MPs warn against rushed MTD implementation
Andrew Tyrie, chair of the Treasury committee, has challenged the government over its planned timetable for HMRC to introduce its flagship making tax digital (MTD) scheme, warning that announcements made in the Autumn Statement suggest there will need to be delays to the proposed 2018 start, or implementation will be very rushed
1 Dec 2016
The deadline issues are highlighted in a letter which Tyrie sent to Jane Ellison, financial secretary to the Treasury, following the news from the Chancellor that the government will publish its response to the MTD consultations and provisions to implement the previously announced changes in January 2017.
Draft legislation for the 2017 Finance Bill is due to be published next week.
Tyrie points out that in the Autumn Statement speech, the Chancellor also said that ‘the government remains committed to the tax policy framework and will consult on tax changes in the spring and draft legislation in the summer, before they are introduced as Finance Bills.’
The tax policy framework states that ‘in most cases ... draft clauses for the Finance Bill will be published for scrutiny at least three months before the Bill is introduced to Parliament’. However, it also says ‘there will be times when it will be necessary to deviate from this framework. In these circumstances the government will be as open as possible about the reasons for such deviations.’
On this basis, Tyrie argues that there are only three possible ways forward on MTD. One is that MTD is one of the ‘deviations’, while the second option is that Finance Bill 2017 will be introduced to Parliament later than is normal, in order to meet the timescale for scrutiny.
The third outcome is that MTD will be legislated in Finance Bill 2018, which Tyrie says would leave very little time, if implementation is still planned for April 2018.
Tyrie said: ‘It is welcome that the government has decided not to rush its response to HMRC’s consultation. But this may mean that there is insufficient time for adequate consultation to take place on the draft clauses, once published. Were that to be the case, the clauses should be considered for the Finance Bill after next.
‘The government may have to accept that the 2018 planned implementation timetable may not be compatible with adequate consultation.’
Tyrie indicates he is expecting a ‘substantive response’ from the Treasury on the question of the implementation timetable in January.
In an earlier letter to the committee, sent in mid-November, Ellison laid out the government’s plans to implement MTD gradually over a number of years, making clear this would start with income tax and NICs from April 2018, before being introduced for VAT in 2019 and corporation tax in 2020.
At the time, Ellison wrote: ‘The government's response to the consultations will provide further clarity on timings and exemptions. Nevertheless, the staggered start dates will allow time for systems to be tested and refined at the piloting stage, before being released more widely.’
The letter said HMRC will be running two pilots for income tax self-assessment, the first of which started in October with 1000 participants. The second pilot will begin in April 2017 with around 400,000 businesses across a wide range of trade sectors and geographical areas. There will also be pilots for both VAT and corporation tax in due course.