MTD: Request calculation of tax savings denied

End of the road
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Wendy Bradley is not giving up on her quest to unravel the numbers given by HMRC for costs and savings to be achieved through MTD for business.

It’s in the TIIN

The costs and savings of MTD are supposed to be explained in the impact assessment for the tax policy change (known as a TIIN). In a former life, I was the impact assessment programme manager for HMRC, so I know that the calculations underlying a figure in an impact assessment, or TIIN, are eligible for disclosure under the Freedom of Information Act (FOIA).

Request made

As I explained in MTD: the costs and reality, I submitted a request under the FOIA for the information underlying the disputed exchequer impact figures in the TIIN for MTD. This should have revealed the calculations behind the controversial £945m of extra tax apparently to be collected from small and micro businesses in this parliament, as a result of making them keep their records digitally from April 2018.

Request denied

The response I had from HMRC's Knowledge, Analysis and Intelligence division says that they "consider that the information is exempt from disclosure under Section 35(1)(a) of the FOIA."

FOIA s 35(1)(a) excludes information from disclosure if it relates to­ "the formulation or development of government policy."

This response makes no sense to me. A TIIN is sometimes published with a consultation, in order to seek further and better information from the affected population, but the commitment is to publish a TIIN when policy development is at or near completion.

David Gauke told parliament in 2011 that TIINs would be published when a "policy design is final or near final" and the explanation on gov.uk still uses the same phrase, "final or near final". Can a policy which is final or near final still be described as subject to "formulation or development" as specified in 35(1)(a)?

Try again

I have today sent in my request for the decision to be reviewed. As I understand it, there are two layers of internal review by HMRC before I can go to the Information Commissioners for a ruling.

This three-step process means that it is very unlikely that I will get an answer before the MTD enabling legislation comes before Parliament in the Finance Bill 2017. Any MP who wishes to question the basis of the mandation of MTD argument, by reference to the data underlying the exchequer figures, will have to seek the information from the Minister directly. I urge any MPs reading this to put in a Parliamentary Question as soon as possible.

Why the delay?

I am not suggesting that HMRC are arguing that the exchequer impact calculations are covered by the FOIA exclusion simply to delay the scrutiny of their figures till it is too late to impact on the Finance Bill discussion. I'm sure this is not the case.

There are a couple of reasons why HMRC’s reluctance to release their workings may be justified. There are some policy matters still to be decided, which are to be announced before the Finance Bill 2017 is published on 20 March.

Whether the threshold for inclusion in MTD is kept at £10,000 or, as campaigners have suggested, increased to the £83,000 VAT registration threshold is still under discussion.

If this discussion depends on how the £945m in purported lost tax is distributed between different sizes of business, and the data has sufficient granularity to influence that discussion, then, perhaps there is a policy question still to be formulated or developed.

There is also a question of whether the very smallest businesses must begin to use MTD in 2018. If the underlying data is sufficiently granular to show where real difficulties will arise, HMRC could argue that there is a policy question in development.

No doubt all will become clearer, in time.

About Wendy Bradley

Wendy Bradley is a retired tax inspector, a PhD student at Sheffield University (researching the relationship between tax simplification and better regulation) and a freelance journalist.

Replies

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By Tornado
02nd Mar 2017 18:20

Your tenacity in this matter is appreciated.

There is definitely something fishy about this whole MTD project. Just what is it that HMRC are trying to hide?

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By Matrix
02nd Mar 2017 18:20

Good luck Wendy.

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By SM80
02nd Mar 2017 19:39

Pls pls keep digging.

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02nd Mar 2017 21:08

I've forgotten which software provider it was, but they said it was clear from their meetings with HMRC that they were being ordered from above to run this project. Maybe the truth will never out

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to SpreadsheetUser
03rd Mar 2017 14:09

Its Gauke's baby.

That is where all the pressure is coming from, presumably he wil follow in Geroge's footsteps when leaving politics and get paid hundreads of thousands of pounds by large software companies for, er "consultancy" I think they call it now the wads of cash no longer fit in brown envelopes.

There really is no other logical explanation for the amount of money being spent for no gain for either the tax payer who have to feed in the data, or HMRC who have to administer it. It will cost HMRC a bomb to police it all and issue all the fines and reminders alone - for data no-one wants or uses!

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02nd Mar 2017 21:33

Let's face it nothing at all on this stupid MTD project is being done anything other than rubbishly.

