Making Tax Digital (MTD) - The view from ICAS
Making Tax Digital
The Government vision for totally digital tax administration is a once-in-a-lifetime change.
It will impact everyone interfacing with HMRC: practitioners, business, and the public, alike. It will revolutionise every aspect of the relationship between taxpayer and HMRC. It will change the way HMRC delivers its service, and impact the way personal and business tax records are kept.
HMRC’s MTD road map is a bold vision on a tight timescale.
It requires small businesses both to embrace digital record keeping, and give HMRC quarterly updates online from April 2018. Companies follow suit by 2020.
Starting small is starting big
But starting with small business is a tremendous challenge.
There is a significant gap between the current digital capability of many businesses, and the digital and accounting expertise needed to make MTD work. Many small businesses, especially in their infancy, survive by delegating accounting and book keeping to a relative, friend - or sometimes a paid adviser.
For this sector particularly, digital record keeping and more frequent reporting will almost inevitably mean increased admin and higher costs.
Opportunity and challenge
While many aspects of the digital future hold promise, the challenge should not be underestimated.
Small business owners already spend almost a quarter of their working hours on admin, according to research published last month by the Federation of Small Businesses. How does MTD fit in here?
And looking to HMRC resourcing, the recent National Audit Office (NAO) report on HMRC, highlighted serious concerns over customer service.
‘HMRC needs to move forward carefully and get their strategy back on track,’ commented Amyas Morse, NAO Head.
ICAS strategy for MTD
Whilst the four foundations of MTD are laudable goals, ICAS has significant reservations about timescale and approach. These centre round
- Digital record keeping
- Quarterly reporting
- Impact on agents and taxpayers
- Role and resourcing of HMRC