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MTD is being tackled in reverse order

10th Jan 2017
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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 “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

“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”.

Agent relationship

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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Replies (24)

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By David Gordon FCCA
11th Jan 2017 10:38

This is the same executive board that, according to the media, have made a complete £600 million"C**k-up" of their move to new premises.
Who also get their knickers in a twist dealing with 64-8s, and who are incapable of having CIS refunds issued in acceptable time.

A wise rabbi once said of a foolish person who purported to be a sage, "A goat is still a goat even though it also has a long white beard".

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By Chris Gladwell
11th Jan 2017 11:06

This is an excellent article and correctly states the madness of the current intended direct of the Revenue.
I completely agree with the suggestions made and hope to god the people who need to read this do.
Lets just hope sense prevails.

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By Pygmy
11th Jan 2017 11:25

If MTD was voluntary the very taxpayers for whom MTD was designed would be the people who wouldn't use it. You are looking at MTD the wrong way round; it is an exam to ensure that SMEs are complying with there record-keeping responsibilities in the broadest sense. If you put MTD back two years the people who deliver receipts in carrier backs will put off addressing digital accounting for 25 months.
Unless either MTD or the long-term digital accounting project fail why do you think there will be a long-term role for the agent between the tax-payer and HMRC?

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Replying to Pygmy:
By scalesco
11th Jan 2017 11:36

And what exactly is your role in the system?
Clearly you are not at the coal face with the rest of us because you do no seem to understand the problems that this as yet untested system is going to create.

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Replying to Pygmy:
By johnjenkins
11th Jan 2017 11:39

Pygmy, there is no law that says HMRC should dictate how records are kept.
Please tell me what difference (apart from a time consuming event of no purpose) it makes on keeping 1/4 figures (which nothing are done with) with a yearly amendment and a yearly figure incorporating those amendments (well they won't need to be incorporated would they?)?
Those business that want 1/4 figures do them now anyway. To make a business with a turnover of £30k do 1/4 figures is absolutely absurd and serves no purpose.
So the difference is, HMRC says business should keep records (not timeously) on a time scale that suits them, whereas business says it will keep records when it suits them. I know who will win.

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Replying to Pygmy:
By raybackler
11th Jan 2017 12:47

I have to agree with scalesco.

There will be a steep learning curve for the self employed with turnover between £10000 and the VAT threshold. They will need help and the accountancy profession will be expected to provide it. Even for clients above the VAT threshold, who do VAT returns themselves on spreadsheets, there will be a learning curve, because they will be expected to change over to a system that provides the quarterly uploads. At the moment this type of client can submit VAT returns using HMRC software. I foresee a log-jam in accounting practices caused by clients who will be sinking fast.

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By johnjenkins
11th Jan 2017 11:29

Brilliant article which encompasses common sense (something which HMRC aren't allowed to have until the [***] hits the fan).
If you check Aweb posters, though, you will find we have been saying this for a long time.
I still cannot see how HMRC will be able to deliver. They now have a period of time to reflect and take note of what (not the so called "experts") business and agents have to say.

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By Tornado
11th Jan 2017 11:53

"It really doesn’t give you confidence that it will be ready in just over a year’s time."

The simple answer to this is that it will not be ready. I am not even working on the basis that it will be.

I agree with just about everything that Andrew says and that it is obvious to all that the country is no where near ready for this massive change to the tax administration system.

The biggest stumbling block is the mandation of using specified software. This simply will not happen overnight, and it is only a fool who thinks it will.

As time has gone on with this, I think there is a gulf between the HMRC MTD Team perception of a 'Sole Trader' and reality. HMRC seem to perceive a Sole Trader as a person on their own, operating from home and possibly with a turnover of between £10,000 and £30,000 per annum. I have no clients like this but I can accept that they could possibly deal with their taxes and accounting on a phone. This is of no interest to me as I think the vast majority of sole traders are more complex than this.

