MTD minister talks VAT and tax strategy
Financial Secretary to the Treasury Mel Stride spoke to AccountingWEB about the decision to delay MTD, his life in business, the VAT threshold and his vision for the future of HMRC.
Stride was promoted to FST and Paymaster General following the snap election in June, when previous incumbent Jane Ellison lost her seat.
One of his first actions in the post was to announce that the government’s flagship Making Tax Digital (MTD) project would be delayed by two years to 2020 at the earliest for taxes other than VAT.
“Whilst the direction was and still is absolutely right, the pace of change is something I was concerned with,” said Stride. “Through working closely with stakeholders and listening to what they were saying, I took the decision to ease that pressure off and bring it in in a more manageable timeframe.”
Despite his status as a new minister, Stride said he felt his business background allowed him to push for the delay in spite of the significant financial consequences of rowing back on the policy.
Before his election to Parliament in 2010, Stride founded and ran an events company, which he expanded to America before selling the US operation.
Wait and see on MTD
When discussing the next phase of the MTD project, including bringing income tax and corporation tax into the fold after 2020, Stride was a little more circumspect.
“We’ll have to see,” he said. “It’s my ambition that in April 2019 we’re going to roll out MTD for those above the VAT threshold, but what we’ve said is that come April 2020 that’s the earliest we may bring in income tax and corporation tax changes.
“I’m confident from the early signs of engagement that we’re heading in the right direction, but I do want to make sure that we’re in the right place before we press the button on that.”
Additional help required
According to research released by HMRC this week, 72% of 2,900 small businesses and landlords anticipate consulting an accountant for help meeting the MTD digital reporting requirements, with 40% asking for more clarity and guidance on how to prepare for the new regulations.
“What I’m keen to ensure, and I know HMRC are as well, is that we are there to help companies,” said Stride. “We have to communicate what it is that we’re expecting companies to do at the various points we take those decisions, but at the same time we are there to support them through that process.”
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Stride reiterated that one of the main drivers behind the MTD scheme is the government’s wish to eliminate the tax gap, currently estimated at around £34bn, £9bn of which it believes is down to taxpayer error.
However, HMRC's recent research also found that 98% of respondents were confident that the information they provided to the tax authority was correct.
The pre-Budget rumour mill was awash with stories about a possible drop in the VAT registration threshold of £85,000, particularly following the release of the OTS report on VAT simplification that considered a drop to £26,000. Stride confirmed that while a reduction was considered, he felt it was not the right time to make such a move.
“As with all taxes and thresholds we’re constantly looking at them,” he said. “I think there are certainly arguments for lowering that threshold, particularly when you look at other countries like Spain where there is no threshold at all, or Germany where it’s around £16,000.
“However, I think we took the right decision, which was to freeze it for the next couple of years and nothing further than that, given the pressures that small companies are under and therefore not wanting to bring more into the VAT regime.”
Stride did, however, confirm that longer term it’s something the government will continue to keep under review.
HMRC not a ‘monolithic digital beast’
While Making Tax Digital may represent the Treasury’s current focus in terms of change, where does Stride see the direction of travel in the future, and how fast will any subsequent changes be made?
“HMRC itself is undergoing a major transformation at the moment, and what that is partly about is how as an organisation we interface with the business community and individuals about their tax,” said Stride.
“This means shifting away from paper and telephone interaction, and to do more digitally. This is good for everybody because it’s more efficient. People get quicker answers to their questions, and the accuracy of that interaction is improved.
“So my vision for HMRC going forwards is not some kind of monolithic digital beast, but a responsive and nimble digital interface with customers, whether they be individuals or businesses.”
*This article was amended to clarify the correct tax gap figure*
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