The government’s consultation process for HMRC’s flagship making tax digital (MTD) proposals has been heavily criticised as being too rushed and leaving little time for a successful implementation in an end of year report on tax policy from the Tax Professionals Forum
The forum’s fifth independent report, covering the period from 1 April 2015 to 15 September 2016, describes HMRC’s Making Tax Digital plans as ‘very controversial.’
It points out that the government launched the consultation at stage two of the process, omitting stage one completely.
The report states: ‘It would have been far better to have honoured the policy framework and started at stage one, rather than seek to forge straight through to stage two. This observation is concerning as it is the third time that the forum has raised this issue.’
The forum warns that this means the consultation is taking place within a fixed framework ‘which may be suboptimal’. As a result the policy may have to go back to the drawing board at a late stage, with the risk that the final policy is rushed through with too little time to consider all the issues.
in its review of the development of MTD, the forum says when it was first announced in December 2015 HMRC set out its intention to transform the tax system, but although this implied radical change to the system, few details were given.
The report states: ‘It is rare that wholesale changes are made to both the rules for taxing business and also to the system of administrating tax within the same short time frame, yet this is what MTD proposes to do.’
The forum takes issue with the timings of the consultation, pointing out that six consultation documents, containing 243 pages, were published simultaneously for feedback by a deadline of 7 November 2016. The 2016 Autumn Statement announced that, in order to consider the large number of responses received, the government will publish its response to the consultation in January 2017.
The forum says that this approach means the government is paying no more ‘lip service’ to the idea of early and continuing engagement on tax changes.
The report states: ‘Furthermore, the consultation is only asking for views on the design and how it should be implemented, not on alternatives. This limits considerably its scope which is not within the spirit of the framework, particularly for a policy for which there is little evidence that the cost of administration for UK businesses has been estimated accurately.’
It is also critical of the timescale ahead, pointing out that as implementation is scheduled to begin in April 2018, so legislation will need to be implemented by Finance Act 2017. The draft Finance Bill 2017 clauses will be open for consultation for just eight weeks, which will include the Christmas period and a very busy self-assessment period for accountants and tax advisers.
The report says: ‘Overall, the timetable for implementing a package of policy changes of this magnitude is extraordinarily short and we caution government to reflect fully on the responses to its consultations and take the time to get it right.’
In its wider comments on tax policy development over the year, the forum sounds a warning about what may happen in future.
Its report states: ‘The extent of reform being undertaken by HMRC and the Treasury is such that the members are concerned that this may extend beyond the ability of the government to deliver within the timescale.
‘We would recommend that the government considers the extent of work that is likely to be involved in implementing the current amount of policy change, the future policies that the government wishes to introduce and the consequential work that will arise in preparation for the exit of the UK from the EU. It will be important to prioritise proposals and to consider where lies the limit of deliverability.’
The forum meets bi-annually to advise government as part of a commitment to reform the framework for developing tax policy and making tax law. Members include Chris Sanger, global head of tax policy at EY and chairman of the tax policy committee of the ICAEW’s tax faculty; Jane McCormick, global head of tax at KPMG; Stephen Herring, head of taxation, Institute of Directors; Anita Monteith, technical lead and senior policy advisor, ICAEW tax faculty; and Jonathan Riley, head of tax, Grant Thornton UK.
