Accountants at a seminar on Making Tax Digital (MTD) raised concerns about interpretation of tax policy, the quality of nudges, MTD pilots, and overcoming security issues.
At an ACCA event on 15 February, Lee Hawksworth, head of software development and collaboration at HMRC, spoke about the MTD programme from HMRC’s perspective, and took questions from the audience.
Hawksworth said the aim of MTD was to make tax easier than it is right now, so it just becomes “a thing that you do as you run your business.” This should avoid the worry at the end of the year to submit the self assessment tax return.
A second goal of MTD is to reduce errors made by the taxpayers, such as misunderstandings about what expenses can be claimed. Hawksworth said he was working with tax policy colleagues to remove shades of grey, and replace those points with black and white tax policies, which can be built into the MTD software. That software will then make it easier for taxpayers to get their tax right first time.
Hawksworth added that as soon as interpretation is brought into the tax system, people may not always interpret in the “right way”. The software will help people get it right as long there is a black and white tax policy underpinning the software.
When questioned on who sets the black and white policy for tax issues, Hawksworth said there was a disconnect within HMRC, and in the wider government, between separate tax policy and technology. Previously the policy was set and the technology teams had to make it work. Now the technology people are working closely with the tax policy team, to make it easier to bring tax policy into software.
Nudges and prompts
A question was raised as to how the MTD software will help a taxpayer decide how to categorise a payment to say an estate agent, or whether that cost should be included as a business expense at all. Hawksworth admitted it was very difficult to do this. A range of guidance would have to be provided to the taxpayer from prompts and nudges within the tax software, webchat facilities on GOV.UK, and as online videos accessed through the personal tax account.
An audience member asked whether there would be people available within HMRC with the knowledge to answer the taxpayer’s questions on webchat. Hawksworth agreed that this would show up the success or otherwise of webchat.
A beta pilot of MTD software is due to start in April 2017. Hawksworth was asked how much of the nudges and prompts would be included in that beta version of the software. He said the beta product would be concentrated around certain types of income initially, and during the 2017/18 tax year more features will be added. He confirmed that there would not be an end-to-end pilot of the MTD software for all types of unincorporated businesses.
A member of the audience wanted to know whether there would be an alternative means to submit data under MTD. Her employer does not permit any access, at any time, to the internet from inside the company, for security clearance reasons. This has already caused problems with meeting tax obligations as the staff cannot do webchats and cannot connect to HMRC through GOV.UK. Hawksworth said they would have to look at that situation.
Finally, a gentleman asked when tax agents would be able to communicate with HMRC by secure email. Hawksworth confirmed that HMRC has moved away from email applications. Instead HMRC will be working with external software developers to provide products which will include secure messaging services, so that questions and answers can be sent to and from HMRC within the third party software.
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