The economic affairs committee of the House of Lords has called for a delay in the rollout of Making Tax Digital (MTD) for VAT-registered businesses, currently scheduled to take effect on 1 April 2019.
Among other recommendations, it calls for MTD for VAT to be delayed until April 2020, and for its rollout for other taxes to be delayed until April 2022.
The peers' report argues that many small businesses will not be ready in time, and the cost to those businesses will be higher than the Government has estimated.
"As much as 40% of affected businesses have not heard of MTD, let alone have started to prepare for a substantial change to their accounting processes."
The Chartered Institute of Taxation (CIOT) and Association of Taxation Technicians (ATT) have backed the report.
Adrian Rudd, chairman of the CIOT/ATT Digitalisation and Agent Strategy Working Group, said:
"MTD for VAT will be the biggest overhaul in VAT obligations in decades.
"With just a few months to go before it kicks in, these knowledge gaps could mean normally compliant firms fail to fulfil their new obligations."
An HMRC spokesman added:
"We are disappointed the committee's report doesn't reflect HMRC's wide and significant engagement on MTD over the last three years, nor the changes made as a result for small businesses."
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