CLA Warns UK Gov Over Digital Tax and Lack of Fast Rural Broadband

The Country Land and Business Association, which represents land owners and rural businesses in England and Wales, has warned that the HM Revenue and Customs (HMRC) initiative to make tax digital could “throw the rural economy into chaos” due to the on-going lack of fast and reliable broadband.

At present around 91% of the United Kingdom can already access a fixed line superfast broadband (24Mbps+) connection and this is widely expected to reach 97-98% by 2019, while the proposed 10Mbps Universal Service Obligation (USO) will aim to fill in the gaps from 2020 onwards.

However the plans to digitise all tax-related accounting are due to be phased in across the United Kingdom from 2018 onwards and by that point universal coverage may not yet have been achieved, although there is always the option of getting an inferior Satellite connection. Mobile Broadband may be another solution, but coverage can be very patchy.

We should add that the 98% coverage expectation mentioned above is reflective of a national UK average, which means that some counties will still have significantly less rural coverage than the headline figure.

On top of that the CLA warns that HMRC has not undertaken any comprehensive user testing of the new system, which could risk storing up problems for the future.

Ross Murray, CLA President, 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.

It is [also] 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 fairness the CLA could perhaps help by doing less to obstruct on-going efforts to revise the Electronic Communications Code (ECC) through the new Digital Economy Bill 2016-17. The changes aim to remove barriers for new broadband and mobile infrastructure, but land owners remain opposed (here and here) because it would result in them receiving lower rental income than today and having less control over their own land.

The CLA’s Making Tax Digital Consultation Recommendations

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.