Let’s not assume for one moment that this whole Making Tax Digital regime that HMRC is proposing is based on any desire to help businesses, whether micro, small, medium or large. The only consistent message that HMRC has stuck to, to the point that it is almost sounding like a mantra, is the £8b of the supposed tax gap that they deem due to errors.
Believing that this is a true statistic and never having been in a business themselves from somewhere, and I know not where, they came to the conclusion that if they made small and micro businesses report their income every three months then miraculously they would eliminate errors, report more profits and thus pay more tax – because remember it is errors that are the problem.
But just in case those who were not on the same road to Damascus as themselves questioned whether timing was the sole reason tax was being underpaid, they have recognised that ‘to err is human’. So how are they to deal with this? Have they actually looked to make the tax code simpler? No, all that is needed is for software developers to include some ‘nudges and prompts’, and if that’s not enough promote a failed experiment to rebase how a business should quantify its profit, because they really don’t need to know their profit do they? They just need to know how much tax to pay, don’t they?
If the tax gap values are to be believed, and if the nudges and prompts are to work, then every software or app must have exactly the same nudges and prompts and that includes every spreadsheet as well. And how many ‘nudges and prompts’ will there be? If you ask any accountant how many times a taxpayer could get an entry wrong the list would run into thousands, so I very much doubt we will get that many. What HMRC needs to guard against is the ‘Monty Python moment’ when a taxpayer posts an item to ‘Entertaining’, to be prompted or nudged that while this is a legitimate business expense is not a valid tax deduction and will not reduce their tax. So ‘nudge nudge wink wink, say no more’, it ends up in ‘Advertising’.
• Tony Margaritelli Chair, ICPA
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