The Making Tax Digital consultation ends early next month but in the absence of a national marketing and advertising campaign many small businesses are unaware of the extent of the planned changes and tight timetable.
With less than two weeks before HMRC's consultation on digitising the tax system ends, the tax department will do more to publicise the planned changes after the consultation in spring 2017.
Although there is support for MTD’s aims, many in the profession are concerned that there may not be enough time to prepare for the changes. They are also puzzled as to why the planned changes - the biggest to the UK tax system since the introduction of self assessment tax returns in 1997 - have not yet been explained and publicised in a national advertising campaign.
Contrast this, some experts say, to publicity campaigns for automatic enrolment and campaigns against tax avoidance in different parts of the economy.
HMRC said in a statement to AccountingWEB: “We are currently consulting on the arrangements for Making Tax Digital, using a range of approaches to reach as many stakeholders as possible, and urge all interested parties to respond and make their views known.
“We will expand our activities to raise awareness of what MTD will mean for businesses once the current public consultation is complete and there are specific actions for businesses to take,” the Revenue said.
HMRC did not give a date for when the publicity campaign will start, although mainstream comms are expected to increase early next year following consultation.
IT is another big challenge as many clients will still be using spreadsheets for their financial records.
Ed Molyneux, founder and chief executive of FreeAgent said that recent research it did found that 43% of the UK’s micro-business owners have no idea what Making Tax Digital is.
“The highest priority after the consultation would be for HMRC to provide more clarity and detail to businesses, accountants and other stakeholders on their plans for implementation. This would allow everyone to work together to be able to fully support the initiative,” he said.
Tax expert Rebecca Benneyworth added: “[HMRC] will have to work with software companies and software companies will have to work as quickly as they can once they have nailed down the details [of MTD]. Tax agents can’t really start migrating clients [to MTD] until there’s a reasonably [steady] software product”.
Although HMRC has recently not said much to the press about MTD, it is carrying out thorough consultation with businesses and accountants.
It’s not clear, though, what the main messages of the consultation have been and whether HMRC is prepared to make changes if people don’t like the plans.
“I am encouraging businesses and [accounting] firms to make responses directly to HMRC because on this uniquely it’s the view from the frontline that’s important,” Benneyworth said. “The [representative accounting and business] bodies might have things that they can add to the technical side of it but in terms of answering questions about how [MTD] is going to work and what we see are the key problems it’s the people in practices and businesses that have the insight to say this is exactly the problem.”
For Benneyworth, consultation priorities should focus on supporting businesses moving to the digital tax system and setting the right exemption turnover threshold (£10,000 is the current proposal) for when businesses are covered by MTD.
Is HMRC listening?
“HMRC tells us that they are in listening mode - a phrase they have used many times,” said Richard Wild, head of the tax technical team at the CIOT. “I Hope that’s the case.”
He added: “One thing that’s quite key is almost what they are not consulting on, this is a stage two consultation. A lot of the initial thinking has already been done, for example the timescale [for when MTD becomes mandatory].”
Tina Riches, national partner at Smith & Williamson, hoped that the consultation would clarify what tasks businesses can hand over to their accountants when MTD starts.
“Surely HMRC can’t mean that businesses don’t have to keep digital tax and accounting records themselves rather than getting their accountants [to do it]? That would discriminate against smaller businesses.”
When MTD becomes mandatory some clients may want their accountant to do everything for them while others may decide to do all their own tax, even though they may make mistakes when submitting returns because, for example, they don’t know the right tax relief to claim, Riches said.
Have you and your clients responded yet to the MTD consultation yet? Take a look at Rebecca Benneyworth's condoc resource pack for more information on responding.