22 December 2016
In a flurry of activity since the 2016 Autumn Statement it has become apparent that, despite maintaining the appearance of consulting and collaborating over the introduction of Making Tax Digital (MTD), HMRC have behind the scenes been preparing a steam roller of an introduction which appears to pull the trigger whilst still half cocked.
Concerned at the apparent willingness to charge headlong into the unknown, whilst ignoring the calls for caution emanating from all quarters, Graham Boar recently contacted his local MP to see if pressure could be brought about through Parliament to force a more considered approach to be taken:
I’m sending this e mail having just followed a link “tell your MP you’ve just signed this petition”, the petition in question being “Stop Making Tax Digital because it will be hugely burdensome on small businesses”.
As an accountant I’ve been keenly following the progress of Making Tax Digital, and so have an acute awareness of the government rhetoric about cost savings and efficiencies and the universal rubbishing of those claims from all quarters. All of the professional institutes involved in tax and accounting have repeatedly fed back information to the Government, and bodies like the FSB have felt the need to go further as their pleas are falling on deaf ears, and so they’ve engaged one of the ‘big 4’ accountancy firms to prepare a report drawing on the experiences of other national tax agencies in digitisation and designed to urge HMRC to learn lessons from these.
There has recently been a 12 week consultation period with 243 pages of consultation and well in excess of 100 questions asked. HMRC inform us there are circa 5,200 responses in either written, round table or face-to-face form. The results have yet to be published and are due in January alongside draft legislation. Despite this, however, the Government are failing to heed any advice and instead of slowing down and seeking to ensure things are done properly, are speeding up and introducing a 400,000 strong beta trial period starting in April 2017, just four months from now. That is despite none of the computer systems being ready, no commercial software being ready, and major questions such as agent two step verification and the changes needed to be made to basis periods, penalty regimes and a multitude of other areas of long standing tax law needing to be addressed.
It is evident that the process of the accelerated trial and the writing of draft legislation must already have begun, and that the consultation is therefore nothing more than a box ticking exercise, the feedback from which was never intended to be collated and considered before starting to design this seismic change to our tax system.
Most damning of all is the strength of opinion led by Andrew Tyrie MP in his open letters dated 26 April 2016, 15 September 2016, 27 October 2016 and 29 November 2016. The latest letter was a response to Jane Ellison MP, who had written back in response to Mr Tyrie’s letters, telling her:
“It was little more than a holding response”
“This suggests either Making Tax Digital is one of those deviations, that Finance Bill 2017 will be introduced to Parliament later than is normal, or that Making Tax Digital will be legislated in Finance Bill 2018 (which would leave very little time, if implementation is still planned for April 2018).
I look forward to receiving your substantive response in January”.
These letters are all available in the public domain. Ms Ellison’s letter does nothing more than recycle earlier rhetoric, doing nothing to answer Mr Tyrie’s questions or to say anything factual or stemming from the consultation process.
UHY have been sharing our thoughts on the Making Tax Digital process through a series of blogs and in certain presentations and similar.
Like the rest of my profession and the wider business community, I’ve always had misgivings about its introduction but until now have remained hopeful that the opportunity to participate in the consultation process would lead to a gradual and voluntary phasing in of the scheme in a modified form which learns from other experiences (whether other countries, or other tax digitisation processes in the UK, such as the 2006 Carter report, the voluntary basis of online self-assessment, or the financial rewards offered to incentivise the movement of PAYE year end reporting online).
At this stage though, I find myself disheartened as it appears the consultation will be nothing more than the keeping up of appearances and that we are about to have a top down system imposed on us as an unblinking determination to stick to a pre-defined timetable bulldozes all warnings, offers of help and feedback aside.
Exasperated, I am reaching out to you in the hope of stimulating debate in Parliament, which may prove the one area of resistance which cannot be ignored by those parties pushing this policy through.
With only 271 signatures it seems unlikely that the petition mentioned above will gain the necessary traction to trigger that debate, but with introduction of the policy poised to be achieved through next year’s Finance Bill there will be a period of discussion and possible challenge as the Bill moves through Parliament and into law.
I imagine that Andrew Tyrie will be looking to raise some of his as yet unanswered questions during that process.
I am urging you to join him in challenging the introduction of this policy in such a rushed, ill considered and speculative fashion. It is imperative that the Government pause to take stock of the feedback so far offered to it, and to properly think through the policy and its introduction before moving to put it on the statute books.
I hope you will agree with my sentiments and that this will be something you feel able to support.
For the avoidance of doubt, the views expressed in this e mail are my own, and not necessarily those of UHY Hacker Young.
I am anticipating sharing this letter on our Making Tax Digital page alongside our other publications on this topic.
Many thanks for any assistance you can offer.
A prompt reply was received and Graham was informed that his concerns have been taken up with the Chancellor of the Exchequer. With draft legislation and the results of the consultation due for publication in January. We’ll be posting further detail of the MTD juggernaut in the new year.