On 14 December 2015, HMRC published a “roadmap” showing that the new process known as ‘MTD Making Tax Digital’ would be mandatory for most businesses:
“By 2020 most businesses, self-employed people and landlords will be required to keep track of their tax affairs digitally and update HMRC at least quarterly via their digital tax account. These changes will be introduced for some businesses from April 2018, and will be phased in by 2020, giving businesses time to adapt.”
Accountant’s have been saying for sometime that 2018 is too ambitious and the £10,000 threshold is too low.
The House of Commons Treasury Committee now agree that 2018 is too soon and feel it should be 2019 or later.
One of the big areas of concern has been over the quarterly tax reporting requirements and concerns over data accuracy.
Data accuracy is going to be critical, are most businesses up to providing data in real time? RTI has worked for payroll but could it really work for accounting information? many businesses rely on their accountants and book keepers to get the information correct.
The relationship between UK Taxpayers and HMRC is a good one, the vast majority of UK taxpayers want to pay the right amount of tax and the UK tax gap is already one of the lowest in the world. HMRC could lose that trust by rushing MTD.
Software is also a big issue, with the threshold at £10,000 even very small businesses will need specialist software to cope with MTD and spreadsheets will not be able to cope.
It’s time to take a slower more considered approach.