David Gauke has been promoted to secretary of state for work and pensions and has been replaced by Liz Truss as chief secretary to the Treasury, number two to Chancellor Philip Hammond, who has lost her job as minister of justice.

Gauke has been at the Treasury since the coalition government first came to power in 2010 and has been heavily involved in the plans to digitise tax and implement tough anti avoidance rules to curb abuse of the tax system, particularly by multinationals. He was appointed Exchequer secretary to the Treasury in May 2010, and promoted to financial secretary to the Treasury in July 2014 where he served until July 2016 before becoming chief secretary after the Brexit reshuffle.

The Treasury has confirmed that the appointment of the financial secretary to the Treasury has not been confirmed by the Cabinet Office and Number 10.

Truss is an accountant, CIMA trained, and she will have to get up to speed quickly with the Treasury portfolio in her new role as chief secretary to the Treasury.

The priority will be reviewing the pretty much abandoned Finance Bill 2017 which was cut by 80% to 140 pages against the planned 762 pages of legislation in order to pass it before parliament was dissolved before the snap general election. At the same time, it will be critical to make the final decisions on Making Tax Digital, particularly the thresholds, implementation dates and plans for larger businesses and limited liability partnerships.

A big blow for tax advisers and the accounting profession will be the loss of Jane Ellison as financial secretary to the Treasury. She was only appointed in July 2016 and was responsible for Making Tax Digital. Insiders in the profession felt that she had made a big effort to get to grips with the digitisation of HMRC and 'was on top of her brief', according to a number of accountants. Now she has lost her seat, her successor will have to start from scratch again. 

This comes as HMRC has also lost two of its most senior staff, with the departure of business tax director general Jennie Granger and customer service director general Ruth Owen.

Making Tax Digital

There are also serious reservations about the rushed timetable for the introduction of Making Tax Digital – unincorporated businesses, landlords and the self-employed registered for VAT will have to start reporting quarterly from 1 April 2018.

There is cross-party concern about the plans, with MPs from across the House criticising the rushed nature of the implementation, lack of information about the real costs for business and criticising a general lack of understanding about how businesses operate.

The Democratic Unionist Party, the Conservatives’ likley ally in government, has also criticised the plans, questioning the costs for small businesses and the lack of rural broadband which would make it impossible to comply with the new HMRC tax reporting requirements.

The concerns of the farming community, for example, have been ignored by the Treasury and there is scant information about any exceptions for specific sectors, who would not be able to report credible quarterly reports. This has led to accusations that only the fifth report, the year-end reconciliation would be a true to the year end financials as all other reports would have to be rough estimates.

The timing issue is one of the biggest worries for business and advisers, while any uncertainty brought about by the minority government will only make the situation more uncertain.

Ray McCann CTA, partner at law firm Joseph Hage Aaronson, and CIOT vice president, said: ‘I think that the direction of Making Tax Digital will not itself be affected but I would not be surprised if the timing goes out of the window.

‘There is significant cost and the proposed revenue savings are likely to be looked on with some extra scepticism as to whether in the end Making Tax Digital is self-financing, which I do not think it will be.

‘David Gauke’s departure together with Jane Ellison losing her seat mean almost a complete change, both were generally seem as bringing a positive approach to their relationship with the profession.’

John Cullinane, CIOT’s tax policy director, told CCH Daily: ‘We need an urgent statement to clarify the government’s intention on the Finance Bill proposals.

‘There is a need for clarity for taxpayers who will be affected by the uncertainty in whether or not the measures intended to take effect from 6 April 2017 will come into force as originally drafted, or in amended form, or not at all, and also when the measures will take effect.

‘The ongoing uncertainty leaves taxpayers and their advisers not knowing which rules to apply in many every day scenarios. In some cases, taxpayers will have made significant decisions on the basis of previous announcements and the published Finance Bill: in others, they will have had to reach decisions uncertain as to what version of the law will be applied.

‘The inconclusive election result puts a particular question mark over the controversial plans for quarterly reporting and mandatory digital records for all but the smallest businesses.

With every opposition party in the Commons, including the Democratic Unionist Party, as well as the cross-party Treasury Committee, having expressed concern about the reach and pace of the government’s plans, there must be a strong likelihood these proposals will be subject to change.  

‘Nobody is seriously challenging the move to digitalisation of the tax system, but the timetable remains extremely challenging. The many complexities of tax still need to be translated into functioning software, and the diverse nature of businesses accommodated, not to mention how their agents can support them. This is an opportunity to reconsider whether so many businesses need to be compelled to adopt the system in such a short timescale.’

Report by Sara White