Head of Tax Grant Thornton
Share this content

MTD: An inconvenient truth

6th Mar 2017
Head of Tax Grant Thornton
Share this content
sunny
iStock_Savushkin_sunny

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.

Decision made

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. 

Bumps ahead

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.

Mandation

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. 

HMRC’s role

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.

Future questions

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’.

Replies (31)

Please login or register to join the discussion.

avatar
By Billy Watson
06th Mar 2017 16:47

RTI was a great example of taxpayers supplying more up to date digital information without human interface or HMRC staff losing information. We all get the satisfaction of filing online and knowing we get a digital signature for CT600's and SA returns. If you can be sure that the digital interface can allocate between capital and revenue then MTD sounds good. However if Jonathan has ever filed anything recently ie SA CT600 himself he would know that you need to be sure the information is correctly coded. Tax elections, payments for personal goods, tax addbacks are difficult for some accountants let alone clients. No amount of help sheets will assist clients who don't know their assets from their electrons.

Thanks (3)
avatar
By RobertD
06th Mar 2017 17:59

Another at the theory end of MTD commentator. All very nice sitting in your plush leather chair preaching utopian ideals when you're not at the reality rock face trying to change multiple businesses entire systems. MTD is ill considered and will be an abject failure.

Thanks (14)
Replying to RobertD:
avatar
By P2
07th Mar 2017 14:08

Have any staff at Grant Thornton "distanced" themselves from Jonathan Riley's opinions?

Thanks (2)
avatar
By GW
06th Mar 2017 18:18

Some inconvienent truths:
- HMRC are not good with computer systems - RTI still doesn't work properly for example.
- MTD is being forced through at a rush.
- Computerised accounting systems are not perfect.
- A smartphone won't turn a plumber into an expert bookkeeper with a deep understanding of tax law.
- Apart from HMRC is there anyone that would make a new system live before completing the pilot?

Thanks (18)
avatar
By thegreatgrumbleduke
06th Mar 2017 19:03

Do you own a tin hat Mr Riley? I think you may need one ;-)

Thanks (6)
Tornado
By Tornado
06th Mar 2017 20:45

"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..."

Lucky you. I expect the high net worth clients have little interest in MTD and the massive problems it will bring to those less fortunate.

Enough said.

Thanks (27)
Hallerud at Easter
By DJKL
07th Mar 2017 09:57

"Despite many of their clients being well capable of booking holidays online, registering for driving licences, medical appointments and online banking. "

But is HMRC "well capable" of manning a new system, will they have the resources to deal with the issues that cannot be sorted via a pre determined list of questions and answers on their website?

And frankly, ought I really take much heed of someone who uses "well capable" in a piece of journalism that does not relate to football?

Thanks (7)
avatar
By Trethi Teg
07th Mar 2017 10:41

MTD is nothing like Brexit. 17 million plus voters ticked the box for Brexit. Who precisely ticked the box for MTD.

Of course Grant Thornton do not have to concern themselves too much about MTD as a much larger proportion of their client base are large and have appropriate systems. They also aren't too concerned about paying ridiculus fees to the larger firms for what in reality is a much poorer service.

Still I guess the commentator will gather a few more brownie points with HMRC who will doubtless reciprocate if GT have a future tax issue to deal with.

Agree, totally detached fro ther real world.

Thanks (16)
Tornado
By Tornado
07th Mar 2017 11:13

"Do I believe MTD should be mandated for all those who are not exempt? Yes. Painful but true,"

I think 'true' in this context is subjective, as is the use of 'Truth" in the article title.

Opinions are perfectly acceptable, but not when they are promoted as the truth.

Thanks (13)
Worm
By TheLambtonWorm
07th Mar 2017 14:36

I don't think it's unreasonable to request how HMRC have arrived at those figures.

After all, it's public money and there's a fair amount at stake.

Thanks (8)
Replying to TheLambtonWorm:
Hallerud at Easter
By DJKL
07th Mar 2017 16:09

Walked past the hostelry in Sunderland that bears your name when going to the game on Sunday. However did not really notice it on the way back to the car afterwards, I suspect my view by then was somewhat downward. (Championship)

Thanks (1)
Jonathan@Aiteo
By [email protected]
07th Mar 2017 14:43

I've never found any difficulty with Wendy Bradley on Twitter, so I wonder what Mr Riley is referring to. It seems an unnecessarily catty thing to allow to slip through on a main article.

