In this blog, Jason Reynolds, national recruitment team manager at AJ Chambers, shares his views on Making Tax Digital.
HMRC is unleashing a piece of legislation – Making Tax Digital, which obliges the self-employed to file tax returns four times a year, rather than once annually, as with the current requirement. According to the government, filing returns more regularly will make it easier for businesses and individuals to get their “tax right and stay on top of their affairs”, as there will be less work required than compiling the information in one large chunk, which is presently the case.
Having discussed the changes with an accountancy practice owner, it is clear there is concern amongst the profession that the new system will only add to tax return-induced stress. He said it was “nonsense” to think increasing the process to four times a year would speed things up or streamline costs. He said although tax returns would be smaller, the bulk of the current work involved chasing clients to supply the required information – a burden that the new legislation will increase threefold.
It has been suggested that the introduction of new software will help firms overcome challenges that the new system presents, but again, this is refuted by the accountancy practice owner. Online accountancy systems have been heavily touted as a quicker, easier filing solution for tax returns. But as my accountant contact explained, information from plasterers, bricklayers and the like is provided in manual form, as smaller traders are not interested or do not have the time to be constantly updating digital systems. The concern amongst small-to-medium accountancy practices is that the extra time and cost that this returns process incurs will have to be passed onto the client – a problem that larger businesses with more established structures built around the invoicing process will not have to face.
According to HMRC, the Making Tax Digital legislation will fulfil its ambition to become “one of the most digitally advanced tax administrations in the world”. And whilst it’s true the new system – which comes into effect in April 2019 – will only apply to businesses with a turnover above the VAT threshold, there is some disquiet among those in the finance and accountancy sectors that this “modernising” of the tax system will have firms very quickly yearning for a return to the good old days – as difficult as they were.
Jason Reynolds is national recruitment team manager at AJ Chambers.