Taxman offers concessions on MTD

Following criticism from MPs, who described the Government’s plans for Making Tax Digital (MTD) “overambitious”, HM Revenue & Customs (HMRC) has pledged that businesses will not be hit with penalties in the first 12 months.

Having concluded its consultation into the implications for businesses of MTD, the taxman has promised pilots involving “hundreds of thousands” of businesses to help them prepare for the changes and will also allow firms to keep using spreadsheets to record their finances before linking to software that will upload their accounts to HMRC.

In addition, the department has confirmed plans to provide free software to small firms that might otherwise not be able to afford to buy new systems. There has also been confirmation that businesses that cannot go digital will not be required to do so.

MTD, which will start in 2018 despite claims that this is too rushed, is expected to cost businesses £1bn initially, which works out at around £280 per firm, but HMRC is confident that it will deliver savings of £100m a year from 2021.

Defending the planned timetable, a spokesman for HMRC said that MTD will help small businesses get their tax right first time around, pointing out that more than £8bn a year is currently lost in tax as a result of avoidable taxpayer error by this group. He added that it is evident that the majority of firms want this to happen and also that the appetite for digital services is growing.

HMRC launched an application programming interfaces strategy in September 2015 and then an API developer hub a few months later. The aim of this is for suppliers of accounting software to interface with HMRC automatically through the hub and test their products in advance of the MTD deadline.