“We’ve listened to those responses and they’ve been instrumental in shaping the detail of what we’re announcing today”
- Theresa Middleton, HMRC Director for Making Tax Digital
This was what Theresa Middleton is quoted as saying on the day that the HMRC responses to the six consultations on the proposed digital agenda were issued.
A good soundbite if ever there was one, giving the impression of a department caring enough in the first place to ask for opinions and then responsive enough to listen to the responses. Thus giving the listener the impression that no minds were closed and, ultimately, saying that having listened they have acted in line with those responses.
Having had grave concerns over many of the issues raised by this project, and having met with and spoken to countless members about this project, my initial take to this response was one of reassurance that the concerns raised by the ICPA on behalf of its members – and virtually the whole profession – had been addressed. So I was keen to read the responses.
I spent hours reading the responses, and one specific word stood out: ‘mandation’. Why was that? After all, I knew the mandatory nature of these proposals, which was a worry.
This is what the ICPA had to say in our response: “The membership fully recognises the value the digital initiative can bring to themselves as businesses, their clients and to the tax system in general. However, their preference is most certainly not for a mandatory approach, preferring that the digital initiative be made voluntary, believing that over a period of time the benefits and advantages will make the switch to adopt this approach ultimately attractive for most businesses, but leaving those that have no desire, necessity or inclination to digitalise their way of recordkeeping a choice.”
We also said: “The membership are further concerned that HMRC are proposing to mandate the system commencing with landlords, sole traders and partnerships first when this sector will require more training and ongoing help rather than starting with larger corporate clients, which would have the effect of bedding in the systems and giving those following behind additional time to prepare.”
Now I know we were not alone in this regard because here is what the House of Commons Treasury Committee on MTD said in their report issued on 10 January 2017: “Based on the evidence it has heard, and on published responses to HMRC’s consultation, the Committee supports the idea of the digitisation of the reporting of tax. However, it considers that mandating the digitising of record keeping and quarterly reporting, as currently envisaged, has not yet had its overall benefits proven.”
They further quoted a small business owner who said: “For me, the problem lies with the word ‘mandatory’. This is a great system for opting in for the next four or five years, but this is a huge burden.”
The CIOT added that even for larger businesses mandation was far from proven. They said: “The case for mandating larger businesses into MTD has not been made.”
The ICAEW commented: “Taxpayers and society need to have trust and confidence in the move to MTD and this is likely to be best served by adopting a non-mandatory approach at the outset. There should be no question of mandation during the implementation period.” It added: “Once the system is up and running successfully and taxpayers are taking it up then the question of mandation can be reassessed.”
The LITRG said: “We do not support the principle of mandating MTD and are wholly opposed to this approach. If we compare it to self assessment (SA) online filing, which has been very successful without being mandatory, we can see that if a product is good and beneficial, taxpayers will naturally migrate to it. Mandation is very likely to have the opposite effect to that which it is intended to foster: instead of increasing tax receipts, it may act as a disincentive to businesses to trade legitimately and encourage some into the hidden economy.”
The committee concluded by saying: “The Government should draw on the experience gained at the beginning of this century from introducing online filing for income tax self-assessment over a period of many years. This suggests that there is merit, both for the customer and for HMRC, in moving gradually. To rush it might imperil the yield.”
Faced with these responses to the consultations I expected to see them at least mentioned as HMRC sought to placate our concerns. However, what I found in the sections ‘Responses’ was the following, which to me is hardly a fair reflection of even the four I have quoted above: “…and that mandation for smaller businesses should only follow if benefits were seen by both business and HMRC”.
“Some respondents suggested that VAT registered businesses should be the first to move to MTDfB, with mandation for smaller businesses only following if/when benefits were seen by both business and HMRC.”
What we were told in the introduction to the response was: “Online banking, shopping and interaction is commonplace and social media is used for a whole range of purposes.”
I would comment simply that for every online bank transaction, every online shopping transaction and every social media interaction the person responsible actually CHOSE to make that interaction – they DID NOT have to.
I think this is what we at the ICPA (and the ICAEW, the LITRG, and no doubt many others) thought about mandation, but were we listened to? You decide for yourself. Were our concerns answered? That’s a definite NO.
- Tony Margaritelli Chair, ICPA
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