The results of a survey of members of the Chartered Institute of Taxation (CIOT) and the Association of Taxation Technicians (ATT) have strengthened the two bodies’ concern that the timescale for implementing compulsory digital record keeping is unrealistic and must be delayed.
The results of a survey1 about the Government’s Making Tax Digital (MTD) project highlight the substantial assistance that tax professionals believe their clients will need to manage the move to digital record keeping. The concerns about taxpayer compliance led to an overwhelming majority of tax professionals who responded to the survey, to call for an extension to the deadline.
The UK-wide survey will help to inform the two bodies’ separate responses to a raft of consultations on MTD, due to be submitted next week.
John Cullinane, CIOT’s Tax Policy Director, said:
“Taxpayers will need considerable support and guidance to avoid a major struggle to make the move to digital record keeping and quarterly reporting because the timetable is unrealistically tight.
“There is widespread agreement that digitisation can bring efficiency and other benefits to HMRC and taxpayers alike. The Government appears to be forcing the pace in the belief that requiring even very small businesses to 'go digital' in a tight timescale will transform their record keeping and reduce the tax gap, helping HMRC to recoup its investment in the project. Our survey results heighten our fears that this current aggressive approach by HMRC may have the opposite effect, with more haste meaning not just less speed, but maybe even see compliance levels go in the wrong direction.
“There is a significant risk that small businesses will fall into non-compliance, whether deliberately or inadvertently, unless HMRC reconsiders the timetable for mandating MTD. What is at stake is the spirit of voluntary compliance within our tax system that sees over 90 percent of all that is due collected without significant intervention from the authorities.
“We are also concerned that advisers will be unable to cope with the amount of help needed by their clients. Based on the proposed timetable, our members will have to not only help their clients with their tax obligations under the current regime, they will also need to help them transition into MTD from April 20182. HMRC will need to gear up to provide an increased level of support during this period.”
Key findings in the survey include:
· 89 per cent of members believe that the timeframe for implementing quarterly reporting should be extended to help businesses.
· 95 per cent of members consider that compulsory digital record keeping and quarterly reporting will place an additional burden on their clients.
· 90 per cent of members consider that compulsory digital record keeping and quarterly reporting will place an additional burden on their practice.
· 33 per cent of members report that the vast majority (defined as at least 75 per cent) of their clients will need to move from paper/hard copy accounting records to digital records.
· More than half of members thought that the vast majority of those clients will need help with moving to digital record keeping.
· 68 per cent of members consider that the vast majority of their clients will need help with their MTD reporting obligations, including filing their quarterly updates with HMRC and completing their 'End of Year' activity.
· 87 per cent of members have called for the £10,000 exemption from mandatory reporting responsibilities under MTD to rise. Some respondents suggested the VAT registration threshold of £83,000 is a better level.
Yvette Nunn, Co-chair of ATT’s Technical Steering Group, said:
“All the evidence the ATT has got is that MTD will lead to significant costs and burdens for small businesses in additional accounting systems and support from their accountants. The survey shows that HMRC must help smaller businesses and those who are the most vulnerable in society to adapt to MTD.
“We firmly believe that HMRC is moving too fast and too quickly on MTD. How can HMRC fully digest the feedback from stakeholders within the proposed timescales?”
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.
Notes for editors
1. The full results of the survey can be viewed here. The survey closed on 3 October 2016 and there were 1,082 replies.
2. MTD will overlap with the normal work for members. For instance, for 2017/18: (a) Normal tax return preparation from April 2018 to January 2019, with the majority of the work being undertaken in late 2018 and January 2019. (b) Having to help clients from, for instance, April 2018 to start keeping digital records, and do quarterly reports from July 2018 (for April to June).
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.
The Association of Taxation Technicians
The Association is a charity and the leading professional body for those providing UK tax compliance services. Our primary charitable objective is to promote education and the study of tax administration and practice. One of our key aims is to provide an appropriate qualification for individuals who undertake tax compliance work. Drawing on our members' practical experience and knowledge, we contribute to consultations on the development of the UK tax system and seek to ensure that, for the general public, it is workable and as fair as possible.
Our members are qualified by examination and practical experience. They commit to the highest standards of professional conduct and ensure that their tax knowledge is constantly kept up to date. Members may be found in private practice, commerce and industry, government and academia.
The Association has over 8,000 members and Fellows together with over 5,600 students. Members and Fellows use the practising title of 'Taxation Technician' or ‘Taxation Technician (Fellow)’ and the designatory letters 'ATT' and 'ATT (Fellow)' respectively.