The UK government should rethink its strategy for the digitalisation of tax and defer its introduction, amid fears the current timetable and lack of information underpinning its implementation could undermine voluntary compliance and trust in the tax system.
The call was made by the Chartered Institute of Taxation (CIOT) in its response to the government’s Making Tax Digital (MTD) consultation which closed this week (Monday 7 November).
The Institute said that while it understood and recognised the benefits to HMRC of the move to a digitised tax system, the likely impact on most businesses and taxpayers will be an increased workload and / or increased costs, without the commercial benefits to offset such costs.
In particular, the CIOT has called on HMRC to:
· Defer the introduction of MTD to allow a smoother and more effective transition to digital record keeping, giving businesses sufficient time to prepare for the significant administrative, technological and financial implications associated with the move to digital accounting
· Scale back the timetable for introducing mandatory participation in MTD and substantially raise the participation threshold from the proposed £10,000
· Ensure that simplification of the tax system, particularly for small businesses, takes place before the introduction of MTD
The CIOT has also reiterated its call for government to ensure greater awareness and understanding of the changes among taxpayers and advisers, stating that this would be essential in ensuring a successful roll-out and helping taxpayers and businesses to understand their obligations and prevent non-compliance and error.
The CIOT’s intervention comes a little over a month after the House of Commons Treasury Select Committee warned that HMRC’s plans risked causing "considerable cause for concern.”
Commenting on the submissions, Adrian Rudd, Chair of the CIOT’s Digitalisation and Agent Strategy Working Group, said:
“The Government’s plans for Making Tax Digital represent a significant undertaking. One that will involve large-scale change for taxpayers, tax advisers and HMRC.
“We welcome measures that simplify the tax system, and assist businesses in keeping accurate accounting records, but we remain concerned that there is insufficient detail available to be sure that MTD – in its present form – will deliver tangible benefits to businesses and individual taxpayers.
“In today’s digitally connected world, it is very easy to assume that just because someone can use their smart phone to make calls and send messages, they will be able to keep a digital record of their accounting records and tax obligations.
“But our engagement within the profession and beyond suggests that transitioning to a truly digital tax system remains a significant undertaking and one that the present proposals fail to adequately address.
“HMRC needs to recognise the significant challenges that businesses and individuals will face in making the transition to digital record keeping, as well as the potential costs – both financially and in terms of time – that are likely to be incurred with these changes.
“We have valued the opportunity to engage with HMRC throughout the consultation process and look forward to working with them to identify the best way forward.
“But as things presently stand, there is a very real concern that by acting in haste now, we will repent at leisure for years to come, with a potentially damaging impact on the public’s confidence and trust in our tax system.”
Commenting on the submissions, Moira Kelly, Chair of the CIOT’s Scotland Technical Committee, said:
“This is already a very busy time for tax in Scotland and businesses and individuals will be looking to HMRC for clarity and certainty over how its plans for Making Tax Digital will impact on them. So it is disappointing that this consultation has left us with more questions than answers.
“Many businesses across the country already face significant challenges with digital connectivity, a situation that could potentially be exacerbated as a result of these plans.
“HMRC need to recognise that their proposals – as they presently stand – risk placing significant additional administrative and financial burdens on small businesses across Scotland.
“Coming alongside tax devolution and uncertainty around Brexit we are concerned that this could be too much change, happening too quickly, for many small firms to cope with.
“We urge HMRC to work alongside the tax profession and all those affected by the plans to establish a clear roadmap on a realistic timetable for the move to a digital tax system.”
ENDS
1. CIOT’s submissions on MTD this week can be read here.
2. At Budget 2015, the Government set out its vision for a ‘transformed’ tax system. In December 2015 it launched the MTD Roadmap which sets out how this would be achieved, with the aim to turn HMRC into one of the most digitally-advanced tax administrations in the world by 2020. Read more here.
3. The Chartered Institute of Taxation (CIOT)
The CIOT is the leading professional body in the United Kingdom concerned solely with taxation. The CIOT is an educational charity, promoting education and study of the administration and practice of taxation. One of our key aims is to work for a better, more efficient, tax system for all affected by it – taxpayers, their advisers and the authorities. The CIOT’s work covers all aspects of taxation, including direct and indirect taxes and duties. Through our Low Incomes Tax Reform Group (LITRG), the CIOT has a particular focus on improving the tax system, including tax credits and benefits, for the unrepresented taxpayer.
The CIOT draws on our members’ experience in private practice, commerce and industry, government and academia to improve tax administration and propose and explain how tax policy objectives can most effectively be achieved. We also link to, and draw on, similar leading professional tax bodies in other countries. The CIOT’s comments and recommendations on tax issues are made in line with our charitable objectives: we are politically neutral in our work.
The CIOT’s 17,600 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’, to represent the leading tax qualification.
Contact: Chris Young, External Relations Officer, 07900 241 584 cyoung@ciot.org.uk
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