Making Tax Digital: Q&A with head of taxation at ACCA

In a new series of interviews on Making Tax Digital, Accountancy Age speaks to Chas Roy-Chowdhury, head of taxation at ACCA, about what the future holds for the government’s digital agenda

Making Tax Digital was removed from the Finance Bill in April ahead of the debate on the bill in the House of Commons. What does this mean for the digitalisation of tax?

I think it’s going to come back in the bill that’ll be introduced after the election. So, whether there’s going to be another budget, which there could well be, there will be another Finance Bill introduced. This is assuming there’s a Conservative government, but I think even if there’s a Labour government it’ll still come back; or whatever the government shade is, I think there will be some form of making tax digital.

The hope is that it will actually be modified so that there are requirements around filing, and we would hope that the starting point at which filing is required can be set at the VAT threshold. £83,000 is the exemption in the first year, but we would want that to be the exemption going forward. And, we would also like to see the start date deferred as well, because at the moment the larger small businesses start in 2018. Now, with so much delayed legislation, so much delay to knowing exactly where we stand, at the very least we need to defer to 2019 if not beyond.

But, also what I’d say in terms of Treasury Committee evidence we were given with the Office for Budget Responsibility, when they looked at the HMRC’s figures around the credibility of how much tax take there would be from MTD, they indicated that they couldn’t be sure about the amount of tax they’d get, how much HMRC might get, how much tax would be gained by introducing MTD. So, I think we need to factor that in rather than blindly going ahead with MTD.

Has the government carried out sufficient consultation on MTD?

Well, there is a lot of consultation but whether they actually listen I think will be the critical point.

Do you believe the government’s estimated costs to be accurate?

Well, the Office for Budget Responsibility looked at both the HMRC costings and those supplied by a business organisation which are much higher, and they basically said that both could be accurate and they just couldn’t tell.  And so, I think I would say that HMRC’s costings are on the low side. They seem to show a net gain in a few years, say from 2020 onwards, and I’m not sure there would ever be a net gain for small business on MTD, so I think there would be an ongoing cost.

Would you support a proposal which would see MTD first applying to businesses with the highest turnovers, and then filtering down to SMEs?

Yes, that’s right, that makes sense. But as I said, I think if the government is accurate about there being a cost saving for those businesses moving to MTD then why not make it non-mandatory? Because then shouldn’t businesses be inclined to move to MTD because it would save them money?

Should businesses see MTD as an opportunity to improve their efficiency and embrace the digital world in which we operate?

Well, I think businesses should be doing that anyway. I think the main problem is at the very small end, how much time do they spend on embracing and complying with administration as opposed to trying to make a business work and surviving?

What can businesses with little digital experience do to adapt to the measures?

It depends on what their exclusion is, so those with digital exclusion are meant to be outside the scope of MTD, so there’s definitely one branch of people there. Generally speaking, businesses won’t want to use that excuse – I think it’s mainly age related or if you don’t have broadband access. I think you do have to embrace technology, you do have to embrace online filing. I think smaller businesses should really be getting into some form of IT system, they shouldn’t just be keeping manual records.

Do you think we’re still on track to become the most digitally advanced tax administration in the world by 2020?

I just don’t know. I don’t have any idea what it looks like for other administrations. I certainly know that countries outside of the UK, like Australia and the Far East, are very advanced in terms of their use of digital, so I don’t think that would necessarily be the case, but certainly I think there would be a need to embrace digital.

What does the tax system look like in 2030?

Well, if you look back 15 years or 30 years, it’s been quite incremental, so I think we will be filing online and are going to be converting to smartchat for HMRC. There will be far less people contact, but I think there will still be access to real people when you get stuck.  I think the real discussions around that are going to be down the track – I don’t think it will happen overnight when MTD comes in.

Interview by Alia Shoaib, reporter on Accountancy Age