Making Tax Digital came to be – and why such a "revolutionary" scheme was scrapped from the Finance Bill.
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Former chancellor George Osborne announced the Making Tax Digital scheme in his March 2015 Budget, promising a revolutionary simplification of tax collection”. Two years down the line, however, legislation to implement it has been axed from the Finance Bill.

Osborne had hoped to allow individuals and businesses to file tax returns online. The plan was to roll the scheme out in April 2018 before achieving a fully digital tax system in 2020. However, Making Tax Digital sparked early controversy. Namely, the cost small companies would have to absorb.

While the government estimated compliance costs to be on average £280 per business from 2017-18 to 2020-21, the Federation of Small Businesses suggested it would amount to £2,770 per year.

Other concerns included the self-employed with turnovers of over £85,000, who would have to file five returns per tax year. These statistics led chancellor Philip Hammond to delay Making Tax Digital for companies with an annual income of over £10,000

Some may be pleased to note then, as tax experts were, that even with the changes made by Hammond, Making Tax Digital has found itself scrapped from the Finance Bill, alongside corporation tax measures.

Prime minister Theresa May’s snap general election is partly to blame, with the government deciding on reducing the Finance Bill substantially so as to rush it through ahead of the election.

Making Tax Digital may have been parked, but this isn’t the end of the line. Anita Monteith, tax manager at ICAEW, said: “Making Tax Digital plans remain controversial and need more scrutiny by those who will be affected, and most importantly proper parliamentary debate – a clear roadmap as to how it will work in practice is needed.

It is not coming into effect until April 2018, and the announcement of the general election on 8 June 2017 provided an opportunity to withdraw these clauses from the Finance Bill which will likely to be enacted on 27 April. These seminal clauses and schedule can be reintroduced after the election which will allow more time for proper scrutiny.”

Image: Shutterstock

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About Author

Shané Schutte

Shané Schutte is a senior reporter at Real Business, with a particular specialism in employment and business law, human resources, information technology and sales/marketing.

Real Business