The Association of Accounting Technicians (AAT) is calling on HMRC to opt for a phased introduction of Making Tax Digital (MTD) requirements, and make the threshold for mandatory participation much higher than planned, arguing that the current approach risks being too costly and burdensome for SMEs
In a letter to Chancellor Philip Hammond ahead of the Autumn Statement, AAT chief executive Mark Farrar says the association, 60% of whose members are employed by an SME, ‘remains concerned about the timetable for implementation and the costs MTD may place on both SMEs and taxpayers more generally’.
AAT says the qualifying threshold for MTD should be set at £83,000 (the current VAT threshold) falling to £11,000 (the personal allowance) over a three year period.
‘This will assist SMEs whilst simultaneously helping HMRC achieve the best possible policy outcome. Revenue implications are minimal and yet the phased process of implementation would significantly increase the effectiveness and value for money of the programme,’ Farrar writes.
The AAT argues that the revenue implications of this approach are ‘minimal’, but says ‘the phased process of implementation would significantly increase the effectiveness and value for money of the programme.’
CIOT has expressed similar views in its response to the MTD consultation, which closed this week on 7 November. The institute said it wanted HMRC to defer the introduction of MTD, currently scheduled for April 2018, 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.
CIOT also wants to see the timetable for introducing mandatory participation in MTD scaled back and, like AAT, wants a substantial increase in the participation threshold from the proposed £10,000. Adrian Rudd, chair of CIOT’s digitalisation and agent strategy working group, said: ‘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.’
For its part, the Association of Taxation Technicians (ATT) is flagging up its concerns about proposed penalty regime for MT, which it says fail to address the need for taxpayer education, provide no early facility for taxpayers to explain why they failed to meet a filing obligation and may leave taxpayers feeling that they cannot get out of being regarded as non-compliant.
ATT says the recent consultation does not indicate what penalties will apply if a taxpayer fails to keep their business records digitally, and argues that if the existing legislation is not overhauled, it would enable HMRC to charge penalties but without any power to suspend the penalty. That, in ATT’s view, misses a significant opportunity to encourage taxpayers to learn how to meet their ongoing obligations. If a taxpayer has no right to appeal against a penalty point, their opportunity to explain why they were late in filing a declaration or a quarterly report would be delayed until they accrued enough penalty points to trigger a financial penalty – by which time they might no longer have the evidence to support their appeal.
The consultation proposes that a taxpayer would need to have a clear 24-month period of meeting all deadlines before a penalty point was removed from their record. That means that someone could incur a monetary penalty despite having only four late quarterly submissions in almost six years.
Yvette Nunn, co-chair of ATT’s technical steering group, said: ‘It is absolutely vital that the penalty regime encourages compliance with MTD in a positive way. If a taxpayer does not understand how to keep their records digitally – which many will not – simply penalising that lack of understanding will achieve nothing.
‘Under the penalty points system, HMRC expects a monetary penalty to be charged if a taxpayer builds up four penalty points but without any provision for an appeal as the points are built up. It is essential for taxpayers to be able to record their objection to a penalty point as soon as it is incurred. They may have a valid “reasonable excuse” meaning that no point should be charged.’
AAT’s letter to the Chancellor is here.
CIOT’s submissions on MTD are here.
