The digital tax agenda has been accelerated by Coronavirus. Where are we heading?
By Philip McNeill, Head of Taxation (Tax Practice and Owner Managed Business Taxes)
30 October 2020
Making Tax Digital - where are we heading?
Coronavirus has accelerated the digital agenda and highlighted the benefits of contemporaneous reporting. Making Tax Digital (MTD) has leapt up the agenda. What direction are we heading and why?
Coronavirus impact
Coronavirus has changed the way we do business, and this is apparent in how we do tax, and in terms of Covid-19 business support.
Real Time Information (RTI) for PAYE reporting has facilitated targeted help for businesses and their employees. By contrast up to date information on profits of the self-employed has not been available to HMRC. Could digital tax reporting transform the picture?
A new digital vision
In a welcome move, the Government has set out a ten-year vision for reform and digitalisation for the tax system. Entitled ‘Building a trusted modern tax administration system’, it highlights the need for real-time information in creating an effective tax system.
Reforms to the tax system aim to transform the UK tax system to make it:
- more efficient and resilient
- easier for taxpayers to get their tax right, and
- accessible to both agents and taxpayers.
It includes the requirement for most businesses and individuals to interact digitally, and in real-time, with HMRC.
This bold vision envisages a revolution in the relationship between HMRC, businesses and advisers.
The ICAS MTD Strategy
While ICAS broadly supports the Government’s vision these are some provisos. Digital taxation must recognise its limitations. Simply because a system is digital it does not follow that it is either accessible or easy to use. ICAS does not support mandatory digital for everything.
Taxpayers preference, and the right to appoint an agent, should be built in from the start, with agents able to see and do all their clients can see and do. The process of appointing an agent should be standardised, simple, immediate and intuitive. This would enable tax agents to act for their clients in all matters relating to HMRC – which promotes efficiency and compliance.
Digitalisation should be business-driven, not tax-driven. Software solutions should flow from the needs of the business, rather than being dictated by tax compliance.
There needs to be adequate support for the digitally challenged as well as the digitally exclude, and radical simplification may be needed to enable effective tax compliance for the smallest businesses.
Digital facilities should be accessible to all, on the terms that they want, and be so good that everyone wants to use them.
ICAS seeks a tax system where
- Tax administration is efficient for all stakeholders.
- Digital facilities are accessible.
- There is a ‘want-to-use’ system.
- The timetable for implementation takes account of the need for new systems to be robustly tested to develop a ‘state-of-the-art’ digital tax system before extended roll-out.
- Agent Services are made available at the same time as, or ahead of, services for individuals and businesses so that agents can properly support their clients.
You can see the full ICAS MTD Strategy 2020 on the tax policy page.
Let us have your views
Share your views on MTD and send your comments to tax@icas.com