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HMRC’s Making Tax Digital programme dropped from Finance Bill

With the 2017 Finance Bill due to pass through parliament before the general election, the government has removed HM Revenue and Customs’ digital tax programme from it, but the controversial IR35 reforms remain

The government has dropped HM Revenue and Customs’ (HMRC) Making Tax Digital programme from the Finance Bill, which is due to go through its remaining stages in the House of Commons today (25 April).

The programme, which was intended to make HMRC one of the “most digitally advanced tax administrations anywhere in the world”, was part of the bill when it was published on 20 March, but the government has now made several amendments, resulting in a much-reduced bill in order to pass it ahead of the general election in June.

The Chartered Institute of Taxation (CIOT) wrote to chancellor Philip Hammond last week urging the government not to “rush substantial tax changes through parliament” before the election, but adding that measures dropped in the bill could be reintroduced post-election.

“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,” wrote CIOT president Bill Dodwell in the letter.

The Making Tax Digital programme has been under close scrutiny recently. In March, the Lords’ Economic Affairs Committee urged HMRC to delay launching its Making Tax Digital for Business programme until 2020 because of “unjustifiable risks” in the current timetable.

The committee said the plans to mandate the use of digital tax records for businesses by April 2018 did not allow enough time for “such a fundamental change”.

Other clauses that have been removed from the bill include PAYE settlement agreements and pension advice. However, HMRC’s IR35 anti-tax avoidance reforms remain part of the legislation.

IR35, which came into force on 6 April, means that limited company contractors cede control for determining whether they should be taxed in the same way as salaried employees (inside IR35) or off-payroll staff (outside IR35), to the public sector bodies (PSBs) they engage with.

The reforms have caused uproar in the industry, with concerns mounting that they will lead to a severly reduced digital workforce. Contracting stakeholders fear that the “blanket approach” many PSBs are understood to have adopted in the rush to comply with the reforms means many contractors risk having their outside IR35 engagements incorrectly reclassified as inside IR35.

“It is likely that most, if not all, of the provisions dropped will return in a bill after the election, regardless of who wins the election,” said the CIOT.

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