Countryside concerned over making tax digital

Making tax digital will be difficult for businesses in the countryside without fast and reliable broadband

The CLA which represents landowners, farmers and other rural businesses said the HM Revenue and Customs (HMRC) initiative to make tax digital will be difficult for businesses in the countryside without fast and reliable broadband.

Plans to digitise all tax-related accounting is due to be phased in from 2018 onwards but in response to the HMRC consultation which ended yesterday (7 November), the CLA warns that poor digital connectivity in rural areas and no plan from HMRC to undertake comprehensive user testing of the new system could throw the rural economy into chaos.

CLA North Regional Director, Dorothy Fairburn, said: “It is vitally important to help everyone achieve tax compliance. We support new technology which aims to make life simpler for businesses but the Government must look at the whole picture before making tax digital.

“Rollout of superfast rural broadband has been too slow and the Government’s Universal Service Obligation (USO) of 10Mbps by 2020 is not guaranteed to be met. Current broadband technology in the UK means download speeds are faster than upload speeds, so the Government must reassure businesses they will not be unfairly penalised as a result of poor connectivity when trying to complete and submit tax information online.”

Miss Fairburn added that without the right broadband infrastructure in place or by ensuring the new digital system is fully tested in advance, rural businesses could suffer and HMRC could experience similar problems to the Rural Payments Agency (RPA) when it digitised the Basic Payment System for farmers.

She said: “It is crucial in view of previous government digital systems failures such as the RPA that HMRC should reflect on the lessons learned from that project to avoid a serious breakdown in the system which would cause yet more chaos for the rural economy. In addition, it would make sense to pilot the proposed regime with larger businesses first to avoid any detrimental impacts on smaller, more vulnerable businesses.”

The CLA’s response to the HMRC consultation on Making Tax Digital contains five key recommendations to help support rural businesses:

1. Implement the system with the largest businesses first to thoroughly test and iron out issues before rolling out to the more vulnerable 3-4 million small and micro-businesses.

2. Delay implementation by at least one year to enable comprehensive user testing to take place over a full tax year cycle.

3. Reassure rural businesses they will not be unfairly penalised as a result of poor digital connectivity.

4. Increase the exemption threshold from £10,000 to at least match the VAT threshold (currently £83,000) so the cost of the system will not be an overwhelming burden to the smallest businesses and affect their profitability.

5. Make costs incurred by businesses purchasing bespoke software allowable for tax relief.