This month’s general election has delayed the rollout of Making Tax Digital, but it won’t change HMRC’s desire to place the burden on advisers, says Peter Williams
This article was first published in the June 2017 UK edition of Accounting and Business magazine.
Making Tax Digital (MTD) is going to happen, whatever the hue of the next government. As far as the tax authorities are concerned, digital transformation is about policy and process, not about politics. The general election may have removed MTD clauses from this summer’s truncated Finance Act but they will return in some form.
Three key reasons dictate why MTD will happen. First, HMRC is convinced that moving online is the only way to operate in the 21st century. The tax authorities look at the enthusiasm with which businesses and consumers have embraced digital over the past decade and reckon there is no obstacle to following suit. Outraged cries from bodies such as ACCA over MTD’s hows, whys and whens have not quite fallen on deaf ears, but they are certainly nothing unexpected and don’t trouble the people running HMRC.
Second, government wants to increase the tax take. The tax authorities calculate that more than £8bn a year in tax is lost from what HMRC calls ‘avoidable taxpayer errors’. Even those who use professional help get it wrong. Finding and sorting out those mistakes costs HMRC time and money. It is banking on digital to cut that tax gap, allowing it to concentrate on the minority of taxpayers who try to wriggle away from their obligations. Whether or not that £8bn figure sounds right, no politician will ignore it.
Third, government needs to cut its running costs. HMRC is no exception, and reorganisations – such as reshaping the way it manages its property portfolio – are designed to save £83m by 2025–26. MTD is another obvious tactic in trimming government costs. That may mean putting work – and crucially, responsibility – onto taxpayers and advisers but, as far as HMRC is concerned, this would be nothing to lose sleep over.
The pause created by the general election might kick the digital can down the road a year or two, but don’t bank on the project disappearing. Instead, tax advisers might use the breathing space to think about what MTD will mean for their business.
HMRC’s vision for digital doesn’t include third-party agents. While the department does not explicitly say so in this implementation period, as far as HMRC is concerned, once up and running, businesses should be doing digital for themselves.
Tax advisers are being pushed to the margins by HMRC as it strives to ensure its online services are as intuitive to operate as a bank account. Tax professionals may argue that their expertise and knowledge remain indispensable to British businesses. But plenty of others have argued the same, only to find their business model swept away forever by an unstoppable digital tide.
Peter Williams is an accountant and journalist
"HMRC's vision for digital doesn't include third-party agents. As far as it is concerned, businesses should be doing digital for themselves"