Chancellor to jettison Making Tax Digital plans from Finance Bill

Written by Rebecca Hill on 25 April 2017 in News

Wash-up period sees government compromise to rush crucial tax legislation through House of Commons today

Philip Hammond drops Making Tax Digital from Finance Bill - Photo credit: Kirsty Wigglesworth/AP/Press Association Images

The chancellor Philip Hammond will today propose scrapping a large chunk of clauses and schedules from the Finance (No2) Bill, including those related to Making Tax Digital.

The move is part of the government’s efforts to pass crucial pieces of legislation before parliament is dissolved next week, following the prime minister’s decision to call a snap general election.

The Finance Bill - which the government needs to get through both houses before 3 May to ensure continuity of tax collection - only had its second reading in the House of Commons on 19 April, and still has three further stages in the Commons before passing to the House of Lords.

Because of the pressure to get the bill through parliament in what is known as the wash-up period, the bill is to undergo all of its remaining stages in the Commons today, in proceedings that are expected to start at around 12.50pm and take up to five hours.

This gives parliament much less time to scrutinise the 700-plus page piece of legislation, and in a bid to speed up the process, the chancellor has given notice that he intends to drop a number of clauses and schedules to the bill.

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An amendment paper published today on the Finance Bill’s landing page on the parliament website said that the chancellor had given notice of his intention to oppose the inclusion of 72 of the 135 clauses and 18 of the 29 schedules.

This means that the provisions will be left out of the bill, and so cut down the amount of legislation the house has to consider and debate.

The clauses that will be dropped include all those relating to digital reporting and record-keeping for taxes - the reforms known as Making Tax Digital that will require businesses to keep digital tax records and file quarterly updates to HMRC.

The plan has been the subject of much controversy, with both the House of Commons Treasury Committee and the House of Lords Finance Bill Sub-Committee saying the reforms were in danger of being rushed through without proper trial.

Among the MPs' and peers' concerns were the pressure it would put on smaller businesses and that there was not enough time for the software and systems to be properly tested before the start date, which was set to be as early as April 2018 for income tax for some businesses.

The Treasury Committee has also repeatedly flagged up major discrepancies between the estimated financial burden it will place on businesses - the Federation of Small Businesses has said could cost each business £2,770 a year, while the government expects an overall net saving for the reforms, with a one-off transitional cost of £280 per business.

In March, the committee’s chairman Andrew Tyrie asked the Administrative Burdens Advisory Board to provide an independent view of the FSB’s and HMRC’s cost assessments, as well as urging the government to carry out a comprehensive trial to “shed some light on which assumption is closer to reality”.

Government and opposition 'deserve praise' 

Even before the snap election was announced a number of bodies had urged the government to take more time on the plans it had set out in the Finance Bill, which is the longest on record, and the decision to severely cut down the bill has been welcomed.

In a statement published today, the Chartered Institute of Taxation said that the government and opposition had made the right decision.

"While this [the truncated timetable of a single afternoon's debate] isn't an ideal way to take a Finance Bill through parliament, the government and opposition both deserve praise for agreeing to take the most controversial and/or complex provisions out of the Bill so they can get the further scrutiny they merit when parliament returns after the election," it said.

The institute added that it was likely that many of the provisions would return in a bill after the election, and the institute's president Bill Dodwell last week said that a post-election Finance Bill "would also enable more of the framework for Making Tax Digital to be put in statute, rather than brought in through regulations".

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