However, the main thing that astonishes me is to read a senior figure in a large accounting firm suggesting that it is impossible to put a reliable business case together. "Rather tricky to prove something in advance of a change I think." Perhaps his own Advisory team should have a word with him:

"We help you understand the impact of your decisions before you make them."

http://www.grantthornton.co.uk/en/services/advisory/financial-modelling/

Thanks (10)
Replying to [email protected]:
avatar
By Expat24
13th Mar 2017 15:19

Brilliant response! Mr Riley has egg on his face now!

Thanks (0)
Tornado
By Tornado
07th Mar 2017 16:08

"Will we look back in five years’ time and wonder what all the fuss was about?"

I don't think so. There is more than enough evidence to suggest that the 'fuss' is based on real concerns and adverse expectations.

In five years time it seems more than possible that businesses, both large and small, will still be struggling with software that does not work properly and a Tax Agency that is in meltdown.

The situation could be a lot different if the Government slows the pace down on the introduction of MTD and takes a realistic look at how its aims can be achieved taking into account the needs and assistance required by many of those that will be affected.

Less arrogant views from smug commentators would be useful and more realistic support and understanding of the problems involved would be welcome.

Thanks (17)
avatar
By Billy Watson
07th Mar 2017 16:29

Yes it always a good to ask Government departments where they get their figures from. Remember tax need not be taxing nonsense. Government regulation is a mess with the FSA or FCA or Frank Field all not speaking to one another. Hopefully the efforts to stop more Fraud and error will go into the banking sector and less red tape for small business. Just sayin...

Thanks (2)
avatar
By Vaughan Blake1
07th Mar 2017 16:57

As we are four years into RTI, not many people are left wondering what the fuss was all about and I suspect that in twelve months time matters will be much the same!

I haven't read any posts on AWEB that suggests that the poster is fundamentally against the concept of MTD. I am certainly not against it, BUT. And it is a big BUT, my concerns being:
1) The start of "live" MTD is before the pilot scheme finishes, let alone before the results are known and any glitches can be fixed.

2) Why o why quarterly filing? What's it for and why don't we know who it affects with only 13 months to D Day?

3) What happened to the idea of data already known to HMRC pre-populating tax returns? Not heard much about the trials for this. In my view this is where the bulk of errors could be eliminated. I suspect that the system dealing with this will have more than its fair share of problems. Let's get this bit working first.

I blame Gordon Brown for all of this. His baby was WTFC (sic) and it turned out to be an unmitigated disaster. I am sure its replacement Universal Credit caused RTI and then one day someone said, "Ah, how will UC work for the self-employed?"

Thanks (3)
Replying to Vaughan Blake1:
avatar
By observe
13th Mar 2017 11:25

In relation to 2), it makes no sense to force small businesses to perform half-baked tax calculations on a quarterly basis. Does HMRC not realise these businesses rely on their accountant's annual audit to give proper consideration to capital expenses & depreciation, exclusion of those items which are tax deductible elsewhere & their knowledge of the specific changes in legislative rules restricting or allowing deductions?

To submit half-baked data and then have to correct & adjust afterwards will be a huge burden for small businesses & their accountants alike.

Thanks (6)
Replying to Vaughan Blake1:
avatar
By Peter Bromiley
13th Mar 2017 12:15

I think a lot of of us could see some point in RTI. Many businesses used their PAYE liability as an interest-free overdraft which only had to be cleared every April. RTI made this much more difficult because HMRC can now compare the PAYE due with the PAYE paid.

But I agree with your other points. If there is no tax to be paid quarterly, what is gained by quarterly reporting? I literally cannot see the point.

And can someone explain why MTD will bring in more tax? What errors (to HMRC's disadvantage) are we/our clients missing that will now be spotted in a quarterly report? Organised clients get it right anyway. Clients with time pressures are still going to give duff information in a rush.

It only seems to make sense if it gets linked to paying income tax/CT quarterly.

Thanks (2)
Replying to Peter Bromiley:
avatar
By dgilmour51
13th Mar 2017 12:39

If there is no tax to be paid quarterly, what is gained by quarterly reporting?
=
HMRC are selling this with the tenet that tax does not need to be paid Quarterly 'today' in the full knowledge that even before the ensuing shambles is sorted out it will be further shambolised by the introduction of Quarterly payments - shortly followed by 'and you have to pay the next Quarter's in advance'.

