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Why weather the storm when you can ride the wave?

We weigh up the positive and negative aspects of HMRC’s directive

HMRC’s Making Tax Digital announcements have been a source of great consternation for the accounting world, a fact driven home by the results of our recent survey on the subject. While we fully support HMRC’s digital transformation and strongly believe that this is the right approach to take the tax system forward in the digital age, we do have our concerns and reservations, primarily around the timescales and the level of change required to carry out such ambitious plans.

The Good

The idea that taxpayers will no longer have to repeatedly provide the same information to HMRC makes sense. Once data has been entered once, it will remain in HMRC’s system and be visible to both the taxpayer and, more importantly, to agents. This is something that accountants and the software industry have been keen to see actioned for a long time.

Giving businesses the opportunity to see the amount of tax they are likely to pay well in advance of it being due is also a welcome idea, and we’re sure that most business, if not all, would be receptive to this opportunity.

Additionally, the provision of a single place for taxpayers and their agents to see their complete financial picture for liabilities and entitlements, and have the ability to control and offset payments accordingly, seems to us the best way for taxpayers to remain informed and in control.

Finally, the ability to interact with HMRC digitally at any time reflects the direction in which the world is now moving and is what most individuals have come to expect from the service providers they deal with.

The Bad

Major reservations raised involve the time frames that HMRC have projected and the sheer volume of changes required.

We welcome the view from HMRC that these issues can be alleviated by increasing the number of exemptions or by deferring the introduction of MTD for a limited group of businesses and landlords, but the solutions still need to be built now and built competently in order to make the transition as easy as possible for those using them.

From communicating with our customers, the other main concerns so far include the lack of information and detail currently being provided to both the taxpayer directly and to the agent community, and the impact this has on their ability to be ready for the incoming changes.

Also, the number of taxpayers that are currently using either spreadsheets, paper or nothing at all for bookkeeping purposes, and their ability to change this, has been greatly underestimated.

We have contacted HMRC to raise these concerns, further details of which will feature in our next blog, focusing on our MTD survey.

Only 47% of businesses currently use bookkeeping software.

That means thousands of businesses need to make the change.

Chart of how many people use software vs other solutions

The Bigger Picture

In the grander scheme of things, MTD is just one part of a larger digital journey that you and your clients will have to take as the industry shifts to a digital-first culture as standard.

That makes now the opportune time to assess the current state of your practice and your clients’ businesses to ensure that when the digital tidal wave truly hits, both you and they will be ready not just to weather the storm, but to ride the wave.

Questions you should already be asking:

  • Are your clients digital-ready?
  • If not, what’s stopping them?
  • How can you get them onboard and instil in them a digital-first attitude?
  • How ready is your practice?
  • Is your practice able to manage the changes that are coming?