Government plans to enforce quarterly digital tax reporting have received more scorn from the profession.
The Making Tax Digital initiative has been subject to surveys of members by the AAT, CIoT and ATT – who have found the plans ‘insufficient’ and ‘unrealistic’.
Surveys were conducted during the consultation period of MTD, with major concerns raised over the timescale and threshold.
John Cullinane, tax policy director, CIOT, said: “The struggle to move to digital record keeping and quarterly reporting is unrealistically tight. It is agreed that digitisation can bring efficiency and other benefits to HMRC and taxpayers alike, yet the government appears to be forcing the pace. Advisers may be unable to cope – with the current tax obligations as well as the MTD transition.”
Following the publication of six HMRC consultation documents on MTD, and with the consultation period set to close on today, the accounting groups surveyed more than 5,000 members in total. Firms have also conducted research, finding the MTD deadline ‘unachievable’.
The AAT said there was little support among members for HMRC’s proposed MTD exemption for unincorporated businesses or landlords with a gross income of under £10,000, with only 5% deeming it sensible.
The institutes have posited an alternative solution, meeting the desire for a higher threshold as well as reaching HMRC’s objectives that almost all SMEs are covered by the MTD programme.
The AAT would set the threshold at £83,000 (the current VAT threshold) falling to £11,000 (the personal allowance) over a three-year period, a proposal supported by 65% of respondents. In the CIOT and ATT survey, 87% have called for the £10,000 exemption to rise, with some suggesting the VAT threshold of £83,000. HMRC has expressed a willingness to consider the proposals.
Adam Harper, director of strategy and professional standards at AAT, said: “Linking the exemption limit to the existing VAT threshold allows many small companies additional time for the challenges and opportunities MTD presents. This could be a win-win situation for all involved.”
The CIOT and ATT survey found that 89% of members believed that the timeframe for quarterly reporting should be extended, and some experts have said that the deadline should be reset.
Cullinane continued: “There is a significant risk that small businesses will fall into non-compliance, whether deliberately or inadvertently, unless HMRC reconsiders the timetable for mandating MTD. The spirit of voluntary compliance is at stake which sees over 90% of all that is collected without intervention from authorities.”
According to Gill Aitken, general counsel and solicitor at HMRC, speaking at a PfP conference, ‘big data’ will be an increased source for tax investigations, she warned. The information gathered will be used ‘as necessary’ and information sources such as the Revenue’s Connect database, the Panama Papers scandal and the data revealed through the Common Reporting Standard will play a significant role.
Aitken argued it was important that “something intelligent” was done, and MTD will prevent many taxpayers from making errors, simplify the process, as well as providing more accurate information for HMRC.
Kevin Igoe, managing director at PfP, commented: “Any efforts to reduce errors must be a good thing. However, many accountants are concerned as to how effective this will be, more mistakes might be made. With the increase of data, it’s likely investigations will also increase.”
Additionally in the CIOT and ATT survey, 95% agreed that new digital record keeping would place an extra burden on clients and 90% believed it would do the same to their practice. Some 33% of members reported that at least two-thirds of their clients must move from hard copy accounting to digital, and 68% believe that the majority of those clients will need help with the MTD reporting obligations, quarterly updates and ‘end of year’ activity.
Yvette Nunn, co-chair of the technical steering group, ATT, said: “The evidence shows that MTD will lead to significant costs and burdens for small businesses, in their additional accounting systems and support from their accountants. HMRC must help smaller businesses to adapt, as we firmly believe that HMRC is moving too fast. How can HMRC fully digest the feedback within the proposed timescales?”
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