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MTD faces growing delay demand

28th Sep 2016
Editor AccountingWEB
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Professional bodies have added their voice to accountants’ concerns about the Making Tax Digital timeline for implementation, with many still believing that a delay does not go far enough.

In a letter to Chancellor Philip Hammond, Treasury select committee chair Andrew Tyrie suggested a pilot scheme. “From this,” he writes, “the lessons from customer’s experiences can be learnt, and well before digital reporting is made mandatory.”

He concludes: “Better to get it right than stick to a rigid timetable.”  

In the letter Tyrie outlines his concerns over the availability of free software and how long it will remain free, how the quarterly reporting will align with universal credit, and the impact of the £10,000 exemption, especially for business whose turnover is just over the threshold. 

Profession supports delay

Joining the dissent, the CIOT's president Bill Dodwell told the Treasury committee during a hearing on the UK's tax policy on 6 September that the groups view is that [MTD] is “too rapid” and making it compulsory is going to make the rollout “very challenging”.

The ATT is also urging the government to listen to Tyrie’s advice. ATT president Ralph Pettengell said: “It is in no-one’s interest to rush the introduction of MTD and end up with a range of problems for both businesses and HMRC when proper consideration of suggestions and further detailed consultation could assist the achievement of making HMRC into one of the most digitally-advanced tax administrations in the world by 2020.”

It wouldn’t be the first time the government took a more measured approach to introducing a digital change. AccountingWEB's consulting tax editor Rebecca Cave cites the gradual move from paper to online filing for PAYE as already setting a precedent from 2004 – 2009. Online filing for VAT returns was also introduced gradually before it became compulsory from 1 April 2010 for businesses with turnover over £100,000.

Backing a delay in a previous article, Cave wrote: “It would give the software companies the time to develop low cost or free apps to be used by this tier of businesses. The delay will also allow accountants more time to introduce their clients to digital methods of keeping business records (the exact format of which is another detail to be decided).”

A delay doesn’t go far enough

However, ACCA’s head of taxation Chas Roy-Chowdhury tells AccountingWEB that a delay is “just kicking the can down the road” and not dealing with the real problem, which he says is mandation.

“We can defer it as much as we want, but we need to get to the heart of the problem, and the heart of the problem is the additional admin burden that the new system is going to bring… The whole mandation issue is ill-conceived.”

Roy-Chowdhury argues that small businesses are already fearful of what a post-Brexit world might bring, and the MTD mandation would impose an additional burden on small businesses.

He adds: “Our members are going to have to incur costs which they will not be able to recover in fees, and the whole framework is completely unnecessary. It's not there to help small businesses as the spin the government puts out on this - it's there to try and fill the tax gap.”

The consultation documents themselves were originally supposed to have been published in Spring 2016, but were knocked off schedule thanks to the EU referendum campaign and the Panama papers fallout. 

What do you think? Should MTD be delayed to fit a more realistic timeline or will that just prolong the inevitable? 

Replies (62)

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By RobertD
28th Sep 2016 18:13

Hurrah for Chas Roy-Chowdhury! The devil isn't in the detail, the whole hideous plan is fundamentally flawed.

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Chris M
By mr. mischief
29th Sep 2016 09:15

I agree. A delay is welcome. But the Government has no business specifying how a given operation keeps its records. If a company wants to log its transactions on papyrus reeds it should be free to do so long as they are complete and accurate.

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Replying to mr. mischief:
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By JoandToby
29th Sep 2016 11:19

Couldn't agree more - what does it matter as long as the records are accurate and taxpayers are paying the right amount of tax. We have a client who still uses the big ledger books and his totals balance to the penny and another on all singing and dancing software with his van posted to motor expenses and his drawings in wages and salaries. As long as we as their agents are verifying the records and submitting them digitally what is the issue?

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Tornado
By Tornado
29th Sep 2016 09:40

I have written to Amdrew Tyrie to support the comments in his letter to Philip Hammond.

I have many other thoughts which I did not convey to Mr Tyrie but it does seem that there is s significantly greater number of people across the spectrum who are now questioning the value or need for the whole MTD project.

My further thoughts are that as one of the stated aims of the project is to reduce the tax gap and collect more revenue, where is the most likely place the 'lost' taxes are going to be recovered from?

Most people who use Accountants and other Agents will not be high on this list for the simple reason that Accountants know what they are doing. They also have a legal and ethical responsibility to their clients and like me, are just interested in ensuring that our clients pay the correct tax.

I think the most obvious source responsible for the Tax Gap is the vast number of people who have been actively encouraged by the Government into Do-It-Yoursef-Taxes. As Accountants we know the common errors that people make when preparing their own Accounts and invariably those errors result in under-declaration of tax in my experience.

