Making Tax Digital for VAT: Treating Small Businesses Fairly Contents

Making Tax Digital for VAT: Treating Small Businesses Fairly

Chapter 1: Introduction

1.This is the thirteenth report in a series which began in 2003 when the House of Lords Economic Affairs Committee 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; in recognition of the House of Commons’ financial privileges, the Sub-Committee does not inquire into rates or incidence of tax.

2.This year the Sub-Committee decided its inquiry should address two areas: progress on the ‘Making Tax Digital’ programme since the Committee’s March 2017 report on Making Tax Digital for Business;1 and developments in the balance of powers and safeguards between Her Majesty’s Revenue and Customs and the taxpayer. This report considers the first of these areas.

3.The legislation introducing Making Tax Digital (MTD) was the Finance (No. 2) Act 2017.2 The provisions relating to the penalty and interest regime for MTD, which complete the legislative package, were in the draft clauses for the Finance Bill 2018–19, published on 6 July 2018.3 These are considered below, although the provisions are now expected to be included in the 2019–20 Finance Bill.

4.The Economic Affairs Committee usually publishes the report prepared by the Finance Bill Sub-Committee before the Budget and publication of the Finance Bill itself. However, the parliamentary timetable and announcement of an early Budget on 29 October 2018 meant that the report could not be published ahead of the Budget.

5.As in previous years, the Sub-Committee took written and oral evidence from stakeholders, including leading professional and business organisations, academia, accountants, tax advisers and software houses, as well as from HM Treasury (HMT), HM Revenue and Customs (HMRC) and the Office of Tax Simplification (OTS). The Committee thanks all who contributed to our work.

6.The Sub-Committee invited the Financial Secretary to the Treasury, the Rt Hon Mel Stride MP, to give evidence to the inquiry. We were concerned that the Financial Secretary refused to participate.4 We hold more serious concerns about the Minister’s failure to give evidence on the powers of HMRC, which we will address in our second report of this inquiry. However, we were disappointed that the Minister, who officials told us takes a “close interest” in MTD, was unwilling to discuss the issue with the Sub-Committee. We will continue to pursue constructive solutions to the issues raised by our witnesses in coming months.

1 Economic Affairs Committee, Draft Finance Bill 2017: Making Tax Digital for Business (3rd Report, Session 2016–17, HL Paper 137)

© Parliamentary copyright 2018