Draft Finance Bill 2017: Making Tax Digital for Business Contents

Chapter 1: Introduction

1.This is the twelfth report in a series which began in 2003 when the House of Lords Select Committee on Economic Affairs first appointed a Sub-Committee to inquire into selected aspects of that year’s Finance Bill. The Finance Bill Sub-Committee’s inquiries address technical issues of tax administration, clarification and simplification, rather than rates or incidence of tax.

2.This year the Sub-Committee decided to concentrate its inquiry on the provisions required to establish the new mandatory digital tax regime for businesses which, starting from April 2018, is to replace annual tax returns with digital tax accounts and to require digital reporting by most businesses and private landlords. The new system is generally referred to as ‘Making Tax Digital’ (MTD).

3.Although the draft Finance Bill 2017 was published on 5 December 2016, it did not contain any of the draft legislation to put Making Tax Digital in place. A limited number of the draft clauses were published on 31 January 2017 with the majority being deferred until the publication of the Finance Bill which is expected to be on 20 March 2017.

4.The Economic Affairs Committee usually publishes the report drawn up by its Sub-Committee on the draft Finance Bill before the Budget and the publication of the Finance Bill itself. However, the delays in publication of the legislation meant that the Sub-Committee’s inquiry could not begin until 6 February 2017 and that, consequently, its Report could not be published at the usual time.

5.As in previous years, the Sub-Committee conducted its inquiry by taking written and oral evidence from stakeholders, as well as from HM Treasury and HM Revenue and Customs (HMRC) and the Office of Tax Simplification (OTS). This year the Sub-Committee received a high number of submissions from small businesses, individuals and accountancy practitioners. This reflects the level of concern about the proposed changes. Those who have contributed to the inquiry in this way are listed in Appendix 2. The Sub-Committee would like to thank all those who have contributed to its work.

6.Chapters 2 and 3 of this report briefly cover the development of the MTD proposals. Subsequent chapters set out the Sub-Committee’s findings on the evidence supporting the case for the proposals and their impact on those taxpayers affected by them (Chapter 4), the readiness of the various stakeholders and the support they would require (Chapter 5), and the proposed pilot and robustness of the proposed timetable (Chapter 6). The final chapters consider the adequacy of the associated tax simplifications (Chapter 7), and the quality of the consultative process when measured against the tenets of the ‘new’ approach to tax policy-making (Chapter 8).

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