MTD director defends roll-out strategy
The appearance of the Making Tax Digital (MTD) for Business director Theresa Middleton on a discussion panel at last week’s Iris World London event was one of the main draws for conference attendees, with the bulk of the questions from audience members focussed on specific details of the proposals outlined in the MTD consultation documents.
Before the panel AccountingWEB briefly caught up with Middleton to ask a couple of questions about the project, its rollout and ambitions, and put a couple of key concerns AccountingWEB members have raised.
One concern expressed by accountants has been around the project’s rollout to the smallest businesses first, with many worried that their clients will struggle to adapt to such dramatic a change in the relatively short timescale given. Some have expressed a preference for the scheme to be rolled out to the largest businesses first in the same vein as auto enrolment.
While Middleton expressed sympathy for this perspective, she argued that the way Making Tax Digital is to be implemented will allow the project more flexibility to adapt to its users’ needs.
“The way in which we delivered IT change in government used to be big bangs”, said Middleton. “We’d spend a long time gathering the requirements, then deliver and deal with what happened. In that scenario you were able to work first with the biggest businesses, then roll out slowly across the population to the smallest last.”
However, according to Middleton the government does not run IT projects like that anymore. “We start with what we call a minimum viable product, which is the smallest, most straightforward service we can deliver, built on customer research, and then we test, build and iterate.”
This means starting with the smallest and the most straightforward: in this case unincorporated businesses. Middleton revealed that private beta testing service for this has already started, with HMRC sharing the project’s APIs with 18 software providers who are part of the private beta.
Closing the tax gap
Another reason Middleton gave for MTD’s initial rollout to smaller companies is the government’s demands for a return on its investment in the project. Around £1.3bn is being spent on the scheme, and the way the government plans to get a return on that is to reduce the tax gap caused by error. According to Middleton, error is something that is a “behaviour of small businesses”.
“Typically large businesses don’t make errors – they may engage in other behaviours that contribute to the tax gap, but error is not one of them,” she said.
The most recent figures have the UK’s tax gap - the difference between the amount of tax that should be collected against what HMRC actually received - at an estimated £34bn.
Virtual customer relationships
Middleton also stated that with small businesses increasingly interacting digitally with HMRC, the Revenue hopes to use MTD to mirror the type of experience for them that larger businesses receive through having a customer relationship manager.
“What we are seeking to do is to mimic the type of experience we’re all used to from the sites we use to buy goods and services”, she said. “They use their IT to know how you behave, what you buy, and are able to prompt and nudge to encourage you to buy more things.
“We might use such tools to say ‘you’re approaching the VAT threshold, are you aware of that and might you want to think about registering?’ or ‘here’s a relief that businesses like you have claimed – you haven’t claimed it, are you sure this hasn’t been overlooked?’”
Nudges and prompts
While Middleton was adamant that HMRC does not see MTD displacing the role of the accountant in the tax system, what is clear is that they see the role they perform in it changing.
“Depending on what type of operating model an agent currently employs”, said Middleton, “they may find that some of what we call ‘lower value’ work such as adding up a pile of invoices and filing a return based on that will disappear. The agent will then be able to spend their time giving the business advice about growth or being more profitable.
“We’ve certainly not detected in any of our research any appetite amongst businesses to not use an agent, but the way in which they use them will be a much higher value add in terms of profitability and growth, which we think must be a good thing.”
Do you think HMRC’s ‘agile’ way of working will increase the likelihood of the MTD project landing, or is the uncertainty around the exact nature of the tool just adding to public concerns about the scheme? Have your say below the line.