Three fundamentals that make MTD seem inevitable
MTD really is here to stay – although the form it will eventually take is still largely unknown, says Ian Vickers.
First of all, let us be clear – Making Tax Digital (MTD) will happen in one form or another. Many of the accountants we speak to still believe that MTD will be scrapped due to cost, logistics or Brexit (or other political considerations), but as recently as 13 July HMRC reiterated the current deadlines on the UK Government’s own website.
I think, however, what is up for debate is the eventual form that MTD will take, the speed of its implementation and what facets of it will go live, when and in what order. This is why I believe that MTD is a journey, not a destination – accountants, taxpayers and HMRC are all working towards a 21st century approach to accounting, reporting and tax gathering, and given the speed of technological advancement, don’t be surprised if MTD evolves mid-implementation.
If you think I am exaggerating consider the recent partnership between Amazon and HMRC to use the former’s Echo devices and Alexa smart assistants to remind people about tax credits. Of course, this is more PR than process at the moment, but it has already led to headlines in the tabloid press such as “Alexa… Pay My Tax!”, which gives the impression to the general public that in the near future they will not have to touch a keyboard (or even a touchscreen) to file their accounts with HMRC.
This is why, as a software developer, I am only looking to implement functionality to my software as and when specified or needed by either HMRC or accountants themselves. To do otherwise would be costly, presumptive and potentially a waste of time, and that misspent development cost would have to be passed onto the end user… that’s you, the accountant!
This is not meant to be a dig at other software developers or a sales pitch, but a statement of fact. Hopefully, it articulates an ethos I think all concerned with MTD would be wise to adopt, as it will result in a practical and effective adoption, and not failure or panic.
I suspect that despite my arguments above, many of you remain sceptical as to whether MTD will eventually see light of day, but I want to give you another perspective. In a past life, I was a derivatives trader in the City of London. Our successful trading strategy was to identify the particular fundamentals behind a situation or a proposition and to base our investment decisions on what those fundamentals told us. With this mindset, I think the following three fundamentals make MTD inevitable:
• The government must become more efficient, reducing and optimising it overheads, which it could achieve, in part at least, with a successful, consolidated digital strategy.
• The government must maximise its tax receipts, which it could achieve with the transparency brought by a successful, consolidated digital strategy.
• The government must improve its cash flows, which it could achieve if all taxes from all taxpayers, not just VAT, were paid quarterly based on quarterly reporting, instead of nearly two years in arrears with carefully chosen year-end dates.
Given these three fundamentals, MTD is the ‘Occam’s razor’ to take to all these problems as far as the UK government is concerned. Electronic submission of taxes will mean (in theory) the automation of tax returns, analysis and investigations, which will help to lower the overheads and staff requirements of HMRC.
Demanding quarterly payments of tax owed will address the Government’s cash flow and revenue forecasting problems. If you think there is another way that the UK government can meet the objectives that I think underpin the MTD project, I would be interested to hear them. As I have written before, I think MTD provides a huge opportunity for accountancy as a sector and it shouldn’t be seen as a threat.
However, remaining in denial about the inevitability of MTD will lead to the failure of your practice, because the accountancy world outside is changing as I write this, and you are not. The way you currently work will soon cease to be viable, so I genuinely urge all accountants who have yet to embrace the digital revolution to do so for their own sakes, and not just for the benefit of software developers like me.
MTD is not immediately going to be a panacea to all of HRMC’s problems, nor does it necessarily mean extinction for an older generation of accountants (if they’re proactive), but it is a journey we are all on, with a final destination being a hazy landmark on the distant horizon. It is a journey we’ve all undertaken (either by choice or circumstance), and it is one I am glad to be on, and one that I want to enable others to make.
Ian Vickers is Managing Director of Diamond Discovery Software. Email [email protected] or call 01656 725800