Making Tax Digital – wide ranging response submitted
Making Tax Digital (MTD) received the smallest of mentions in the Chancellor’s Autumn Statement, but it is a concerning one.
The Office for Budget Responsibility Economic and Fiscal Outlook Report highlighted that HMRC has reported progress in delivering MTD and it is ‘broadly on track’. You can see the paragraph in full at A.32 in the report.
ACCA’s consultation response We submitted a wide ranging response to the initial consultation, with valuable input from many of our members.
Throughout the consultation period we undertook a wide range of activity, including:
conversations with government departments including HMRC at various levels (including at chief executive level)
ACCA’s chief executive Helen Brand met with Edward Troup from HMRC (Executive Chair and Permanent Secretary)
submitted evidence to the Treasury Select Committee
raised concerns at the Conservative and Labour Party conferences
consulted with members of ACCA’s sector network panels and our Global Tax Forum
sent joint letters with ICAEW and FSB to the Chief Secretary of the Treasury
spoke about MTD at many ACCA events, Accountex and IRIS World
raised the profile of the issue across the media, including in: - AccountingWeb – 28/9/2016 - 21 different trade journals (including hairdressers, vets, electrician, optometrists) between February and September 2016.
Letter to ministers and MPs We sent a letter on your behalf to ministers and a large number of MPs. Here is what it contained:
Consultations on Making Tax Digital ACCA has today responded to the six HMRC ‘Making Tax Digital’ (MTD) consultation documents. As we pointed out in our written evidence to the Treasury Select Committee in January 2016, MTD affects every aspect of UK system: ‘the legislation that imposes the charge, the forms and mechanisms that enable assessment and communication of the charge, and finally the payment processes that facilitate collection of the charge.’
ACCA has engaged with HM Treasury and HMRC from an early stage on the Making Tax Digital proposals, and we have significant concerns that the transition to quarterly reporting, and potentially payment, of taxes will create difficulties for many sectors, transactions and tax rules.
MTD is the most far reaching reform to the UK tax system in this parliament and indeed for generations. The proposed changes will affect all UK businesses and a significant proportion of taxpayers. We have received an unprecedented level of input from our membership and concerns about the potential impact of mandatory integrated accounting software designed to HMRC specification for every business taxpayer have been universal. Given the impact of the project, it is vital that enough time is allowed to understand the implications and properly develop the legislation and systems required. The burdens placed on taxpayers must be proportionate to the rewards delivered to/for society, and we believe HMRC have not demonstrated a proportionate benefit to the wider UK economy. We would urge that the adoption of interim reporting for business be voluntary.
We support government efforts to improve UK rankings in international “ease of doing business” tables, both for the domestic advantages which accrue and the incentivising of international investment into the UK. But the UK economy as a target for long term domestic and international investment faces plenty of unavoidable challenges. However resilient economic indicators have been up to now there is still an uncertainty about the future, and the risk of potential additional administrative costs and uncertainties will only exacerbate those concerns.
Even if the ‘steady state’ of MTD represents an improvement, the learning time and disruption of adoption will impact business. The opportunity cost of administrative time in a large business is profits spent on support staff time instead of being reinvested. The opportunity cost of admin time in a smaller business is trading foregone, decisions not taken and management time absorbed. Without a dedicated finance team, any burden of MTD will fall upon the profit makers of business; a direct double cost to business and the wider economy. Figures from surveys undertaken over the summer suggest that the annual cost to business will be of the order of billions of pounds per year. We are very surprised and extremely disappointed that HMRC are not proposing to undertake their own impact assessment of the economic cost of MTD until the draft legislation is published. Tax systems exist for the benefit of society, not vice versa, and the business case for any change to the tax system should be based on the total economic impact, not just the HMRC aspects.
We will continue to keep you informed and once again we thank all of you who continue to keep us informed of your views on MTD.