Are HMRC taking stock of MTD?
I responded to every HMRC MTD consultation. HMRC did react to the first consultation by watering down the entry threshold and permitting spreadsheets. Personally I felt this defeated HMRC's argument for MTD because spreadsheets are more prone to errors than manual records (I have seen plenty of spreadsheets produced by clients where they've claimed non-existent VAT on insurance, rates etc because they rely on formulas). The areas where clients are most likely to make errors are the more complex calculations such as partial exemption, retail schemes, margin schemes etc. None of the mainstream software automate these. HMRC should have insisted that the software industry automate these but instead HMRC said these can be done manually. What a cop-out. That really did rubbish the whole point of MTD.
After making the initial concession re spreadsheets, HMRC closed its ears and pushed on with MTD and completely ignored feedback from agents, businesses and others such as the House of Lords. HMRC may say it did listen: if so, I challenge HMRC to say what significant changes it made after allowing spreadsheets. I can’t think of any.
HMRC started a pilot. HMRC had told me they expected 10% of businesses to take part. I understand that the actual number during 2018 was less than 0.1% - a tiny fraction of HMRC's expectations. This should have made HMRC take stock: but it didn't. The MTD steamroller continued oblivious to everything.
As we got near to mandation we started to see how woefully unprepared HMRC were. You want examples? How about the voice unrecognition system (I won't use 'service' because it doesn't serve taxpayers or agents). Somehow HMRC had forgotten to program it to recognise 'Making Tax Digital'. How had HMRC missed this? Hadn't HMRC heard about MTD? Is it a case of the right hand not knowing what the left hand is doing? Or is it a case that HMRC genuinely thought there would not be the volume of phone calls that occurred? If the latter, then HMRC had no excuse because we, the HoL, businesses etc had all been telling HMRC about it and HMRC had ignored. So I put that down to HMRC's arrogance. I can site many more examples of HMRC's lack of preparedness eg the lack of functionality in the ASA, inability to view VAT certificates etc.
As an agent I had been calling for MTD to not be made compulsory. One of HMRC's arguments was that businesses would find MTD so much better than the old system so they would want to switch. In which case why mandate it? But no, HMRC said mandated it will be and it was. Except that it was not. In the end HMRC caved in and in the week before the deadline HMRC announced that in effect MTD was not mandated at all and businesses that we not registered could file the old way. That makes a farce of MTD. HMRC, are you proud of this? HMRC, the decision to proceed with MTD was made by people in HMRC. The faceless organisation that is HMRC does not by itself make decisions: all decisions are made by people. People that should now be held accountable for the failures that have occurred and the £1.3 billion of public money that has been wasted.
I many on this forum I put a lot of time into MTD. I read every consultation document and responded in full, read all the HMRC publications, worked through the MTD requirements with my clients to prepare them etc. I spent literally several hundred hours on it. A quarter of my clients would never be able to comply so I obtained exemption. The other three quarters would be able to comply with various levels of hand-holding. But what has HMRC gained. HMRC receives 9 boxes then and receives 9 boxes now. Opportunities have been missed such as the ability to file supporting documents for large input tax claims such as the purchase of buildings. Figures that were manually input into GOV.UK are now being manually input into spreadsheets that have no self-checking built into them and are more prone to error than GOV.UK because more figures are being input. I look back and wonder why HMRC invested so much time and resources into MTD. I hope HMRC thinks it was worth it. As a taxpayer myself I am in no doubt it has been a gross waste of public money and I hope those responsible are held to account.