Here’s my story about how I was invited to the House of Lords to talk about Making Tax Digital for VAT.
The issue of Making Tax Digital (MTD) has been with us for a couple of years now. This is HM Revenue and Customs (HMRC) dictating how taxpayers should send information to them. It was originally any business income over £10,000 (including Buy to Let landlords and small sole traders), although in summer 2017 this was commuted to just VAT submissions (Making Tax Digital for VAT, MTDfV), with other taxes to follow.
Making Tax Digital for VAT – What Is It?
The requirement to keep and submit VAT information electronically will be from 1st April 2019. We have been opposed to such a requirement, as it will undoubtedly create problems for clients. The principal issue is about choice. If you want to use software, you will do. That is the main reason behind your actions, not because HMRC say that you have to. We feel that the current course of action is unfair to smaller businesses.
Our recent blog covers the mechanics of MTDfV.
On 19th September 2018, we came across a request for information from the Economic Affairs Finance Bill sub-committee. They were calling for evidence in respect of Making Tax Digital for VAT and also HMRC’s powers. We put together a two page summary of our thoughts and sent it to them, hoping that it would help in some way to possibly postpone MTDfV. I then received an email on 10th October 2018 inviting me (and other accountants) to a private roundtable discussion in the House of Lords the following week. This was extremely interesting, and completely unexpected.
I was actually fortunate to see a similar meeting on Parliament TV between the various Lords and Baronesses and representatives of accountancy bodies beforehand, so was able to assess the strength of feelings.
The Discussion: 17th October 2018
Our meeting was scheduled for 4.05 pm and would last about an hour. It was 8 accountants being questioned by the following:
Lord Forsyth of Drumlean (Chairman)
The agenda in terms of pre-defined questions was as follows, although the actual discussions moved about quite frequently, depending upon who was speaking:
Making Tax Digital for VAT
- Readiness. How ready do you feel for the Making Tax Digital for VAT regime’s full introduction in April 2019? What changes will you and your clients need to make to implement it in time?
- Practical impact. Practically speaking, how will Making Tax Digital for VAT affect you and your clients in April?
- Communication. What communication have you had from HMRC? Has it been helpful?
- Suggestions for improvements. What should HMRC do to make the programme work better for you and your clients?
- Personal or client experiences. Have you had any experiences of HMRC enforcement activity you wouldn’t mind sharing with the Sub-Committee?
- HMRC’s powers. HMRC have obtained a number of new powers in the last five years or so. Have any of these affected you or your clients? Do you think they are proportionate? Do you think HMRC use their existing powers appropriately?
- Rights of taxpayers. Does HMRC achieve the right balance between tackling tax avoidance and evasion, and respecting the rights of taxpayers? If not, has the revenue ever achieved this balance? What should change? Should taxpayers have more safeguards to protect their rights?
- Culture. In your dealings with HMRC, what impression do you have of its culture?
There was a split between the accountants who attended. Half were from larger practices and and half from smaller practices (like GBM Accounts) who represent the micro-business level. The results of the discussion was interesting. As accountants, we understand the benefits of keeping digital records, but also recognise that this approach is not for everyone. The Lords were pretty much united in believing that MTDfV would not benefit all businesses and that the costs of complying, supplied by HMRC, were insufficient. They were also interested to hear real life accounts of instances where HMRC had gone beyond what would be considered reasonable behaviour.
In time, the sub-committee will present their report to Parliament. Hopefully, their findings will contribute to helping small business deal with their tax burdens.