Jim Harra, tax assurance commissioner at HMRC, has been making soothing noises about Making Tax Digital (MTD) while the tax department digests responses to the consultation documents.
In a letter to the Financial Times coinciding with the end of the MTD consultation period, Harra said HMRC will not be asking anyone to file accounts five times a year, nor introducing in-year quarterly payments.
“Businesses will simply send in-year updates to HMRC using information collated automatically by the same software used to record day-to-day transactions,” he said.
On the costs issue flagged up across by the profession, Harra said that businesses already keeping records digitally should see no additional costs at all.
He added: “Free software will be there for businesses with the most straightforward affairs, and we are looking at additional assistance with transitional costs.”
However, many of the professional bodies specifically highlighted costs as a major stumbling block in their responses.
The CIOT said in its MTD con doc response: “Whilst MTD will bring benefits to HMRC, the likely impact on most businesses and taxpayers will be an increased workload and/or increased costs. It is not at all clear that there will be commercial benefits to offset such costs, particularly for smaller businesses.”
Despite detailed feedback on the MTD timetable and the impracticalities of meeting the deadlines in the coming months, Harra added in his letter that HMRC recognises MTD as a significant change for businesses, “which is why we’re introducing it gradually as well as exempting some of our smallest businesses”, he wrote.
The LITRG said in its response that the proposed level of turnover of £10,000 or less to qualify for complete exemption from MTD was far too low: “We recommend that businesses with a turnover of up to an amount equivalent to the current VAT registration limit, as determined by the figures on the previous year’s tax return, be exempt from complying with MTD,” it said.
All eyes now turn to the Autumn Statement on 23 November for an update on the digitisation project and whether or not the Chancellor will pay heed to concerns across the profession.
There has been a groundswell growing behind calls from professional bodies for a delay to the proposed timetable.
In its MTD con doc response the ATT said: “We believe that much more can be achieved if the taxpaying public is led progressively and systematically through these changes rather than being forced into such radical changes in a very tight time-scale.”
Along with ICAS, ACCA and the ICAEW, the CIOT echoed this call in its response: “The timetable for mandation of MTD is far too optimistic and must be pushed back.”
There are also concerns across the profession about the use and availability of software for MTD.
The OTS said in its response: “A key challenge with software is simply convincing businesses and landlords that appropriate digital tools will be available and won’t require wholesale re-engineering of their business processes.”
The ICAEW added that the government should decouple the digitalisation of record-keeping from any quarterly reporting requirement.
“While the two functions could ultimately be made to work with the right software and skills, a more gradual implementation will be easier to achieve, especially for those whose business administration skills would not easily adapt to embrace an end to end mobile phone app or IT system,” it said. “In addition, digital exclusion must be appropriately addressed.”
During the consultation phase AccountingWEB and Thomson Reuters carried out a detailed survey of more than 1,000 accountants. Along with concerns about timelines, the survey revealed a high percentage of people who were not digitally confident.
Six out of 10 respondents felt their clients didn’t actually have software systems or digital recordkeeping in place yet. In addition 44% of practitioners are expecting extra workloads around MTD and another 41% are concerned about how they’re going to be able charge for the extra work.
More than two thirds were also very concerned about the quality of the information submitted by clients and held by HMRC.
Who do you think the new Chancellor is going to listen to? What are your other Autumn Statement predictions?