Although many people trading on their own do so though a Limited Company, there are still Sole Traders/Partnerships that have turnovers into the millions, have thousands of transactions to deal with and will employ staff of between say 1 and 50. These are the people who are going to be hit the hardest by the mandation of software use when they already have accounting systems that are perfectly adequate for their businesses, possibly bespoke spreadsheet programs.

Andrew is correct with his assessment of the situation and I hope that at some stage the Government will take real notice of what he and others in knowledgeable situations have to say.

Meanwhile, that awesome institution called 'The European Union" is moving out of one Glass Palace into a new Glass Palace in Brussels, wasting more of our money to make themselves look better and provide an even more luxurious setting for them to play in.

I wonder if the HMRC thinking behind MTD is one of money wasting vanity as well.

Thanks (6)
By david wilks
11th Jan 2017 11:44

Harra & Co (and Pygmy) my offer still stands. You are all barking (up a wrong tree).
Now, got to get on with January!

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By vinced
11th Jan 2017 13:22

Is there a specific timescale from HMRC to get us from here to Apr18, because we should be on the home straight?. I am a 50 client sole practitioner, who has read more than is healthy on MTD & still I haven't got a clue what the practicalities (not the theory) are for my business & that is totally shameful (but not surprising) from HMRC.

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Chris M
By mr. mischief
11th Jan 2017 13:30

Yes where is the road map HMRC as we are supposedly nearing the chequered flag. For the major IT projects I have implemented in my career I would be looking at a P45 right now the way HMRC has gone about this.

So Mr. Hammond why not save the country a few quid and all of us a load of hassle by just issuing p45s to all of the MTD department right now please?

It really is a joke how badly this is being done. There will be tears. None of the will be mine, none of them will be my clients.

The profession is now on damage limitation. Our sole goal in MTD is to ensure that all of the tears are shed by the Numpty Department of HMRC who came up with this drivel.

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Replying to mr. mischief:
By raybackler
11th Jan 2017 14:21

I've said it before but I can't help loving the "Numpty Department" description.

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By ireallyshouldknowthisbut
11th Jan 2017 14:40

This is probably one of the more sensible things I have seen written about Making Take Difficult.

HMRC seem to be approaching this in the 'trendy' development manner of slap something out, and fix it "on the job".

They couldn't even get class 2 NI collected through the tax return right.

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By Tornado
11th Jan 2017 14:49

"MTD is being tackled in reverse order"

HMRC going backwards then :)

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Jennifer Adams
By Jennifer Adams
11th Jan 2017 15:40

Search through the consultation papers and you wont find it stated anywhere as to why MTD in its current format is being introduced (sorry... 'forced') upon an unsuspecting public. Only one consultation document comes close by mentioning the Universal credit system link. I submit that HMRC's intentions are clear - in the end there will be quarterly payments based on quarterly 'current' figures.
Tornado says that he hopes HMRC will see sense in the end - sorry... no.. there have been various bodies complaining including MP's to no avail. As I said in my article 'HMRC has a dream'
MTD will be coming in with maybe a few tweaks but it will be not be changed much from what has already been announced.
vinced asks if there is a specific time scale - the answer = yes and can be found here: pages 11 and 12:
During the next 6 months testing is to start for digital reporting of income from letting property, the new online billing system begins and taxpayers will be able to report additional sources of income through their digital account (about 2 of my clients know they have a digital account)!
July 2017 to Dec 2017 digital tax accounts will show taxpayers an overview of their tax liabilities in one place ... and so on.

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Replying to Jennifer Adams:
By Tornado
11th Jan 2017 18:15

"Tornado says that he hopes HMRC will see sense in the end - sorry... no.. there have been various bodies complaining including MP's to no avail."

At the moment we actually do not know that this is to no avail as we are awaiting a response to the consultations and the actual legislation to be included in the 2017 Finance Bill

"To ensure that the views of respondents to the consultations are fully considered, the government will publish its response to all 6 consultations, together with draft Finance Bill 2017 legislation in January 2017."

The programme is already delayed significantly and the impossible is still impossible even if it ls legislated for.

Just because we are told that something will happen does not in any way mean that it will happen. We need to 'question everything', and use our own judgements about a situation.

