Despite the uncertainty and change that firms will inevitably face in March 2019, the government is insisting on introducing another layer of disruption. Just days after the UK leaves the EU, HMRC are planning to roll out Making Tax Digital (MTD) – requiring all firms above the VAT threshold to change the process for their returns and to implement compatible software.
Next week the chancellor will stand up and deliver his Autumn Budget, and the BCC is calling for him to use this opportunity to announce the delay the start of the programme until the 2020/21 financial year. Not only would this would give HMRC some much-need breathing space to adapt for the system shift, but businesses would be given the much needed time to get to grips with a problem that the majority of them presently know very little about.
Research conducted by the BCC last April found that a quarter of firms had never heard of Making Tax Digital and two-thirds knew it only by name or some details about it. A lack of clear communication from government about the new programme, and what it means for their business highlights the knowledge gap that currently exists in this space. With so much else to get their heads around, asking firms, particularly SMEs, to engage with this change at the same time is not a winning formula.
Among those that are aware, there is concern about the complexity of the online process compared to the manual completion of VAT returns currently in place. We’re also hearing concerns from our membership that MTD implementation will require a costly software upgrade. For those already facing a myriad of the upfront taxes and costs that are now part and parcel of doing business in the UK this just adds to the bills.
MTD represents a significant overhaul to the UK’s VAT system, which in all honesty, couldn’t be happening at a worse time for both business and government.
The rollout of any government programme of this size is bound to have teething problems, which in normal circumstances would take considerable time and resources to smooth out to minimise the disruption to businesses. But in this extraordinary context, HMRC will also be grappling with efforts to support companies through the huge changes involved in Brexit, and the introduction of new customs arrangements, which still remain unclear.
The UK is about to undergo the biggest economic shift in a generation; it is not the time for the government to turn a deaf ear to the concerns of business.
The government has agreed to delay MTD for the smallest firms in the past, acknowledging that the necessary preparations weren’t in place. That rationale needs to come to the fore again.
While the government’s aim to modernise the UK’s tax system is commendable, it must be done at the right time and in the right way. Pushing through changes without the right resources and in conjunction with business is not a recipe for success.
Suren Thiru is head of Economics & Business Finance at the British Chambers of Commerce