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Hourglass sands of time
istock_YinYang

MTD: The count down

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30th Jan 2017
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We are still waiting for the government’s response to the consultation on Making Tax Digital. What’s causing the delay? 

Why are we waiting?

This was a school-yard chant when I was young, directed at late-running school buses, and prefects who refused to open the school doors to allow junior school pupils into the warm. Today I want to stand outside 100 Parliament Street at shout at the top of my voice:

What do we want?

A decision on MTD.

When do we want it?

          Now!

But it's cold outside, so I’ll stick to twitter.

Who decides?

HMRC and Treasury officials write the consultation documents, and analyse the replies, which in the case of the MTD consultations elicited a record level of over 3000 responses, plus a stinging Treasury Select Committee report. But HMRC officials don’t make the decisions.

Only a government minister can give the go ahead for MTD, or make the decision to delay the start date. As MTD is such fundamental change to the operation of the UK tax system the decision will have to be taken by the highest authority in the Treasury: Chancellor Philip Hammond. But will he be required to consult with, and defer to, Prime Minister May? Is she really the control freak she is rumoured to be in some circles? We know she has been a little busy lately, talking to powerful men about trade deals.  

Money talks

A key justification for MTD is the additional tax which will be generated by small businesses submitting quarterly figures to HMRC, which will magically be more accurate than the accounts prepared once a year by their accountant. The Treasury Select Committee report questioned whether the calculations underlying the MTD revenue estimates included all costs as well as savings. If the MTD revenue projections are redrawn, and no longer produced the increase revenue as initially expected, the whole project losses some urgency, making a delay more likely.      

Free software 

A core promise made in the MTD consultations is that free software would be available to allow taxpayers to comply with their MTD filing obligations. HMRC was clear that it would not be producing the software itself, but would work with software providers to provide a free product suitable for the simplest businesses. However, no software provider (correct me if I’m wrong) has stepped forward to say it is willing to provide a MTD-compliant accounting package. This could be a big sticking point for MTD, as no free software means no MTD.

Large business roll-out

The MTD consultations we have seen so far only deal with unincorporated businesses, although MTD is supposed to apply to all sizes of businesses including companies from 2020. HMRC promised to publish another MTD consultation document which would deal with “complex businesses”, covering both companies and partnerships. This was expected to be released in December 2016, but there is still no indication of when it will be published.

I believe that HMRC has not thought through the MTD project right to the end - i.e. how companies and partnerships would comply, or indeed why they should make quarterly reports at all. If the MTD project is to be limited to unincorporated businesses it losses a good deal of its power and importance. 

Brexit

This is already placing a huge strain on the civil service across many government departments. I have heard that inside the Treasury resources are stretched, and people who would normally spend hours thinking about the finer details of inheritance tax are being reassigned to Brexit-related problems. So is MTD an unnecessary and unwelcome burden – not just for businesses, but for the civil service as well?

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