Viewpoint: Making Tax Digital is not all doom and gloom

It might be heretical, but I genuinely believe Making Tax Digital (MTD) is not all doom and gloom.

I know that one should not ignore that those required to on-board will face a range of difficulties, but I feel that their interests have been well served by a myriad of previously published doom-laden articles.

For this viewpoint, I want to focus on the growing cohort of businesses and their agents who already work in the digital world. I believe there is another side of the story that should not be overlooked.

More than an even chance of hitting the new target

Ever since Mel Stride announced in his July 17 written statement “We [the government] have listened very carefully…” and promptly demonstrated that his government had by announcing a major revision to the MTD roll-out timetable, I believe that common sense has prevailed.

Sweeping mandation away for all but the VAT registered means that there is now more than an even chance the new target can be hit.

Especially as VAT mandation will not come in before return periods starting on, or after, 1 April 2019. Then only for those who are VAT-registered with turnover (net of VAT) of £85,000, and HMRC has promised a penalty soft-landing.

The passage of time is setting MTD into context

Back in 2015 when George Osborne announced the death of the tax return, MTD was seen by many to be the biggest show in town to the point where it seemed that HMRC was driving the digital agenda.

At that time, talk about digitally storing all business records in the cloud was just a step too far for many. However, the passage of time coupled with an exponential growth in cloud accounting software, the emergence of AI and talk of a fourth technological revolution have cast MTD in its true context.

After all, MTD is nothing more than HMRC reading the emerging direction of travel for cloud-based computing and seeking to position the UK tax system in pole position to digitally engage with taxpaying businesses as the tsunami of technological change breaks over UK plc.

Many businesses already work in the right way

Over the past 18 months there has been a groundswell in the number of firms ready or getting ready to work in a way that would be considered MTD-compliant.

Many of those already working in a cloud-based digital way could, if their software was enabled, on-board their clients for MTD purposes from tomorrow. Interestingly, many did not even realise it.

What’s more, neither they nor their clients are likely to face any additional compliance cost when they do. It might sound counter intuitive, but trust me it is not.

It’s all about true added value

This group has eschewed the traditional post-year-end accounts/tax return production model, as adding little if any value to clients (over and above an opportunity of a pleasant conversation over a cup of coffee).

Having tackled head-on the exponentially steep learning curve to be faced when transitioning to digital, they and their clients are now reaping the rewards on offer in the world of cloud-based connectivity. Deployment of automated features, such as bank reconciliation, data capture and posting has liberated them from mere data inputting.

Instead, they are free to harness an almost limitless ability to manipulate data and to produce user-friendly reports to provide monthly/quarterly management accounts information for their client, supported by useful comments, observations and advice.

All at a time when it is still useful to the business, enabling their customers to focus on what they are good at.

Just in case you were wondering

Yes…I did realise that my viewpoint hardly mentions tax.

This omission is intentional. In a utopian way, it is a metaphor of what true success will look like. If the full potential offered by the digital revolution and MTD are to be realised, accountants and tax advisers are going to have to shift their focus from tax compliance and move to be pro-active advisers.

Finally

Whenever I give one of my MTD talks I always conclude by saying…

MTD was announced five years too early. However, if HMRC had not started down the path when it did there would not be any hope of ever reaching the target.

Brian Palmer is an AAT Past President, currently the AAT’s tax policy adviser and a UK-leading authority on Making Tax Digital who advises, blogs and lectured extensively on this and other important area of taxation.