Mine is that whilst I am happy to accept that MTD will be introduced eventually, it will not be introduced in the way the Government tell us.

If we believed everything HMRC told us then there would be no need for an appeals system.

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Replying to Jennifer Adams:
By vinced
13th Jan 2017 13:28

JAADAMS. ThanksI have read that document & that timetable. At what point will I be able to tell my clients, say the ones on Excel & the receipts in a bag, that they have to either buy software, get trained on it, or ask their accountant to do it for them (supposedly not allowed). The same goes for me. What is the Practice software, what will I have to do. By now the thory should have passed, the software approved and tested & we should be getting on with it. Like many of my fellow accountants, i don't want to, but am trying to ignore it. the chances of MTD starting in Apr18 are close to zero.

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By AndrewV12
12th Jan 2017 11:30

Another MDT article, I propose a toast to this one ......... and the next 20-30 articles.

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By David Gordon FCCA
12th Jan 2017 12:17

There is a foundation point in the UK tax system which is wilfully ignored by HMRC executive.
The reality is that 99.999% of Uk taxpayers pay their dues without being pursued. They may shout and scream but they pay. There are good historical reasons for this.
Any person who has dealt with taxpayers from, to name a few, Greece, France, Italy, Spain, Russia, India, African states, knows the truth of this incredibly valueable UK fact.
HMRC are now going willy-nilly along the route to destroy this goodwill. Once lost it will never be recovered.

The business of business is to engage in business, no more no less.
It is not as "Pigmy" seems to suggest, to pass a book-keeping exam.
After fifty years plus in the profession it is self-evident to me that persons who engage in business except and unless they keep information sufficient for their needs, do not last very long.

For me MTD cannot be justified on economic, management, or importantly smoothing the relationship between the subject and the management of the UK.

I believe someone once said that taxation is the art of plucking the goose whilst causing the least possible pain.

MTD belongs in a dark room with leather clad ladies smacking civil-service bottoms.

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Replying to David Gordon FCCA:
By Tornado
12th Jan 2017 12:53

"MTD belongs in a dark room with leather clad ladies smacking civil-service bottoms."

Yes, my thoughts exactly.

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Replying to David Gordon FCCA:
By johnjenkins
12th Jan 2017 13:30

Is that on a quarterly basis, David?

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By Tornado
12th Jan 2017 22:53

I have to say that I am growing weary of the incompetence of HMRC and the daily problems that I have deal with, stories of which would fill a relentless blog if I had the time to write one.

It is not the people who work for HMRC that are the problem, well not those at the sharp end anyway, it is the system that they are trying to work that is dysfunctional, and it seems to get worse day by day.

I get the feeling the there may be internal strife at HMRC if the MTD runaway train is not restrained soon.

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By Accountant A
17th Jan 2017 15:03

Looks dangerously like an outbreak of common sense from the TSC:

"... Committee supports the idea of the digitisation of the reporting of tax. However it considers that mandating the digitising of record keeping and quarterly reporting, as currently envisaged, has not yet had its overall benefits proven. Just over a year is too short a lead time for such a fundamental change in any event. There should be a comprehensive set of pilots of the end-to-end system before it is made mandatory for all businesses. The Committee is very concerned about the costs to businesses of introducing MTD, as well as the continuing costs of maintaining digital records and submitting quarterly updates. There is not yet enough information about the free software that will be available, but even if it remains free in perpetuity, businesses will face costs in terms of time and accountants’ fees. In aggregate, these costs may well exceed the benefits to the exchequer in terms of tax gap reduction as a result of fewer taxpayer errors and the overall impact of MTD could even be negative. This requires further investigation.

As it prepares its response to the consultations about its proposals to make MTD mandatory with very few exemptions, the Government needs very carefully to consider the legitimate concerns about the costs and benefits to business, and set them against any benefits to the Exchequer from the proposed approach."

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Replying to Accountant A:
By johnjenkins
17th Jan 2017 16:42

Going in the right direction but what bit about "there is no benefit at all to small business moving to quarterly whatever" do they not understand.

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