Chartered Tax Advisers & Accountants

Making Tax Digital - A Client's Perspective

Published On: 21 April 2016
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If it looks like a duck, swims like a duck, and quacks like a duck… Busting the myths of the HMRC ‘Myth Buster’

If, like me, you’re self-employed, you may well have signed the petition asking the government to reconsider its plans to have us do four tax returns a year.  You may also have seen one or two articles in the press* banging on about this but since then the response from HMRC has been an exercise in spin and obfuscation not to mention blatant propaganda that would make Goebbels weep with envy.  Worse still, the politicians seem to have bought this hook line and sinker.  Given that they are our elected representatives and there are, literally millions of self-employed people (all with votes!), you would think they might at least be prepared to listen to their constituents.  Yet when I tried emailing my MP about the issue, on 16th of February, I didn’t receive a reply (other than the usual ‘acknowledgement’ of my email’s arrival in his inbox).

Not only are MPs (or at least mine) not interested, but the issue does seem to have disappeared from the newspapers recently.  Yet it will not go away and with the ‘consultation period’ having now finished, and a large number of people not knowing what’s going on, it looks as if we’re getting this imposed on us whether we like it or not.

At the root of all this is an understandable desire to embrace digitalisation of tax and increase efficiencies.  Now before you accuse me of being a Luddite, I use cloud accounting, am very comfortable with digital media and the online world (it’s where I make my living) and have absolutely no problem with this laudable objective – with the proviso that it is genuinely safe from hackers and/or leaks from lawyers in Panama.  What I do have a problem with is the idea that I will have to submit tax information four times a year and the likely associated costs this will incur.  I am a small business and, to be blunt, while I could, just about, afford four times what I pay the good people at M&S, it would mean no holidays.  Sorry, but that’s no competition.  I can’t be unique in this respect and I suspect a lot of accountancy firms are trying to work out whether the lost clients will make up for the increased fees that will both result from this measure.

However, what really makes my blood boil is the aforementioned HMRC response.  They have produced a ‘myth buster’ document (see: http://tinyurl.com/zt2lwql) which is smoke and mirrors of the highest order.  Note to whoever runs these things at HMRC: calling a pig a chicken doesn’t make it a chicken any more than claiming that in fact businesses won’t have to submit four tax returns a year because “once a quarter businesses can check the information they are collecting digitally is correct, and simply (my underlining) click ‘send’ to update HMRC”.  Why does HMRC want this “simple” quarterly update?  Is it to prove their technology works?  It’s claimed that they want to reduce the scope for error.  Well, a friend of mine recently received a letter from HMRC telling him that if he didn’t reply by the 1st of the month he would be fined – but the letter was dated several days AFTER the 1st of the same month and the postmark was several days after that.  There is certainly scope for reducing inefficiency.

There is more smoke and mirrors in the section that tackles the ‘myth’ that ‘Businesses don’t want to do tax digitally’.  Citing figures of 99% of VAT returns, 98% of corporation tax and 86% of self-assessment all done online that’s a re-statement of the bleeding obvious.  The world is digital – that’s why papers are losing circulation and you almost certainly don’t use a travel agent to book your flights these days.  It’s not the digital element that people are objecting to, it’s the compulsory element of ‘submit four tax returns – sorry, “simple clicks” – that gets the self-employed worried.

Another ‘myth’ HMRC refutes is that extra records will be needed and it will all cost a fortune.  Obviously, no extra records will be needed, but the extra reporting will be and I don’t think the accountancy profession is going to do that for nothing.  Even if you don’t use an accountant, you’ll have to spend time on this and time is money and if you make a mistake (which we do, don’t we) don’t expect HMRC to be lenient.  If you’re lucky they might send the letter telling you about the fine before the date on which you’re supposed to reply. 

In fact, HMRC claim that their changes will reduce the burden on small/self employed businesses by £400M.  Note they don’t define this “burden’ or say over what period!  Assuming, however, that this is per year, here is another piece of smoke and mirrors.  Suppose that every tax return done by a small (self-employed) business costs £100 (more like £1K, but leave that on one side just now).  Three more returns a year would cost £300.  With 5 million or so self-employed that’s equivalent to £1500M.  Even if half of the self-employed were able to do this work for nothing (not accounting for the time/opportunity cost involved), this still dwarfs the £400M of alleged “burden”.  On a more realistic basis of £1K per extra ‘simple click’, the sums don’t seem to make sense to me.

I could go on.  The sad thing is that it won’t make any difference.  I would, with respect to my friends at M&S (who I know take a broadly similar view and are raising their concerns publicly - see the article "Concern over new quarterly tax filing regime," published in The Courier on Tuesday 19 April 2016) also say that I’m disappointed not to see more of a substantial response from the accountancy profession.  I understand that when HMRC did their ‘consultation’ roadshow, only six accountancy firms turned up in Edinburgh (at least M&S were there) and the event in Glasgow was cancelled due to lack of interest.  I would politely suggest that if accountants want to keep their clients, they should demonstrate some more interest in this subject!

Alastair Blair, thePotentMix

* N.B. The self-employed are not helped by some so-called financial journalists who simply recycle the HMRC propaganda (see for example this article, which simply cuts and pastes the HMRC ‘myth buster’ document - http://tinyurl.com/h46w96j). To be fair, on the other side of the coin, some of the specialist press are writing good stuff (see for example, http://tinyurl.com/jrhde9q) but no-one outside their own profession will see it!