Making Tax Digital – it’s not going away…

If you’re self-employed – and, let’s face it, a lot of people in the construction and engineering industries are – then you’ll probably have cheered loudly at the widely reported news that the government is going to shelve its plans to “make tax digital” (MTD). MTD was supposed to start in 2018, with certain types of businesses beginning to file quarterly returns (or ‘submissions’ as HMRC preferred to call them) from that year.

  MTD had already been known about and debated amongst the accountancy profession throughout 2016, but it wasn’t really until last autumn that the mainstream press picked up on it and brought it to general attention. Before that, unless your accountant was particularly interested in the subject, you may not have been aware that this major change was coming. 

  A major change it most certainly would be – the biggest since the introduction of self-assessment, yet now it seems to have been shelved, thanks to the government calling an early election. If you simply scanned the headlines you might be forgiven for thinking that ‘shelve’ means ‘scrap’. It was becoming increasingly clear that the MTD and its repercussions had not been sufficiently thought through by HMRC so perhaps kicking it into the long grass might seem politically expedient. In particular, the savings and efficiencies that HMRC were promising the government were seriously in question.

  HMRC’s plans eventually to get all businesses to keep their accounts online and report (and perhaps pay?) once a quarter have been a long time in the making. In preparation, several thousand small businesses are currently taking part in a pilot to road-test some of the proprietary cloud accounting software that is available. Although the accountancy bodies (ICAS, ICAEW, CIOT etc.) and many organisations representing small businesses (FSB, Chambers of Commerce etc.) had many justified concerns, the hiatus caused by the June election will give HMRC some more time to address them.

Consequently, the idea that the UK’s tax authority is going to scrap the idea of MTD is laughable. All the major parties (including the one almost certain to win) are likely to increase taxes in the next parliament (to pay for Brexit, the NHS, HS2, etc.). The general mood in the country seems to me to be increasingly anti tax avoidance (at least when it is systematically carried out by large corporations - as opposed to individuals buying an ISA!) and so HMRC ought to be pushing at an open door with any measure that increases its efficiency, reduces the amount of tax avoidance and hence increases the overall tax take. That, plus the amount already invested in the MTD project, means that this is not going away. Yes, we shall have a respite, but that’s all. In the meantime, if you haven’t started to look at cloud accounting software for your business, it’s perhaps time you did…

Chris Peace, MD, Peace Recruitment