MTD: An inconvenient truth
Making Tax Digital (MTD) is the future and should be embraced by the profession. We should focus on making it the success it can be, rather than trying to pretend it isn’t, or shouldn’t, be happening.
MTD is a bit like Brexit. The decision has been made; we can moan about it if we like or we can embrace the change and make it work. This may be an unpopular view, with some, perhaps many, members of the tax advisory profession.
Costs of MTD
Recently, I had an exchange with Wendy Bradley on Twitter – in itself a dangerous thing to do. Wendy is trying to establish, via a Freedom of Information request, what the cost/benefit of the move to MTD would be.
Would be? Rather tricky to prove something in advance of a change I think. So the best that could be hoped for, had the request resulted in a supply of information, would be an estimate. And like so many estimates in the MTD transition, like the claims as to costs of moving to MTD for taxpayers, like the additional yield as a result of improved compliance, it would still be an estimate and, based on experience, bound to be wrong.
Whatever happens with MTD, things will not go as smoothly as the most optimistic hope for. Nor will they will they go as badly as the most negative soothsayers predict. There will be bumps in the road – there always are with major change – it just depends on how you anticipate and plan for change and the ‘variances’ that inevitably emerge as a new system is rolled out.
Embrace the future
So, do I sit at the extreme end of acceptance? Willing to do anything asked of me by our friends at HMRC? Of course not. I do believe that there should be a higher level of exemption for smaller businesses, and as I have written elsewhere, the VAT threshold seems a logical point of entry for MTD. I accept that this would not be popular with the software developers who will want to sell their products to as many taxpayers as possible and their business economics will be adversely impacted by a higher threshold than that currently on the table.
Do I believe MTD should be mandated for all those who are not exempt? Yes. Painful but true, but when you allow people to opt in to anything you never get the take up and engagement you hope for. Voting might be a case in point – would democracy be stronger if all had to vote?
Unfortunately based on my interactions with some in the tax advisory community, there are many who will never accept MTD is right for their clients, or more accurately for them. They would rather continue in a pre-digital environment where bits of paper represent accurate books and records, where change never happens. Despite many of their clients being well capable of booking holidays online, registering for driving licences, medical appointments and online banking.
Do I think HMRC could improve the level of its engagement? Yes. Consultation is to be welcomed but only when the responses given are adequately listened to. I personally would like to see a senior practitioner who is sceptical of MTD but supportive, being used as a sounding board by HMRC so they can better gauge sentiment. I would also suggest that the MTD-software to be used starts to be more visible. The earlier taxpayers and their agents can see and experience what the new world will look like, the better.
So, will the world end with MTD? Will clients refuse to comply? Will tax revenues decline because some taxpayers claim for expenses they currently overlook? Or will tax revenues rise as more comply more accurately? Will we look back in five years’ time and wonder what all the fuss was about? On this last point, I think the responding answer is ‘yes’.
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As head of tax, every day is different and I thoroughly enjoy it. I work with dynamic organisations and people on a daily basis, whether entrepreneurial businesses, high net worth individuals or corporates, or with colleagues across the UK and the globe.