Always remember they have absolutely and legally no duty of care to inform the Taxpayer [or Accountants] the truth of anything, can change their mind on a whim and are mendacious and vindictive by nature.

Thanks (3)
By ireallyshouldknowthisbut
07th Mar 2017 19:01

Do I assume GT has just pitched for some consultancy work with HMRC?

Thanks (6)
By ireallyshouldknowthisbut
07th Mar 2017 19:04

I should add, from a BUSINESS point of view I am very much looking forward ot MTD, its a good chance to look good in-front of our clients and protect them from HMRC's madness. I think it will drive a lot of work out way, especially from less competent practices with poor customer service. Its also a good peg to ratchet up our fees on, and should help spread self assessment work through the year more evenly which is a good thing.

So will I make some money out of this? O yes, and lots.

BUT, from a tax payer point of view, its a complete waste of time and money, and fails to meet its own objectives. For that MTD should be slammed.

Thanks (5)
avatar
By justsotax
08th Mar 2017 13:53

'tricky to prove'....what so you don't undertake any planning tasks based upon estimated numbers and then advise accordingly. Or presumably you no longer do having sold a number of your clients down the river having suggested various tax schemes that no longer work.

You suffer the same reality distortion disorder that HMRC and many who make up the rules do but don't have to deal with the consequences. I wonder what your fees will be for contacting the client qtrly....hmmm yes I wonder why you like it.

Thanks (3)
avatar
By johnjenkins
08th Mar 2017 14:29

Jonathan your comment is rather like the one said last night that Arsenal played well.

Thanks (1)
avatar
By CORSALOVER2
13th Mar 2017 10:52

For me, the whole Making Tax Difficult proposal is flawed. I act for 60 - 70 small traders most of whom will be totally unable to comply with these regulations without total dependence on me - as they already do with SA, VAT, RTI, AE etc. They are too busy being bricklayers, chimney sweeps, small garage owners etc. and would have no clue as to what to do even if they sat through a day's lecture on it. If I use the word 'illiterate' that would be insulting and factually incorrect but you know full well what I mean. They do their thing. I do mine.

So instead of providing free software as with SA, RTI, PAYE and VAT - and excellent software it is - HMRC in their arrogance now appear to require all these little people to go out and buy commercial software. Or to pay me to do it for them. Now I have no objection to being paid more (!) but isn't this just another imposition on them?

As I see it, this will be yet another reason - along with RTI, AE, current employment legislation, and all the million and one other 'regulations' - to drive these people into the 'black economy'. I thought this government was going to reduce the levels of red tape? Or was that just when they were seeking election?

If I were a bricklayer, chimney sweep, small garage owner etc I would be heading for the door right now, closing my business bank accounts and getting myself a big black cashbox..........

Thanks (5)
avatar
By CORSALOVER2
13th Mar 2017 10:53

For me, the whole Making Tax Difficult proposal is flawed. I act for 60 - 70 small traders most of whom will be totally unable to comply with these regulations without total dependence on me - as they already do with SA, VAT, RTI, AE etc. They are too busy being bricklayers, chimney sweeps, small garage owners etc. and would have no clue as to what to do even if they sat through a day's lecture on it. If I use the word 'illiterate' that would be insulting and factually incorrect but you know full well what I mean. They do their thing. I do mine.

So instead of providing free software as with SA, RTI, PAYE and VAT - and excellent software it is - HMRC in their arrogance now appear to require all these little people to go out and buy commercial software. Or to pay me to do it for them. Now I have no objection to being paid more (!) but isn't this just another imposition on them?

As I see it, this will be yet another reason - along with RTI, AE, current employment legislation, and all the million and one other 'regulations' - to drive these people into the 'black economy'. I thought this government was going to reduce the levels of red tape? Or was that just when they were seeking election?

If I were a bricklayer, chimney sweep, small garage owner etc I would be heading for the door right now, closing my business bank accounts and getting myself a big black cashbox..........

Thanks (2)
avatar
By raybackler
13th Mar 2017 12:04

What a complacent article and as many comments already say, a complete lack of understanding of the topic at the coal face.

The cost/benefit of MTD are highly relevant and being used by HMRC to overstate the benefits and understate the costs. Estimates or budgets, call them what you will are always out of date the moment they are published, but as an old boss of mine once said, "it is better to be approximately right than 100% wrong" and by that he meant not considering the impact at all.

