The UK government's tax digitisation plan could be delayed by at least a year after the Treasury Committee exposed "serious shortcomings" with the programme.
In 2015 Her Majesty's Revenue & Customs (HMRC) was awarded £1.3bn of digital investment over four years, which it said would yield £1bn in extra tax revenue after 2020 by ending "bureaucratic form-filling".
HMRC's Making Tax Digital programme will require businesses to keep their records in a digital format and submit quarterly updates to HMRC followed by an end-of-year reconciliation.
The body hopes those "digitisation" savings will offset £717m per year in cuts, including a headcount reduction of 21 per cent by financial year 2019/20. However, Andrew Tyrie, chairman of the Treasury Committee, described the timetable for implementation in April 2018 as "unachievable".
He said: "The government should accept that there needs to be a delay of the start until at least 2019/20, possibly later."
The report from the Treasury Committee called for comprehensive pilots of the proposed system, with full protection from anything that may go wrong for those required to participate.
There is also not yet enough information about the free software that will be available, but even if it remains free in perpetuity, businesses will face costs in terms of time and accountants' fees.
It comes as HMRC also plans to move off its £10bn Aspire deal, the largest project in Europe. Chair of the Public Accounts Committee, Meg Hillier, told The Register that the project was in the top three big IT programmes to come under the committee's scrutiny this year.
Tyrie said: "This is not a minor matter. These reforms will affect millions of taxpayers. Their co-operation and trust are both hard won and easily dissipated. Without them, more of the yield could be at risk than any putative extra revenue from [making tax digital]."
The Chartered Institute of Taxation (CIOT) welcomed the findings.
CIOT president Bill Dodwell said: "So the Committee is right to call for a delay in the project's implementation. Rushing it through to deliver by April 2018 is just too short a timescale.
"There are hundreds of different providers of accounting software – in many cases adapted for specific industries and trades. Right now we have no idea how many of these will be ready and tested in time."
It is not the first time the department has been overly optimistic about the transformative power of technology. The National Audit Office previously found the department had been too hasty to cut staff before expected cost savings from a shift to digital materialised.
That resulted in a service collapse in the first seven months of 2015-16 when average call waiting times tripled, costing taxpayers a total of £97m as they were forced to hold. ®