Comments on ‘making tax digital’ were vague. Find out the latest, plus the revealing thoughts of one ACCA practitioner.

Hidden away there was a comment that ‘from 2018 businesses, self-employed people and landlords who are keeping their records digitally and providing regular digital updates to HMRC will, if they wish, be able to adopt pay-as you-go tax payments – this will enable them on a voluntary basis to choose payment patterns that suit them and better manage their cashflow.’

Let’s hope that ‘if they wish’ and ‘voluntary’ extends to reporting for all business.

ACCA has highlighted the findings of the government report Digital Exclusion & Assisted Digital Research to understand digital access, use and skills among the UK population.

These clearly show that the majority of the 1.95m taxpayers who need their hand held is a lot of somebody’s non-productive time. The digitally excluded population of around 800k will take significantly more resource per taxpayer for a workaround, especially the 62% of them who say ‘nothing would make them more likely to use the internet for government services’.

HMRC cites success with its volunteers, but they are not going to affect success of adoption of a compulsory filing regime. They are by definition early adopters and digitally aware.

What matters is what would break a compulsory quarterly return policy, and whether the government adopts a constructive, caring and supportive approach or just ploughs on without the regard or understanding on how this impacts businesses and business growth.

Case study

We continue to receive feedback that reinforces the burden of compulsory quarterly returns. Last week a member highlighted that of his 400 self-assessment clients, the vast majority were small businesses or landlords. Most will fall within the proposed making tax digital regime. Of these, only two use bookkeeping software which would require no significant adjustment, although they would still like the practice to help them.

Of the remaining clients, approximately:

  • 10% have their VAT return prepared by the practice – mainly using Excel then by manually logging into HMRC’s online services and keying in the VAT returns
  • 40% maintain their own VAT records using spreadsheets and log into HMRC online to manually input their VAT returns
  • 50% maintain their own VAT records on paper. Of these:
    • 25% phone their figures to the practice, which manually logs into HMRC and inputs the VAT return figures
    • 65% log into HMRC online themselves and manually input their VAT returns.
    • 10% rely on friends/neighbours/relatives to manually log into HMRC online on their behalf to manually input their VAT return figures.

Less than 1% of clients maintain data in a digital format that can seamlessly be transmitted to HMRC.

The key thoughts expressed by this practitioner are:

  • HMRC is missing the key point that most records are not currently maintained digitally
  • HMRC is naïve thinking clients will maintain their own records using smartphones. Clients don’t have the time
  • Businesses cannot afford making tax digital and I for one oppose it.

Your thoughts

What do you think? Please share any thoughts on the policy with ACCA via email

Article from ACCA In Practice