MPs told Making Tax Digital campaign must be reconsidered

Small business and tax experts have told MPs that digitising tax returns will lead to substantial, extra tax costs being placed on small businesses, for no or little medium-term benefit.

Consultation on the Making Tax Digital (MTD) project is being held by HMRC until 07 November. As part of the project, SMEs (small and medium-sized enterprises) will be required to report their taxes four times a year, rather than annually.

This, according to committee chair Andrew Tyrie, has “possibly very adverse implications for hundreds of thousands of small businesses,” and he expressed concern over the risk of a “large additional compliance cost” being introduced too.

It has been estimated by the Federation of Small Business (FSB) that the cost for each business will be approximately £2,770 per annum. Mike Cherry, national chair of the FSB, has claimed that mandatory reporting was “wrong”, based on the fact that three quarters of businesses do not keep their detailed accounts electronically.

Cherry continued: “We absolutely agree with the [MTD] pathway, but over a much, much longer period of time that businesses can get to grips with.”

Rebecca Benneyworth, chair of HMRC’s digital advisory group, admitted that the current proposals would involve “inflicting the pain on the smallest of businesses”.