New digital tax proposals on filing every quarter have been withdrawn from the Finance Bill until a new Parliament is formed.
Jane Ellison, financial secretary to the Treasury, announced during the committee stage debate that because the Bill was progressing on the basis of consent and there was little agreement on this topic, that the government would remove the relevant clauses and schedules relating to its Making Tax Digital agenda for now.
She said that the government remains committed to the Making Tax Digital proposals and that the House needs to “consider such measures properly”. As a result, she said, “we have decided to pursue those measures in a Finance Bill in the next Parliament, in the light of the pressures on time that currently apply”.
Ellison said that the “government remain committed to the digital future of the tax system, a principle widely accepted on both sides of the House”.
She continued: “That is why we have decided to pursue those measures in a Finance Bill in the next Parliament, in the light of the pressures on time that currently apply.”
It had been announced earlier this year that the government would exempt charities from the new requirements, which would have meant they were required to file digital tax returns every quarter. However, trading subsidiaries were still going to have to follow the new rules.
John Hemming, chair of the Charity Tax Group, said on the ruling: “As was made clear at the recent CTG Tax Conference, HMRC is very committed to Making Tax Digital and this announcement represents a postponement for practical reasons rather than a cancellation.
“CTG is in discussions with HMRC officials about include charity trading subsidiaries in the Making Tax Digital pilot stage which is taking place in the coming months. We still have reservations about the logic for not extending the exemption to charity trading subsidiaries, and continue to convey these to officials, but, if this is not changed, we will be seeking further protections for charities, including consideration of a de minimis threshold to protect small subsidiaries and provision of free software and training”.
Andrew O’Brien, head of policy and engagement, Charity Finance Group said: “This is good news for most charities which are dreading the idea of filing quarterly accounts for their trading subsidiaries which usually don’t have any tax to pay. Charities must use the opportunity provided by the pause to lobby for the exemption on charities to be extended to wholly owned trading subsidiaries, so that we reduce unnecessary red tape and stop money being wasted on unnecessary fees. CFG will be working with charities to put this on the agenda for the next government when it reviews Making Tax Digital after the election.”
HMRC conducted the Making Tax Digital consultation last year, which included proposals to require all organisations to maintain digital tax records. The Charity Tax Group and other charity tax experts lobbied for the charity sector to be exempt from new rules.