Editor-in-chief Tax Adviser Magazine
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MTD: The psychological factor

10th Apr 2017
Editor-in-chief Tax Adviser Magazine
Columnist
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psychological
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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.

Replies (10)

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By RobertD
11th Apr 2017 12:25

I see Corbyn has pledged to place the MTD entry level at £83,000. Perhaps this will stir the Tories.

http://www.independent.co.uk/news/uk/politics/jeremy-corbyn-small-busine...

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By Andrew Jackson
16th Apr 2017 23:35

On that definition of "return", there seems to be an argument that we are safe - HMRC have indicated that the information in a quarterly update will not be used for calculating the tax liability.

Indeed, there are grounds for suspecting it won't be used for any purposes at all: the point of the exercise seems to be to ensure that the business compiles and collates the data. It's showing your working that's important; the answer you come up with is irrelevant.

So if a return is something that includes "...details that are to be used in the calculation of tax... or for other official purposes", then the quarterly reports are not returns; and if 3.4 and 3.6 are concerned with returns, they would seem not to apply.

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Replying to Andrew Jackson:
Hallerud at Easter
By DJKL
19th Apr 2017 09:48

Surely "or for other official purposes" possibly catches these submissions, the official purpose being to demonstrate that the client has adhered to their record keeping obligations per the draft 2017 finance Bill.

This is an obligation that will for non adherence carry a fine, so hard pressed to argue it is not for " official purposes"

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Replying to DJKL:
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By Andrew Jackson
19th Apr 2017 10:21

Yes, I think that sound reasonable.

On the other hand, the draft legislation refers to the end of year submission as a return, but doesn't use the word for quarterly submissions; and although there is certainly a purpose behind requiring the submission, the definition of "return" in the PCRT seems to require that the details submitted will be used for some purpose - and I'm not clear that this is the case at present.

On the fines point, I'm also not sure that there are to be fines for errors in submissions - late filing yes, but not inaccuracies. You'd think that if the information was required for a purpose then some level of accuracy would be desirable...

It's all distressingly vague, on a number of levels.

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Replying to Andrew Jackson:
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By david5541
25th Apr 2017 10:58

how on earth do consultants working for HMRC think it will be cheaper to intruduce an " RTI-TYPE" submission for the self employed and claim it is not a tax return? they are clearly totally uninformed from a tax technical point of view and great IT SYSTEM" GEEKS

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Replying to david5541:
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By david5541
25th Apr 2017 11:00

i have written to my Mp during this election campaign i hope he speaks to david gauke

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By Eric T
19th Apr 2017 11:18

Osborne told us the annual return was abolished.

Was he lying?

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Replying to Eric T:
Hallerud at Easter
By DJKL
19th Apr 2017 12:31

Both him and Maybe, occupational hazard.

She said something about not calling a election, over her dead body etc etc, this Lady's not for turning, TINA (she did not actually do the last few, but you get the gist)

As an aside who else thinks she has been sent to the MT school of prime Minister Training?

So, despite all such assurances we seem to be getting an election, I have two constructions re this volte face:

1." Look guv, he was lying there on the pavement, virtually passed out, most of his pals were passing him by and ignoring him,I just had to put the boot in, who wouldn't, I mean I would not have being my job right if I didn't really plant one on ole JC given the opportunity he gave me. Nice old duffer JC but really, his minders should not let him out alone. C'mon, it is practically an act of mercy, I did them a favour."

2. "I cannot anticipate the future and despite my assurances no election needed, repeated over and over, I am so incompetent I cannot forward plan for a "what if" scenario, but don't worry , will not get caught out again if all those Europeans don't give me what I demand-no, I don't have a plan B re the Brexit talks, why would I need one?"

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Replying to DJKL:
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By david5541
25th Apr 2017 10:54

i really do hope this election will put the kaibosh on MTD QUOTE "the biggest change in the tax system since the introduction of the PAYE system in 1947" and jeremy hunt will loose his seat along with phillip hammond

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By david5541
25th Apr 2017 10:48

WHEN IT COMES TO "Understanding what motivates tax compliance" i think you will find, as has been the case for many a year, small and micro business tax payers with a lack of access to expertise(and lack of expertise themselves) it is small taxpayers that are most intimidated by the taxman. not only does hmrc view small tax payers as rich pickings by the (100), 000 instead of 1000 butthey are a lucrative source of national insurance!

is key to the generation of an effective tax system.

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