The timescales proposed by HMRC for the implementation of Making Tax Digital (MTD) is unrealistic and poses a substantial risk to SMEs, according to ICAS, the professional body for chartered accountants.
While ICAS supports the overall objectives of MTD, which is set to become mandatory from April 2018, it has significant reservations about the planned rollout, timescale and the mandatory approach, particularly for small and medium enterprises.
ICAS is therefore calling for a slower and phased implementation of the programme over a three to five-year period.
ICAS is also calling for:
Stronger risk management by introducing Making Tax Digital on a phased basis
A non-mandatory start beginning with larger businesses
A single threshold for VAT and cash accounting
To abandon the proposal to have 'HMRC GAAP lite' accounts.
The role of tax agents in bringing positive change to be fully recognised.
Charlotte Barbour, ICAS Director of Taxation, said: "We're concerned that the Government has pushed HMRC on this unrealistic timescale.
"SME business is the life blood of the UK economy. It needs to be encouraged, supported and freed from administrative burden. The technology here is still in its infancy, and it will take time for most business and their advisors to work such systems into their current work process'.
"ICAS is calling for a slower phasing in of this project to ensure we don't end up in a muddle for British business."
Commenting on the consultation closure for Making Tax Digital, Dawn Register, partner, BDO Tax Dispute Resolution, looking at some of the proposals, said:
“The timetable for the 2020 implementation deadline set by HMRC looks extremely ambitious given the extent and impact of the MTD proposals. Especially given the huge volume of responses HMRC will receive by today (7th November 2016) and the level of anger and concern amongst many professional bodies. We recommend the timetable for implementation is subject to ongoing review and that the Government considers a delay if the systems and guidance are not ready in time.
“Asking businesses for voluntary tax payments is one of the more controversial proposals, with many rightly pointing out that tackling historical tax fraud and reducing debts owed to HMRC would be a better use of resources. The ongoing squeeze of those ‘in the system’ and trying to pay the right tax, may of course backfire and increase the ‘black economy’. The burden of tax compliance and the complexity of rules may only serve to motivate some to stay ‘out of the system’ and risk getting caught.
“There is little detail to address how HMRC will prevent fraudulent digital accounts being set up. At first glance, the scope for say false refund claims looks like a gaping hole in the proposals. Many practitioners express overall concerns about ‘rubbish in, rubbish out’ when it comes to digital tax accounts. Most of us embrace the digital world with online shopping and banking, but the nature of these transactions is usually very simple. For example, my wages come in and my bills go out. UK taxes are now the subject of nearly 20,000 pages of legislation and distilling these rules into simple online checklists and boxes appears a rather impossible mountain to climb.”
(Source: ICAS, BDO Tax Dispute Resolution)
