As I write this article in August the dust has settled on what many are calling the great MTD climb-down. Software developers have finished revising their sales forecasts for the forthcoming couple of years and there is definitely less tension in the air.
Many people and organisations are claiming that the pressure from them – and others – was such that HMRC basically caved in and amended the timetable as a result.
This, of course, has led to much publicity from HMRC about listening and recognising the concerns raised by the profession and business organisations, yet is this this the real answer?
Was it a case of listening to the arguments and deciding that, actually, they had a point? Or was it a political decision based on a hung parliament?
I am of the opinion that HMRC may well have heard the arguments for a delay, but the most likely deciding factor, which has hardly been mentioned, is the effect Brexit is having. HMRC are massively involved in the Brexit process and VAT alone will, I hazard, be a significant task to untangle – let alone the rest of the tax code. Could HMRC really handle the strains that MTD would have placed upon their dwindling staff numbers at exactly the same time they are being pressed to help in the Brexit process? I think not. Remember this is the same HMRC that is taking until October to rectify the problems with their own tax calculations for 2016/17, so do we really think they would manage Brexit and MTD?
Up to the election, HMRC were unwavering in their determination to keep to the already amended MTD schedule, which was already taking a different course from their wonderful ‘roadmap’. No hint of a revision was forthcoming and, if anything, the rhetoric was actually stronger – which makes the sudden ‘road to Damascus’ conversion even more startling.
Now we are in a period of positive spin in which we are confronted with a revenue service that is making all the right noises about listening and understanding, and acting upon concerns, when up to now all of the above have fallen on stony ground. One seriously has to wonder why were we not being listened to earlier. We have not altered our stance that digital is the future. But that mandation was the problem, which in turn was enhanced by the incredible tight timescale. No one from HMRC listened then, so why now?
Moving on, we have the revised timetable, with VAT returns (or whatever they will be called going forward) having to be filed from within software, not the gateway, from April 2019. This seems a long way off and for many VAT registered businesses there should be no major problems. But VAT is not the most simple of taxes, and with all the variants, from cash accounting, the annual accounting scheme, the flat rate scheme, VAT retail schemes (point of sale scheme, apportionment scheme, direct calculation scheme, etc), and of course VAT Moss, getting a return correct from within standard software is not the easiest thing in the world to do. Which is, of course, why so many presently prepare the return via software, then work out amendments on paper and file the resultant return via the gateway.
Just ask any VAT practitioner why they do this, and then stand back as they give you a lesson in the complexities of VAT and VAT reporting, which makes it easier to use the gateway to file rather than spend significant amounts of time amending figures within the software to come to the same correct answers.
As the MTD debate moves away from income tax and focuses squarely on Value Added Tax, will HMRC and the software industry get it right in the time available? My VAT practitioner colleagues are firmly in the “yet to be convinced” camp, and you know I agree with them.
- Tony Margaritelli, Chair, ICPA
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