So is this desperate rush to get the small businesses into MTD simply a realisation that encouraging people into DIY tax was not such a good idea and something needs to be done quickly to stick a plaster on the wound.

I can also understand the obsession with sidelining Accountants as although we hold the key to successful tax administration, the Government are not prepared to lose face by admitting this.

A much more pragmatic approach from the Government is what is called for and a significant delay or re-think on MTD altogether would be of significant help.

The MTD Team really are in a little world of their own, although they are probably entirely convinced their proposals are right. I can just imagine this team at work, lots of love between them and a group hug at the end of each day, just before their parents come to take them home.

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Replying to Tornado:
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By Alanpryan
29th Sep 2016 10:24

Tornado is spot on...the whole 'DIY tax' scenario has simply enabled the more IT savvy to have a go at filing their own tax returns. This has led to (in my opinion) particularly where CIS sub-contractors are concerned a cottage industry in filing returns that lead to inflated refunds. I have seen this from clients that have left and done this - where they are still showing as a client and I can see what they have received!

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Replying to Tornado:
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By JoandToby
29th Sep 2016 11:22

The MTD Team really are in a little world of their own, although they are probably entirely convinced their proposals are right. I can just imagine this team at work, lots of love between them and a group hug at the end of each day, just before their parents come to take them home.

[/quote]
Exactly - made me laugh but very true!

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By RobertD
29th Sep 2016 10:13

I think Tornado's statement that they are convinced they are right is correct. They view the outrage by agents as fear of client base and fee reduction. The real truth is that we will HAVE to slim our portfolios and charge the remaining clients more. Intrinsically, the Revenue's belief that digital will promote less errors is flawed. It is promoting a have a go at digital bookkeeping whilst complaining that there is a tax gap caused by agentless taxpayers... sorry customers. The AWEB members and HMRC have adopted a siege mentality and are soldiering on with this lunacy. I suppose backed up by the belief that if HMG have agreed to squander £1.3b it must be correct. The kings clothes. I for one will petition, consult, inform and tweet so that I can say that I didn't just stand and watch.

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Replying to RobertD:
Tornado
By Tornado
29th Sep 2016 10:29

Yes, I must remember that taxpayers do not exist, they are 'Customers' as you point out.

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By accountright
29th Sep 2016 10:15

I agree - we cannot stand by and not have a rant about the whole stupidity of HMRC with MTD
I joined the webinar the other day and asked the question "what about Accounting Standards?" The reply was "what are they?"

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Replying to accountright:
Jonathan@Aiteo
By [email protected]
29th Sep 2016 10:25

Accounting standards, seemingly, are something HMRC are keen to entice companies away from using.

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Replying to accountright:
By Rebecca Cave
03rd Oct 2016 10:44

accountright wrote:

I joined the webinar the other day and asked the question "what about Accounting Standards?" The reply was "what are they?"


OMG!!
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By DMBAcc
29th Sep 2016 10:23

At last some heavyweights are now fighting our corner. Please God some genuine common sense prevails. I have written to Andrew only to find that the Gov't protocol is that I must write to my LOCAL MP. So I just copied him in with the hope that Andrew will start to challenge his colleagues. As someone has said not one of my clients pays the wrong tax. I make sure of that so the Gov't will not get one extra penny from any of my 50 clients (or me for that matter). So the Gov't will not be closing the tax gap by IMPOSING costly accounting software on my clients and me. It will make some of my clients think whether it is worth the effort and close their small businesses. They don't earn enough to pay tax but their turnover is above the rediculously low £10,000 threshold. BARMY!!!!

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Replying to DMBAcc:
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By accountright
29th Sep 2016 10:28

likewise - I have written to my local MP and to Theresa May (email passed on to the appropriate Gov dept who will respond to my concerns). I expect as Mr J told me previously, they will say "we feel your pain" but tough we've made up our mind and we need to save face!

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By MBK
29th Sep 2016 10:36

Andrew Hubbard hit the nail on the head in his editorial in last weeks Taxation when he said that, until the government make the case for quarterly "updates", they will not get the profession to back these changes.

Certainly, from where I sit, I cannot see there is any kind of case for quarterly reporting. The only reason I have seen advanced is that it helps taxpayers to have an idea of estimated tax liabilities. But that is palpable nonsense.

So I shall continue to oppose MTD for the time being.

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Replying to MBK:
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By Vaughan Blake1
29th Sep 2016 14:02

It is the quarterly thing that gets to me. MTD as such is a grand idea, but why quarterly filing?

