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CIOT calls for delay to MTD

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Responding to the government’s package of six consultation documents for making tax digital (MTD), the CIOT has called for the introduction of mandatory digital record keeping to be delayed beyond the proposed April 2018 start date, to allow for adequate testing and ‘real simplification’ of the tax system to take place first.

The following key points were made:

  • MTD will bring benefits to HMRC, but for most businesses and taxpayers it will mean an increased workload and costs, without any obvious commercial benefits, particularly for smaller businesses;
  • the timetable for making MTD mandatory is far too optimistic and deferral will allow a smoother transition, giving time for effective software to become available;
  • the proposed deferral of MTD for certain small businesses over the proposed exemption threshold is insufficient;
  • the £10,000 threshold for exemption from mandatory introduction is far too low and could place the reporting obligation on non-taxpayers and landlords with a single buy-to-let residential property;
  • even for larger businesses that already have comprehensive digital record keeping systems, making a particular method of digital record keeping mandatory, and quarterly reporting, will create significant administrative costs, with quarterly figures still needing adjustment at the end of the year;
  • real simplification of the tax system, particularly for small businesses, such as a simple income-minus-business expenses model would be easier for taxpayers to understand and should take place before introducing mandatory digital record keeping and reporting;
  • the consultations are ‘worryingly devoid’ of much mention of agents, and seemingly imply that businesses will wish to ‘do it themselves’; and
  • better communication of MTD, direct to businesses and individuals, is vital.

Read the CIOT’s submissions at

Overwhelming support for delay

A survey of CIOT and ATT members conducted in October found overwhelming support for a delay in implementation. The responses revealed the following views amongst members:

  • 89% believed the timeframe for implementing quarterly reporting should be extended to help businesses;
  • 95% considered that compulsory digital record keeping and quarterly reporting will place an additional burden on their clients;
  • 90% considered that compulsory implementation will place an additional burden on their practice;
  • 33% reported that the vast majority (defined as at least 75%) of their clients will need to move from paper/hard copy accounting records to digital records;
  • more than half thought that the vast majority of those clients will need help with moving to digital record keeping;
  • 68% considered that the vast majority of their clients will need help with their MTD reporting obligations, including filing their quarterly updates with HMRC and completing ‘end of year’ activity; and
  • 87% called for the £10,000 exemption from mandatory reporting responsibilities under MTD to rise, with some suggesting the VAT registration threshold of £83,000 as a better level.

John Cullinane, CIOT’s tax policy director, said: ‘There is a significant risk that small businesses will fall into non-compliance, whether deliberately or inadvertently, unless HMRC reconsiders the timetable for mandating MTD. What is at stake is the spirit of voluntary compliance within our tax system that sees over 90% of all that is due collected without significant intervention from the authorities.’

'Consistency of views'

The CIOT's submission follows a letter sent to the chancellor by Treasury Select Committee (TSC) chair Andrew Tyrie, in which Tyrie also called for a delay to MTD beyond the proposed start date of April 2018.

Tyrie concluded: 'HMRC's proposals are major changes. There remains considerable cause for concern ... Better to get it right than to stick to a rigid timetable.'

Similar concerns were expressed at a TSC hearing held in October, which heard from Rebecca Benneyworth, who appeared in her role as chair of HMRC’s Digital Advisory Group, the ICAEW’s Frank Haskew, the ACCA’s Chas Roy-Chowdhury and the FSB’s Mike Cherry. Whilst the witnesses recognised the potential for improving tax adminstration, they all cautioned the need to rethink some aspects of MTD.

Writing in Tax Journal, Paul Aplin, tax partner at A C Mole & Sons and vice president of the ICAEW. noted a 'striking consistency of views' over MTD. 'Everyone I have spoken to has been concerned about the timetable', Aplin wrote.

'To avoid imposing new burdens – and to give MTD the best chance of genuine success –  the entry point should be set much higher (and certainly no lower than the VAT threshold),' Aplin suggested. 'Mandation is the wrong approach.'