According to an influential House of Lords committee, HM Revenue and Customs should delay launching its ‘Making Tax Digital for Business’ programme until 2020.
The advice stems from “unjustifiable risks” in the current timetable.
It follows similar criticisms in January this year by MPs on the House of Commons Treasury committee, who said plans to mandate the use of digital tax records for businesses by April 2018 does not provide enough time for such a “fundamental change”.
Committee Chairman Lord Hollick said: “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.
“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.”
HMRC is due to begin a pilot scheme next month, however the committee said the trial does not conform to government best practice guidelines, and does not fully allow enough time to test software and processes.
The Lords also pointed out that HMRC has yet to finalise the technical details of its system requirements.
The committee report said: “The almost universal concern of witnesses is that the current timetable for mandating digital record keeping and quarterly reporting is too tight and entails unjustifiable risks for businesses, HMRC, tax practitioners and the software industry. It does not allow enough time for full end-to-end piloting and evaluation to avoid unnecessary risks for both HMRC and businesses.
“We recommend that mandatory implementation of digital record keeping and quarterly reporting should be deferred until April 2020, after the extended pilot period.”