The article makes it sound like there is a posse of accountants out there who rely on the quill pen and fight against technological advances. We might as well have been called luddites. The reality is accountants can't survive without technology and the resistance to MTD is not technology driven. None of the software has yet been launched. HMRC have not specified to the accounting world what is involved, except in generalities. They seek to include the lower end of the earnings spectrum, where the expertise gap is the widest.

MTD is poorly thought out and heading for a disaster, unless those driving it get their head out of the sand and start to listen to the accounting profession (and not the author of this article).

Thanks (9)
Tornado
By Tornado
13th Mar 2017 12:24

"We should focus on making it the success it can be, rather than trying to pretend it isn’t, or shouldn’t, be happening."

I don't think anyone is pretending that MTD isn't happening or pretending that it shouldn't happen. What people are actually doing is assessing the situation from many informed points of view and raising relevant and real points of concern.

I would also point out that there is a general agreement on AWEB that moving towards a more digitally based tax administration is the right direction to go but this is unlikely to be successful based on the current proposals and time scales.

Far from pretending anything, the informed opinions of many provide a very real indication as to why MTD in its current proposed format is unlikely to work.

Thanks (2)
avatar
By Michael C Feltham
13th Mar 2017 17:20

Let us not forget: the likes of Grant Thornton, et al, represent part of the problem and not the solution!

The magic hand of CCAB, added to the Ivory Towers of major practices are the very same people, Government and HMRC go to for answers.

Great idea!

If they are seeking input on mega-corp, PLCs and major LLPs.

Not great, if they are seeking answers, concepts, ideas and reality from the real world of SMP practice and the SME community they serve.

As I have stated, oft times before, senior government ministers, heads of major government agencies such as HMRC and senior partners of major Accountancy/Consultancy practices such as Grant Thornton, would be hard pushed to operate a hamburger stall at a decent profit.

Collectively, their actual knowledge of the lower echelon SME, trying to nick a living from this hard old world, feed his wife and kids and maintain a roof over their heads, whilst being constantly attacked by government agencies over excess and insane over-regulation is a foreign country to them.

I am almost speechless at the utter malignant arrogance of this article.

Thanks (5)
avatar
By Billy Watson
13th Mar 2017 15:46

Enjoying this debate. To answer some points can I point us in the direction of Economics? How will this increase real GDP? If we are all classical economists then Sic Say it will all come good in the end aggregate supply.
If as I suspect we are all more Kensayian then how will this nonsense assist productivity? Where is the cost benefit of training clients to get their data wrong? Should we start cooking at the restaurants when we go out?
What is the opportunity cost of having the client spend say £500 a year on MTD or £500 to prepare a cashflow?
Will keep Hector the Inspector happy but few others.

Thanks (1)
avatar
By LAC47
13th Mar 2017 16:39

Very disappointed by Jonathan's comments.....shows a complete lack of understanding of the problems small practitioners and their clients will face

Thanks (0)
avatar
By Mr J Andrews
13th Mar 2017 19:48

The author's comments should be taken at face value. He enjoys working with dynamic organisations.....entrepreneurial businesses....HNWs and........{ WHAT ??? }. I suggest Mr Riley takes time out and does a few volunteer sessions at TaxAid to understand the other end of the spectrum and the types of small businesses affected by MTD.

Also I take exception to the preference correlation under ''Mandation'' . Mr Riley refers to booking online holidays [ a matter of choice and leisurely pleasant experience for those that can afford such holidays] , registering for driving licences [ how many licences does a driver need every quarter of the year ? ] , online banking [ choice and convenience ] and medical appointments [ God forbid regular ailments every three months ].
Please don't use such spin examples to justify MTD ; they are akin to the duff examples within the original Consultation proposals.

There are some positives within the article ; primarily the VAT threshold as entry point for MTD -but isn't this the common sense we've all been seeking since the outset ? Although we all know the delay to April 2019 for those below the threshold will be doggedly pursued and targeted by HMG as easy cash cows.
Secondly , a senior practitioner on board HM Titanic . I think Mr Riley must be ruled out as not a cynic but had the likes of Wendy Bradley or Rebecca Cave been invited along on the maiden voyage , we wouldn't all be reading this crap now.

Thanks (2)