If HMRC think taxpayers want this, and they keep implying it is wanted by the 'customers', then we all need to say, "thanks, but no thanks, we're fine as we are".

I would like to see the quarterly filing bit delayed until someone explains the benefit. Alternatively, allow the 'customers' busting to file quarterly (so that they know where they are) to do so voluntarily, then we can see how many actually want it!

Thanks (3)
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By tax91
29th Sep 2016 10:42

We can only hope that the sensible advice given by Andrew Tyrie and others can persuade Philip Hammond to apply common sense and cease the mad rush for HMRC to implement a yet unformulated MTD project and for the concept to be re-examine.
However, I am not holding my breath!
Tax91

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By Sagiquarius
29th Sep 2016 10:46

The whole idea of MTD worries me.
I am now semiretired with a naturally dwindling portfolio of clients. I have worked both sides of the divide, and can only see MTD as yet another staff shedding excuse from HMRC. Where is the service?
I hate all the admin imposed on my own business as much as I hate the idea of taxpayers/clients/customers attempting to do a task which took me years to train for. There is no way mistakes will be reduced. Errors of misunderstanding will take ages to sort out. I've already had one protracted argument about government department "information" being incorrectly applied. No apology, only a threat of increased penalties if I'd got it wrong! Surely a staged introduction of MTD would be best, with more time for feedback? SA in 1995 was child's play in comparison with the changes anticipated now.

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By BryanS1958
29th Sep 2016 10:53

As usual our professional bodies are doing nothing to help their members and businesses in general. Why are they negotiating about delaying implementation? they should just be saying "NO" it is a very bad idea.

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By wyoming
29th Sep 2016 10:47

If any evidence were needed that HMRC's Digital Tax Accounts are unlikely to be "fit for purpose" by 2018, just look at what has happened to NI in 2015/16. When they got rid of the Class 2/4 deferment process, they said it would all be fine. They would automatically adjust Class 2 and 4 bills via self-assessment to give credit for Class 1 payments suffered as an employee. Yeah right, that's going really well!

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By frankmcd
29th Sep 2016 10:48

DMBAcc says:

"...not one of my clients pays the wrong tax. I make sure of that so the Gov't will not get one extra penny from any of my 50 clients (or me for that matter)."

Echoed. I will be responding to the consultation to suggest that MTD is mandated for un-represented clients only, whilst represented clients are be left alone to be looked after by us.

Is there no-one within HMRC who even perhaps suspects that agents actually preserve the tax take?

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By SimonLever
29th Sep 2016 10:51

The only reason for quarterly updates is so that eventually there will be quarterly tax payments for amounts not paid under PAYE.
Once HMRC have the information they can estimate the tax due and then take it from your bank account - yes you will have to sign a direct debit to them.
Paying tax quarterly instead of 6 monthly will greatly increase the cashflow which is the ultimate aim.

Thanks (3)
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By SimonLever
29th Sep 2016 10:52

The only reason for quarterly updates is so that eventually there will be quarterly tax payments for amounts not paid under PAYE.
Once HMRC have the information they can estimate the tax due and then take it from your bank account - yes you will have to sign a direct debit to them.
Paying tax quarterly instead of 6 monthly will greatly increase the cashflow which is the ultimate aim.

Thanks (1)
Replying to SimonLever:
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By Comptable
07th Oct 2016 15:51

So HMC gets a one off cash flow advantage.
And taxpayers get additional costs and work and inconvenience........forever.
And £xm or whatever of cost gets transferred from HMRC to taxpayers.

Does that sound like a reasonable deal?

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By DMGbus
29th Sep 2016 10:54

One software supplier [mentioned in another Aweb thread on MTD] has just stated (quote below) that they have received no information from HMRC about the precise requirements of MTD, so how can HMRC be confident "all will be well" at the mandation date of 2018?

"We will but as yet HMRC have not released any details of how this is going to work so we can’t give any idea yet of what this will entail but we will definitely be incorporating it into the software".

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Replying to DMGbus:
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By accountright
29th Sep 2016 11:34

yes, I made that comment - it was VT software!

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By coleprice
29th Sep 2016 11:02

Agree with Chas Roy-Chowdhury, Robert D et al.

MTD as it stands so far is a flawed mess, ill-conceived by people who appear to have no knowledge of SME's. By knowledge I mean (a) the financial, statutory and regulatory pressures under which owners have to try to run businesses, (b) the strengths of small business owners which usually includes sales, marketing, and how to make a profit but rarely includes the ability to maintain pristine records, however good their overall feel for their business may be.

The reasons trotted out for MTD are at best glib hope without experience or knowledge, at worst economy with the truth. I suspect it would