MTD: The psychological factor
As can be seen from Rebecca Cave’s recent article, ‘MTD: 12 technical questions’, there are a growing number of technical questions around MTD.
But it’s not just the technical aspects there are also issues around the people side of going digital - a point highlighted by Rebecca’s comment on the reflective step of the MTD for business process:
“HMRC computer takes the reported results and updates the taxpayer’s digital tax account with the expected tax position. There is no human intervention by HMRC at this stage.”
The human factor plays out in a few areas, two that come to mind are the increased burden and worries about adherence to professional rules for the adviser and the fear that some taxpayers have when they receive a brown envelope.
The first of these points forms part of one of Rebecca’s 12 questions:
“HMRC does not expect accountants to… review each update for accuracy and disallowable items. If an accountant submits the update on behalf of his client knowing that it contains inaccuracies, is the accountant breaking the professional standards code: Professional Conduct in Relation to Taxation?”
My view as a practitioner is yes.
In my recent editorial for Tax Adviser magazine, I introduced the mnemonic Ja Bloc Disc to remember the important elements of the latest version of PCRT which came into action on 1 March 2017. It seems to me that the element to consider with the above question is C for Professional competence and due care.
2.8 of PCRT states that “a member has a professional duty to carry out his work within the scope of his engagement and with the requisite skill and care”.
More importantly for MTD chapter 3 provides general guidance on tax returns and defines the term ‘return’ as:
“any document or online submission of data that is prepared on behalf of the client for the purposes of disclosing to any taxing authority details that are to be used in the calculation of tax due by a client or a refund of tax due to the client or for other official purposes”
Sounds like MTD falls within this.
3.4 states that “A member who prepares a return on behalf of a client is responsible to the client for the accuracy of the return based on the information provided.”
And 3.6 states “A member should take care not to be associated with the presentation of facts he knows or believes to be incorrect or misleading nor to assert tax positions in a tax return which he considers have no sustainable basis.”
Based on this I’m going to be in risk review mode each time I make a MTD submission – that’s four times more than present!
The taxpayer point continues to be one of my concerns about MTD - it’s the anxiety that some clients have every time they interact with HMRC. Add quarterly reporting into the mix and you could be adding four times as much anxiety. Considered logically, having a better handle of your tax affairs should result in less stress but why then is it those with the most exemplary records and compliance history have developed such a fear of getting things wrong. Why is it that I hear repeatedly ‘It’s such a weight of my shoulders passing this to you’?
I am sure those developing Making Tax Digital have focused on the ‘taxpayer journey’ but what about the psychological aspects of this? The truth is that this is an area that needs more research, but the academic work in this area to date makes interesting reading. Diana Onu and Andy Lymer consider what psychologists say about tax compliance. Psychologists have a lot to contribute to our understanding of taxpayer compliance behaviour – helping us to understand why people pay, as well as don’t pay, their taxes. Understanding what motivates tax compliance is key to the generation of an effective tax system.
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Chris is responsible for the article content in Tax Adviser and works closely with CIOT and ATT technical to ensure that the full coverage is given to issues of importance. Chris set up his practice in March 2014 (http://chrismattostax.co.uk/) and assists a wide range of clients with...