The four main modifications put forward in the report published by the Sub-Committee to make sure that the road to the implementation of Making Tax Digital (MTD) is smooth, are listed as below:

1. Revise and Improve Assessment

The Committee urged the government to revise and improve its assessment of MTD’s costs and benefits. It outlines its concern over the fact that estimate provided by the government regarding the “tax gap” savings seems to be fragile because they are not backed by solid evidence. In addition to this, the declaration that implementation of the system would cost businesses £280 in the initial stage is far from reality. The truth is that this number does not match the actual initial expenses that businesses would incur.

2. Delay the Implementation of MTD Until 2020

This is probably the most important recommendation by the Sub-Committee. The report confirms what many experts have been saying before—that there is a need for the digitisation to be delayed until all the wrinkles in the processes have been smoothed out. Making tax digital is not a small change, and considering that no country in the world has attempted it before, it begs for attention to detail and the streamlining of each cog in the system.

The Sub-Committee has therefore asked the government to “delay the scheme until 2020 to allow a full pilot.” During this time, the government will be able to test whether MTD does indeed accomplish what it had intended to accomplish—reduce errors in the taxation process. It will also give the government ample time to gain valuable feedback from business users and calculate the actual amount that it costs businesses. The most important benefit of this delay would be the time to raise awareness about MTD. Despite the fact that many reports have been published, the public is still in conundrum of whether this digitisation would be valuable or not..

The Chairman of the Sub-Committee, Lord Hollick, said:

“A full pilot will ensure the software works and provide hard evidence of the additional financial and administrative burdens on businesses. It will also provide evidence in place of the widely disbelieved assessment of costs and benefits of the introduction of Making Tax Digital.”

3. Quarterly Reporting to be Made Optional for Some Businesses

The report recommends that the quarterly reporting of digital records should be made optional for the companies that have a turnover below the VAT threshold. For smaller businesses, quarterly reporting would be redundant—not to mention quite burdensome.

This haste in reporting might also lead small businesses to make more errors as they would place more importance on reporting rather than reporting right. As Professor Richard Murphy, the Director of Tax Research UK, mentioned in his oral statement:

“People who are forced to prepare accounts in a short period of time tend to make a lot more errors than people who have a little more time to get the thing right … there will be an inclination … for people simply to dump in estimates to meet a deadline for submission when there is a penalty attached to it.”

4. Create a Filter

The government should take another look at the different types of businesses and create an effective filter (e.g. based on the stability of regular income) to decide which companies should be included in the scheme and which should not. Lord Hollick mentions:

“Many small businesses and landlords are simply unaware of or not ready to cope with the additional administrative and financial burdens that will be imposed by digital taxation.”