By Jason Piper, ACCA’s Senior Manager, Taxation and Business Law
If the only tool you have is a hammer then every problem looks like a nail. If you spend your whole time focused on just one topic, you can sometimes lose sight of the importance of other areas. Some topics though are too important to ever ignore completely, and when it comes to the relationship between business and society, one of those areas is tax. Every business should pay its correct share of taxes, in full and on time, both as a matter of law and as a point of principle.
But HMRC staff, who spend their whole lives engaged in just the one field, must remember that there is more to the world than tax returns.
One of the first things I was taught as a young tax trainee in practice was never to let the tax tail wag the commercial dog. It’s a sentiment HMRC subscribe to as well, especially when trying to ascribe motive in what may be an avoidance scheme. But what we’re at risk of seeing in MTD is the administrative tail not so much wagging the commercial and social dog as dragging it, unwilling, into a morass of unwanted and unfamiliar process changes.
HMRC’s own research indicates that 400,000 businesses would rather disengage totally from reporting their taxes than transmit their information over the internet to a government body. For those prepared to give it a try, the outlook is “challenging”.
The rollout programme currently envisaged by HMRC would see a huge spike in conversion to the new processes between April 2018 and April 2019, with taxpayers having to make the changeover at a rate of more than 1 every 9 seconds, day and night, week in, week out, with no break for Christmas, Easter or HMRC’s “software upgrades”.
Around 40% of them will need assistance with the new systems – or to put that in real numbers, about 1.5m. With a staff not much more than 50,000, that leaves every HMRC staff member an allocation of around 30 taxpayers to hand-hold through the process – or pass the burden onto friends, family, neighbours and Citizens Advice. Of course, helpful acquaintances may not know enough about the system (either the tax or the technology side) to really help out – while charities with experience in the sector have warned of the risk of exploitation of vulnerable taxpayers if they have to rely on third parties to handle this aspect of their financial affairs.
HMRC’s MTD proposals for big business would allow for a longer, later conversion period and provide a less pressured environment for the HMRC staff. It may be sensible to do the first tests with some volunteer big businesses, for even their (more complicated) systems are likely to suffer significant disruption. But some businesses would relish that opportunity. If they and HMRC could work together to understand how this might all be made feasible, then it’d pay dividends for everyone. In any event, some of the issues facing taxpayers (poor broadband, unfamiliarity with the internet) will heal themselves while a robust and workable system is developed for wider rollout.
The digitally disenfranchised are a poor target market for merging two of the things that many people find hardest to understand – tax and modern technology. The additional delays introduced by the Referendum vote, not to mention the related uncertainty about the future of VAT, give weight to our calls to rethink at least the timetable – and with it the chance to maybe revise the substance.
Tax systems exist for the benefit of society, not the other way around. At a time when there are concerns about the whole of the rest of what society gets up to, breaking the bit that pays for it all is the last thing we need.
