An extended pilot phase allows for a better evaluation of MTD.
I ended my last Tax Journal piece on making tax digital (MTD) with the words, ‘The important thing is to build a system that works for all and that businesses want to use’. At that stage we were still waiting for the announcement on thresholds and a delay to the timetable for the smallest businesses. Two very significant things have happened since I wrote that piece.
Firstly, on Budget day, the chancellor announced that unincorporated businesses and landlords with turnover below the VAT threshold will not be mandated to join MTD until April 2019. This additional year represents a very valuable move. Without it, the pilot phase beginning in April 2017 could only ever have been partly successful. We need to see at least one full MTD cycle operate to have any clear idea of how well it is working and with go-live scheduled for April 2018 that would have been impossible.
What we now have is a period of two years in which to see how MTD works in practice. It will give a chance to look at the impacts on a wide range of businesses, to test different apps and software products and for the developers to use the experience gained to adapt and improve those products. It will give agents the opportunity to see what the impacts will be on the way they serve their clients and it will give businesses opportunity to see how well digital tools work for them. It will also allow HMRC to judge the impacts and assess whether they are in line with expectations. It will give all stakeholders the opportunity to get to grips with the reality of digital tax administration.
It will – and this is the critical point – also yield real data on costs, on error reduction and on yield. It is vital that HMRC shares this data well before April 2019. Doing so will enable us all, external stakeholders and HMRC alike, to make assessments of the impact of MTD based on facts, not speculation or estimates. The more businesses – and the greater the variety of businesses – participating in the pilot, the better and more robust the data will be.
The second significant development since my last piece for Tax Journal is the report from the House of Lords Economic Affairs Committee.
The report echoes many of the comments and findings in the House of Commons Treasury Committee’s report. In particular, it recommends that:
HMRC should revise and improve its assessment of the benefits and costs of MTD;
keeping digital records and quarterly reporting should be optional – not mandatory – for businesses with a turnover below the VAT threshold;
the government should delay the launch of MTD until 2020; and
further business-specific exemptions should be considered.
The committee believes that the case for making MTD compulsory for smaller businesses has not been made and furthermore that there is no evidence that MTD will reduce taxpayer error.
I believe that much wisdom is contained in these two Parliamentary committee reports. My own views on mandation are well known.
Although not my favourite character in Dickens, I think I know what Mr Gradgrind would say. It would be, ‘Now, what I want, is Facts’. And facts is what the extended pilot will give us.
Home >Articles > Making tax digital: two welcome developments
Making tax digital: two welcome developments
An extended pilot phase allows for a better evaluation of MTD.
I ended my last Tax Journal piece on making tax digital (MTD) with the words, ‘The important thing is to build a system that works for all and that businesses want to use’. At that stage we were still waiting for the announcement on thresholds and a delay to the timetable for the smallest businesses. Two very significant things have happened since I wrote that piece.
Firstly, on Budget day, the chancellor announced that unincorporated businesses and landlords with turnover below the VAT threshold will not be mandated to join MTD until April 2019. This additional year represents a very valuable move. Without it, the pilot phase beginning in April 2017 could only ever have been partly successful. We need to see at least one full MTD cycle operate to have any clear idea of how well it is working and with go-live scheduled for April 2018 that would have been impossible.
What we now have is a period of two years in which to see how MTD works in practice. It will give a chance to look at the impacts on a wide range of businesses, to test different apps and software products and for the developers to use the experience gained to adapt and improve those products. It will give agents the opportunity to see what the impacts will be on the way they serve their clients and it will give businesses opportunity to see how well digital tools work for them. It will also allow HMRC to judge the impacts and assess whether they are in line with expectations. It will give all stakeholders the opportunity to get to grips with the reality of digital tax administration.
It will – and this is the critical point – also yield real data on costs, on error reduction and on yield. It is vital that HMRC shares this data well before April 2019. Doing so will enable us all, external stakeholders and HMRC alike, to make assessments of the impact of MTD based on facts, not speculation or estimates. The more businesses – and the greater the variety of businesses – participating in the pilot, the better and more robust the data will be.
The second significant development since my last piece for Tax Journal is the report from the House of Lords Economic Affairs Committee.
The report echoes many of the comments and findings in the House of Commons Treasury Committee’s report. In particular, it recommends that:
HMRC should revise and improve its assessment of the benefits and costs of MTD;
keeping digital records and quarterly reporting should be optional – not mandatory – for businesses with a turnover below the VAT threshold;
the government should delay the launch of MTD until 2020; and
further business-specific exemptions should be considered.
The committee believes that the case for making MTD compulsory for smaller businesses has not been made and furthermore that there is no evidence that MTD will reduce taxpayer error.
I believe that much wisdom is contained in these two Parliamentary committee reports. My own views on mandation are well known.
Although not my favourite character in Dickens, I think I know what Mr Gradgrind would say. It would be, ‘Now, what I want, is Facts’. And facts is what the extended pilot will give us.