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By morgani
06th Mar 2017 09:51

Really not sure if my thoughts below have been covered before or considered. I've not seen reference to it anywhere at least.
My thoughts are the costs are irrelevant to them. The reason being is that we have progressed ahead with Universal Credit designed to replace all benefits. The idea being that this will be a real time benefit and we can avoid all the over and under payments that happen with tax credits, housing benefit and the like.
The problem being is that this may work well for employees as info will be received by HMRC via RTI to pass on. However those who are self-employed still won't submit info for potentially up to 20 months after the time others would (i.e. April 2016 info not submitted until January 2018).
Therefore my thoughts are MTD is actually designed to fix this issue and is exactly why they are starting with the self-employed and the smaller businesses included straight away. It defies the logic we have seen from them in the past but for me this seems like the logical explanation. Universal Credit is already getting well under way and suddenly it has been noted it won't work without some for of info from the self-employed. MTD is the answer in their eyes.

As we all know business fluctuates particularly in some industries. How will this be managed? Businesses grow so will they end up with over payments by the later part of the tax year?

I may be completely wrong but for me this just makes the most sense. I think its a good way forward in the long term it just needs far more time to be implemented and feedback / data to be analysed before rolling it out to everyone. However waiting may not be an option if Universal Credit relies on this and therefore costs and tax savings may not be the driver but rather a question of trying to minimise the losses of UC not working at all.

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to morgani
06th Mar 2017 13:34

I think you are on the right lines. However, I don't think there has been enough co-ordination between DWP and HMRC regardign the burden on Universal Credit claimants.
See this report by LITRG to Lords Finance Bill Committee:
http://www.litrg.org.uk/latest-news/submissions/170306-lords-economic-af...

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to Rebecca Cave
06th Mar 2017 13:52

They seemed to have forgotten religion. it will be really interesting to find out what religions are exempt and for what religious reasons.

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By trecar
06th Mar 2017 12:17

I am still of the opinion that what you wish for is not necessarily what you get. MTD relies heavily on the taxpayer using the software correctly. Having seen the most horrific mistakes being made in posting transactions are we really to assume that the weakest point, ie the taxpayer, will not screw up the process in some way or other. And just how will HMRC deal with the correction process? Are we really to assume that they will accept the fallibility of the taxpayer without delving further with all the additional expense. Call me a cynic but to me the whole exercise is about saving the exchequer money at a cost to the taxpayer. The failure to release information only reinforces the suspicion that those in the know don't really.

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06th Mar 2017 12:41

I would have thought HMRC would be only too pleased to publish how they arrived at £945m in lost tax. If true then how could anyone dispute that MTD should be on board pdq. Perhaps MTD is to be put on the scrap heap, where it belongs, so the figures are meaningless, just like 1/4 updates. Or, perhaps, just perhaps, no one at HMRC dealing with MTD has a clue what is going on, including Mr Gauke. What does one do when stuck in the middle of quicksand with only your (perceived) enemies to pull you out???

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06th Mar 2017 13:43

The answers easy:

...the government dont use accruals accounting...everything is simply on a cash basis.....

So if you tell everyone they have to process in real time... then a little while later..... they can then tell them the tax is due 30 days after the end of the quarter like vat...

So instead of waiting to get paid in January and July 3 months either side of the year end, the money comes in quicker and the deficit goes down and someone somewhere gets a big bonus for a clever idea.

Its as simple as that and you can huff and puff but aint nothing changing....

Also it wont bring more tax in it will bring less in because...Accountants will put their fees up for the extra work, some people will do it themselves and make a mess of it.... But when HMRC find out ...well penalties and more tax taken in so its not really an issue.

It will cost the regular self employed person more in software costs and accounts fees.

Its simple really. These are the new rules we just have to get on with it ...well whatever the new rules are going to be... all I can see on here is people complaining...what I want to know is how to EXACTLY do this so I can tell the 1000 s/e clients what todo....

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to Tom 7000
06th Mar 2017 13:59

Whilst I agree that the underlying reason for the under the VAT threshold S/E being put on MTD and eventually RTI and that HMRC think it's a cash cow. The simple fact it's not like SA (where they did get a lot of money in a short space of time. Apparently the Government were embarrassed because of it.) and it won't work. That's even if it gets off the ground.

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06th Mar 2017 14:03

Keep up the good work Wendy.
I do wonder if people like yourself had remained in the Revenue we would have all this MTD crap now .
Took your advice from your previous report and have contacted my M.P.

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06th Mar 2017 14:19

Wendy well done for your work on this matter. I really do smell something here and in my humble opinion do not see how this can work. 48% of returns were completed in January. We really need to be thinking about being on the golf course in the summer not gathering return information that can be amended and amended again. There is no real economic argument to have MTD. Beef up recovery and investigations by chasing large defaulters and using a spectrum of advisers not linked to the top 100 ftse auditors. Please keep us posted.

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By Tornado
06th Mar 2017 15:44

I wonder how HMRC are getting on with recruiting 400,000 people for their MTD Pilot Trial starting in four weeks time.

I reckon the last 390,000 will be the most difficult.

And yes, there is something extremely fishy about MTD, something so compelling that people will do anything to defend it. The truth will always out though, and with this project, I think it will be sooner rather than later.

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