Following extensive discussion with members, ICAEW has submitted its response to the Making Tax Digital: Draft Value Added Tax (amendment) regulations and notice 2018 published by HMRC on 18 December 2017. The response is available as ICAEW REP 18-2018
We have repeated many of our earlier comments, including our full support for HMRC’s digital transformation initiative, but we believe that MTD should be voluntary. Our members make this known to us at every opportunity. They and we want to help HMRC make MTD a success and welcome the assurance from the Financial Secretary to the Treasury that MTD will not be made mandatory for income tax or corporation tax until the programme is working well, but this principle should naturally also apply to VAT.
We have also made the following key points in this representation:
I am fed up with HMRC sending notifications to clients saying that they have corrected the returns that I have submitted. In most cases, the figures are exactly what was shown on the return and, in cases where it isn't the same, almost invariably, the "correction" is incorrect and has to be reversed - guess who ends up paying for that. HMRC need to get their systems sorted before trying to introduce this ridiculous idea - last year, I found two errors in HMRC's programs. "Senior technicians" told me that I was wrong and their program was right but, after standing my ground and a lot of arguments with several people who told me that I was wrong, they backed down, agreed that I was right and I successfully recovered the fees but one of the clients affected was a new client and it is very embarrassing to have to tell a new client that you have got to invoice them a substantial amount for something that was caused by HMRC's errors and that they have to pay it before HMRC will even look at the claim for reimbursement.
It is about time that the ICAEW put up a stronger fight against this stupid scheme - it is your members that are going to have complaints from clients about the massive additional fees that they will incur for which they can see no benefits whatsoever. I have several clients who have said that they will close down their businesses and retire earlier than planned rather than computerise everything, with all of the costs and problems that will entail, when they have accounting systems that have worked perfectly well for many years.
In the same week that we have seen the HMRC presentation on MTD we have received "revised" tax calculations for every client who opted to pay voluntary class 2 NI . These are not revised and show the same figures as the original calculation. The tax account still shows the £145,60 as due. How can we possibly ask clients to go through all the hoops for MTD when the HMRC system can not get this simple thing right and demonstrates that by sending the nonsense to our clients which we have to explain to them
I agree wholeheartedly with the ICAEW response, as summarised above. Perhaps the most significant item is the first one; HMRC have stated there are significant benefits to business of MTD but few in business can work out how doing something five times a year which used to be done in one pass will be of benefit. Despite HMRC being obliged to carry out a business impact assessment, they refuse to publish the details of that for MTD so it is not possible to challenge their assumptions. The answers are simply plucked out of the air. For MTD VAT there are clearly no benefits to business, just cost, & so HMRC have taken the pragmatic step of not even trying to carry out an impact assessment, despite being obliged to do so. Perhaps it is about time ICAEW & other interested professional bodies provided a joint response to HMRC to obtain the detailed impact assessment calculations? At the moment HMRC are getting away with blatant lies & not being adequately challenged.
Richard I suspect that those businesses which are already computerised will have a tougher time of it than you think. As existing software will not have been written with these as yet unspecified requirements in mind at the very least they will need to do will be to upgrade to a later version of their software, if the supplier provides one. There will be an additional cost to that. If their supplier has not developed such software they will be faced with either a system migration to new software, or contemplating taking an output from their existing software, manually manipulating (eg in Excel), then putting the output of that into some new software which is able to transmit to HMRC. For those larger organisations that have tailored their general ledger software to their business, with direct feeds from others systems etc, there is unlikely to be an easy upgrade path. They will no doubt end up outputting from the existing system, manipulating the data then re-inputting that to new software.
I am incredulous that the proposals, which in effect just mandate a digital link between excel records and no doubt expensive third party software to file would do anything at all to reduce error. It is not as if the keying of a few figures is beyond the competency of accountants, not that any errors wont be picked up at the year end as part of a standard VAT rec. I would like to understand how exactly HMRC think the numbers arrive in accounting systems in the first place. The fact is, most of it is keyed. The proposals fail to meet the original objectives, and seems to be carried forward purely on momentum from the failed quarterly reporting project and have no merit for either tax payers or government.