MTD is being tackled in reverse order
Andrew Jackson, chair of the UK200Group tax panel, says the law governing relationships and taxpayer obligations should be hammered out before the IT infrastructure is designed for Making Tax Digital (MTD).
The Treasury is expected to feedback on the MTD consultation document responses later this month, but despite the tight timescales, there is still scope for the tax department to re-think how it approaches rollout.
Jackson told AccountingWEB.co.uk: “It is a good thing that it [MTD] will happen and there are an awful lot of very good things that could be done there, but they need to be in the right order. They need to be thought-out and we need time to bed it all in. The problem is, hardly a day goes by without yet another example of one part of HMRC not talking to another. It really doesn’t give you confidence that it will be ready in just over a year’s time.
“That timescale is the big problem they’ve got,” he added. “They probably recognise that thinking it through would be nice, but they haven’t got time to think about what they’re doing before they do it because they’ve got to get it done by next April. They’ve got to leap before they look.”
According to Jackson, HMRC is proposing to tackle MTD in the wrong order.
HRMC should start by building better infrastructure to share information and at the same time establish the principles of the relationships between HMRC, taxpayers and agents. From there, the Revenue can identify new areas of information provision to help people understand the principles of the new relationships in a digitised regime.
Putting digital tax accounts (DTAs) in place, in a similar fashion to what HMRC is doing with personal tax accounts (PTAs), and increasing the ability to exchange information should be the first stage:
“Get a platform in place that’s optional to use, get that working, when we know that works make it mandatory and start bringing in the other stages. But until you’ve got the operating system installed you can’t be forcing people to use the applications,” Jackson told AccountingWEB.co.uk.
“They could say to taxpayers, ‘here’s the digital tax account, if you want to update it every quarter then great, here’s the mechanism to do so’, but if they don’t want it to happen they have the ability not to as it’s not mandatory. Then you would have the PR victory of saying ‘we have digital tax accounts and that’s what we said we were going to do’, but without really irritating people by forcing them into it before they are ready. That would be the sensible way to do it.”
Jackson added: “By saying ‘here’s an untested platform, we don’t know how it works, you don’t know how it works, but you’re going to have to go straight in there and then we’re going to start charging penalties if you get it wrong’: That really raises the stakes”.
MTD will significantly change the relationship between HMRC, agents and taxpayers. For Jackson the big issue is how MTD impacts practitioners.
According to Jackson HMRC should default to communicating with the agent, as most clients would prefer the agent to sort everything out with HMRC, with the taxpayer signing documents and the occasional cheque. HMRC should only move away from that default position if the taxpayer actively wants to deal directly, or if the agent relationship isn’t working.
Jackson said HMRC needs to re-think how it deals with agents, as they’re the ones who are going to make it [MTD] work: “Taxpayers are going to be faced with this and say to their accountant ‘what do we have to do?’ If we say ‘we can’t do it because HMRC won’t let us’ then the whole project falls down.
“If we’re able to say ‘we can deal with HMRC, we can do your tax’ that really empowers and enables agents, which means HMRC is dealing with people who know what they’re talking about. It cuts out duplication of effort and allows us to do what the clients want us to do, which is to take a weight off their mind. It also saves HMRC a lot of time and effort, allowing them to deploy their resources more efficiently.”
Jackson compared agent involvement in MTD to the process of purchasing a property: “If you look at other areas of life, like house-buying, it gets left to the professionals and that works well.”
He added that changes in the rights and responsibilities of various parties should not be introduced until the necessary technology has been tested over a full compliance cycle.
On whether a delay to the MTD project is on the cards, Jackson said the project was already being delayed as people were expecting something of substance in the Autumn Statement.
“Like RTI and Universal Credit, it’s great in theory but they just can’t get it done in the timescale,” he said.
Andrew Jackson’s full article can be read in the latest edition of Taxation magazine. Do you think HMRC needs to re-think how it delivers a digital tax system?
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