Editorial

HMRC accused of downplaying complexity of move to digital tax for SMEs

Is MTD (Making Tax Digital) being pushed ahead too quickly by the government?

Posted 16 November 2016 by

'British Money' by Bryan Jones on FlickrThe UK’s membership association of chartered accountancy and law firms says its members are unhappy with the way HMRC is preparing to make the tax affairs of smaller businesses fully electronic.

Among concerns raised by the body, UK200Group, are claims HMRC does “not seem to understand how accounts are prepared and used by businesses”.

It also claims its members fear that HMRC’s civil servants see sorting out tax as “the primary purpose of accounts”, that it wants to alter accounting standards like GAAP for its own convenience “without regard to the needs of other users of accounts”.

UK200Group also warns that the timescale planned for going fully online for tax is too short for full consideration and resolution of the issue, that taxpayers’ appetite to engage with HMRC’s ideas seems very modest at the moment – and that the Department’s proposals seem to offer few benefits to off-set the costs.

Finally, taxpayers’ ability to engage has been overestimated, while the cost and difficulty of overcoming the obstacles has been “understated”.

The fears are based on comments from the body’s membership on a just-concluded consultation exercise the taxman ran with the business sector on what the government calls MTD, Making Tax Digital.

MTD centres on a push to make any business, self-employed people and landlords earning over £10,000 per annum having to manage their tax affairs through a digital, online account, and who will be required to update HMRC at least quarterly.

MTD is expected to be up and running by 2020.

As a group, UK200Group says MTD offers great benefits – but that HMRC needs to take note of SME concerns.

Its suggestions for improving the chances of MTD being a success include HMRC consulting with businesses on the future design of the tax system, and that any proposed technology for implementing it is tested over a full compliance cycle – as in one year of interim reporting plus the end of year procedures. among other ideas.

“HMRC officials think that getting small business to use accounting systems will reduce errors, and if people are making fewer errors they should have a more accurate idea of how their businesses are performing,” commented UK200Group’s Head of Tax, Andrew Jackson.

“That’s got to be a good thing.  However, HMRC doesn’t seem to appreciate why people aren’t using accounting systems at the moment.”

Jackson added that MTD is also going to affect small businesses more than it affects larger ones because the overheads for setting up accountancy systems are going to remain broadly the same, regardless of turnover.