Accountancy Age speaks to Katharine Arthur, head of tax at haysmacintyre, about her thoughts on the Making Tax Digital initiative, and what the tax system could look like in 2030
Accountancy Age speaks to Katharine Arthur, partner and head of tax at haysmacintyre, about her thoughts on the Making Tax Digital initiative, and what the tax system could look like in 2030.
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?
It’s a very good question A lot of people are saying it’s the end of the subject – I’m afraid I don’t believe that. I think whatever happens in the election, we will have a move to Making Tax Digital. The timeframe is going to be interesting – that’s probably the most challenging part of it – but I think we will have it whatever government we have after the June election.
Has the government carried out sufficient consultation on MTD?
Yes, I think they’ve tried very hard to be fair to them. They’ve carried out a lot of consultation in different forms, obviously in the usual written form, meetings and offering up presentations and so forth, I think they’ve even had webinars. I think the challenge is as always that they will have received lots and lots of views and priorities as part of that consultation. And the key factor really for me is if they’re listening to the key concerns in terms of the implementation and the timetable.
Do you believe the government’s estimated costs to be accurate? Do these costs pose a real threat to a small business’ survival?
Yes, I suspect the costs are an underestimation. I’m sure that’s not deliberate, but I’m sure they are. I think the fact that we know there will be six returns or six points of information that have to be delivered to HMRC six times a year – that in itself is a cost, it’s a time cost. I think the challenge for us as agents is what do the clients want us to do, what are they going to do themselves, what level of assurance is required . So, I think without any doubt the cost will be higher than estimated.
Would you support a proposal which would see MTD first applying to businesses with the highest turnovers, and then filtering down to SMEs?
Yes, I always thought that made perfect sense. Not least because those larger businesses are already using digital accounting, online accounting and carrying out their processes that way already. But, from my understanding of what HMRC have said is that their key priority in this is not those larger businesses which by and large would already be compliant, their view is they would recover far more tax by targeting those at the lower end of the market and those that are perhaps not 100% compliant at the moment.
Should businesses see MTD as an opportunity to improve their efficiency and embrace the digital world in which we operate?
Yes, I think some certainly should. Certainly there are still businesses which would benefit from using digital records, keeping those digital records themselves. There are still driving numbers of businesses still using a very manual process and I think this will be the kickstart for many of those – they’re going to have to keep those digital records, so I think that is positive. While I say I think they should, I think some of them will find this quite a struggle because they have kept records in the same way for a long time so I think that’s the role for us as agents as well, to help them with that.
What can businesses with little digital experience do to adapt to the measures?
I think starting early. Not waiting three months before they have to get involved and thinking about if they’re going to use cloud accounting software, what they’re going to use, what suits them. Thinking about that now, and getting started so that they are prepared in advance.
Do you think we’re still on track to become the most digitally advanced tax administration in the world by 2020?
I think that was a bold statement from the chancellor I don’t have day-to-day experience of other administrations but I think we have got a long way to go. I think it’s a good aim and I think we should be travelling this road. Whether we’ll get there by 2020 is another matter – I doubt it.
What are the obstacles / challenges?
I think really it’s just the number of different challenges. So, the software is obviously key. I think HMRC has actually started rolling out a full, extensive pilot and they will be doing that in a very small scale way at the moment. I think that needs to be far larger.
I think it’s actually making sure then that everyone has access to the software tools that have been promised. It’s early days yet in a way, but actually already we are within 12 months of that and software houses are running to catch up. I think just the volume of people and the volume of challenges will mean that it’ll take a little longer than planned I suspect.
What does the tax system look like in 2030?
it’s interesting isn’t it. I mean I think if we progress down this road as planned then actually that sharing of information, that one touch reporting, so we’re not re-reporting information that has already been provided elsewhere should be very efficient by that stage. So, actually, hopefully the compliance burden will be reduced by the tools that will exist at that time.
Interview by Alia Shoaib