Making Tax Digital: accountancy profession to give evidence to Lords committee

Representatives from ICAEW and ATT, along with other members of the accountancy profession, will be giving evidence on the impact of the government’s Making Tax Digital proposals, and whether taxpayers are ready for the changes, to a session of the House of Lords economic affairs finance bill sub-committee later today

On 8 February at 3.45pm, the committee will hear first from Tina Riches, national tax partner, Smith and Williamson; Michael Steed, co-chair of ATT’s technical steering group, Kaplan leadership and professional development; and Rebecca Bennyworth, ICAEW council member.

In a second, separate, session at 4.40pm David Lyford-Smith, ICAEW’s technical manager, will be giving evidence.

The committee has indicated it will be asking participants whether their business clients are ready for Making Tax Digital, and whether digital recording will lead to a reduction in errors in tax returns and substantially reduce the tax gap.

The witnesses will also be asked about what lessons the UK can learn from other countries which have moved to a digital tax system, and how HMRC’s expectation that the software industry will develop and provide free software and apps compares with the approach adopted elsewhere.

In addition, the committee says it will be quizzing accountants about whether the government’s estimate of the cost to businesses of meeting new Making Tax Digital requirements is realistic. The government’s estimate, contained in its recently published response to the Making Tax Digital consultations, is that the compliance costs average about £280 per business from 2017-18 to 2020-21. However, the Federation of Small Businesses’ estimate is that it is likely to be around £2,770 per year.

The committee issued a call for evidence on the plans, which will see small businesses and residential landlords keeping digital records and providing quarterly updates, in mid January. The first element of its inquiry, which includes today’s evidence session, is focused on the underlying case for the Making Tax Digital proposals and their impact on taxpayers, HMRC resources and the tax gap.

The second element will look at the specific clauses in the finance bill, including potential exemptions, the timetable for the introduction of the new requirements, and the penalty regime.

Separately, the Treasury select committee is also considering the Making Tax Digital proposals, as part of its inquiry into UK tax policy and tax base. It issued a report with a number of recommendations for changes in the proposals, including having a higher exemption threshold for businesses and deferring the implementation date for some small businesses.

Following HMRC’s release of responses to last year’s Making Tax Digital consultations, the Treasury committee has said it will now explore both the costs and savings for businesses, and the revised revenue estimates, in more detail.

The House of Lords economic affairs finance bill sub-committee evidence session on Making Tax Digital starts at 3.45pm and can be viewed on parliament TV here.

The Treasury select committee response to the outcome of the Making Tax Digital consultations is here.

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