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MTD: ICAEW chief slams mandation ‘roadblock’

29th Nov 2016
Head of Insight AccountingWEB
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Roadblock traffic

ICAEW vice president Paul Aplin took to the pages of Taxation magazine this week to lambast the government’s decision to pursue ill thought-out plans to roll out mandatory digital record-keeping for tax purposes over the next three years.

The position Aplin takes in an article entitled “A no-quills approach” would echo the thoughts of within the profession - and he pointed out that they were no doubt reflected in some of the 3,000 consultation responses submitted to HMRC ahead of the MTD consultation deadline at the beginning of November.

But as the leader-in-waiting for the country’s main professional body and a pioneering insider in the digital taxation movement, his trenchant stance should give some pause for thought in Whitehall as civil servants summarise the consultation findings for the ministers who will ultimately decide how to proceed with MTD.

Aplin’s Somerset firm AC Mole & Co was publicly acknowledged as the first to ever file an electronic self assessment return in 1996-7, and since then he has been involved in virtually every efiling initiative HMRC has introduced.

He was part of the review of tax efficiency undertaken by Lord Carter in 2006-8, and most recently has been part of the Digital Advisory Group led by Rebecca Benneyworth that has been advising the tax department on MTD.

“As far as digitisation of tax administration goes, I am a believer. I think we have a huge opportunity with MTD and I want to see it succeed,” he wrote.

“It is precisely because I want to see it succeed that I have expressed reservations over the past year, not about MTD per se, but about the way HMRC intends to deliver it.”

The crux of Aplin’s argument is that discussions between HMRC and the profession around tax digitisation had been progressing well until last year’s Autumn Statement, when George Osborne surprised everyone by announcing the “death of the tax return” and an accompanying consultation document made it clear that digital record-keeping would be compulsory.

In this year’s ICAEW Tax Faculty Hardman Lecture, HMRC’s Jim Harra expanded on the idea of compulsion by saying: “We need to work together to ensure that software developers develop the products that genuinely allow tax to be integrated into running a business. And we need to work together to help taxpayers – your clients – make that transition.”

Aplin said he couldn’t agree more: “All stakeholders – businesses, agents, professional bodies, the software industry, HMRC – need to work together on this to make it a success. But there is one word standing in the way: mandation. If we are to move back into a truly collaborative space, we need to get beyond the mandation barrier.”

The conversation needs “rebooting”, Aplin wrote, “and the consultation responses provide the opportunity to do that”, especially if the government pays heed to the avalanche of responses pointing out other issues such as:

  • the inadequate £10,000 turnover exemption; “the consensus seems to be that the exemption should be no lower than the VAT threshold” Aplin wrote
  • Scepticism over the purported extra tax yield: Many responses suggested MTD is more likely to capture additional allowable expenses than anything else, could increase the rate of error, and drive business that did not want to comply into the shadow economy
  • More scepticism over the purported cost savings. “The general view is that no convincing case has yet been made by HMRC,” said Aplin.
  • The “overwhelming view” that HMRC should slow down the MTD timetable MTD and carry out pilots to provide evidence for its cost/benefit assertions

The scope of the consultation documents published in August illustrates clearly the sheer scale of what needs to be decided and delivered: This is a vastly complex undertaking and getting it right will need time.

There is overwhelming support for the principle behind MTD but some very clear concerns that need to be reflected on, understood and accommodated.

Replies (3)

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By andyjdicker
30th Nov 2016 08:50

' But there is one word standing in the way: mandation. If we are to move back into a truly collaborative space, we need to get beyond the mandation barrier.”

Problem is, what possible benefit is MTD (in terms of the transmission of data) to the taxpayer? I can't see one. The current system works fine for them. Submit one form once a year nine odd months after the year end.

Why would anyone submit quarterly data unless there was a carrot (in excess of the additional cost) attached?

Thanks (2)
Replying to andyjdicker:
By Charlie Carne
30th Nov 2016 11:23

andyjdicker wrote:

what possible benefit is MTD (in terms of the transmission of data) to the taxpayer? I can't see one.

The benefit to the taxpayer of MTD is not the transmission of data to HMRC; it is the incentive to keep their data digitally. The form of submission to HMRC is what the treasury believes will drive the incentive. But this can be achieved collaboratively without mandation.
Thanks (0)
By adam.arca
30th Nov 2016 09:22

Mandation is absolutely not a requirement to make MTD work: it will happen naturally as the tech-savvy younger generations come on-stream in business and then, within the next 10 to 20 years, completely dominate that environment (and I'm not saying there aren't tech-savvy businesses now, just that you're not in the majority).

And, frankly, given the scale of the job and the fact that HMG digital can be relied upon to get it wrong several times before they get it even approximately right, it should take a 10-20 year timescale to get there anyway if you want to do the job properly.

So, come on Osborne / Harra / collected numpties who are responsible for this mess, stop thinking about how "sexy" your CV will look with a "digital transformation" para in it and start thinking about what's good for UK Plc instead.

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