HMRC warns taxpayers still aren’t ready for Making Tax Digital

The Director of Making Tax Digital (MTD) at HM Revenue & Customs (HMRC) has warned that “not all taxpayers are ready for a digitalised tax system.”

Roy Wallace spoke with the Institute of Chartered Accountants in England and Wales (ICAEW) about the implementation of the new digital tax system after HMRC was criticised by the Public House Committee, who said that “it is not clear that Making Tax Digital will help reduce the tax gap”.

Members of the Parliamentary committee said: “The Making Tax Digital programme is a logical plan in a world where more and more activity is carried out digitally, but it will impose extra, and possibly unreasonable, costs on some individual taxpayers and small businesses, and may be disproportionate to the gain to HMRC, some of these businesses may be less able to afford the changes since COVID-19.”

In his talk with the ICAEW, Mr Wallace said that “the Coronavirus pandemic’s impact on the uptake of digital technologies has helped to strengthen the case for MTD” but he admitted that not “all taxpayers are ready for a digitalised tax system”.

His comments come as the tax authority looks to introduce the next phase of MTD, which from 1 April 2022, will require all VAT-registered companies to switch to the MTD for VAT system that is currently in place, regardless of their turnover.

A year later self-employed businesses and landlords with annual business or property income above £10,000 will need to report and record income tax digitally from their next accounting period starting on 6 April 2023.

Mr Wallace said that HMRC couldn’t be “complacent about costs, nor be cavalier in our attitude towards businesses transitioning to MTD, for many businesses, this still means significant change”.

He added that many businesses and individuals would need help to transition to the new system and that for some it wouldn’t be easy.

Link: Digital tax system must be inclusive

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