As we know with HMRC, the introduction of new initiatives has not always been plain sailing for them in recent times, and there have been calls for their most recent project, known as Making Tax Digital (MTD), to learn from previous mistakes.
MTD will digitalise taxation in the UK will hopefully make processes easier, reduce errors, and be of benefit to both HMRC and businesses. However, another HMRC development, their Real Time Information (RTI) programme which was rolled out over the past few years, has had a review of its success recently issued.
This review found that HMRC benefited from cost savings, reduced fraud and fewer errors. However, it also found that some businesses felt RTI was an additional burden, with few benefits to the businesses themselves.
Costs for small businesses around RTI also exceeded expectations. Both transitional and ongoing costs for small businesses were higher than expected. HMRC acknowledged in the review that it ‘did not sufficiently understand the cost to small business of real time reporting.’
It is misjudgements such as this that has led to the Association of Taxation Technicians (ATT) calling for HMRC to learn from the review and the mistakes made from RTI before implementing MTD.
“As businesses are facing substantial compulsory digitalisation of accounting and tax practices with the introduction of the Making Tax Digital programme,” said Yvette Nunn, Co-chair of ATT’s Technical Steering Group. “For most businesses, MTD will be an even bigger cultural shift than 2013’s real time payroll changes". "It will require them to digitise their underlying business records, often incurring significant costs in doing so.”
Nunn believes that as MTD becomes more established, the experience gained from the introduction of RTI will prove invaluable.
“It is vital that HMRC convert into action in the MTD programme their acceptance in the RTI Review". "There are important lessons to be learned on consultation, communication and implementation,” she said.
Clear and accessible guidance
Contractors that run PSC's and choose to submit their own tax returns will have to get their heads around MTD. Therefore, clear and accessible guidance on how to follow the necessary processes would undoubtedly be beneficial.
“For small businesses in particular, there is a further lesson for HMRC from the introduction of RTI about the importance of appropriate targeting of communications and guidance,” Nunn said. “Recent research (from Ipsos Mori) has already highlighted that many small businesses remain unprepared for the introduction of MTD". "Communications and guidance need to reach all affected by the programme.”
HMRC’s not known for its seamless introduction of new policies and programmes, and MTD has already had a few hiccups. Any lesson that can be heeded should be. HMRC aims to make taxation a more straightforward process for businesses of all shapes and sizes, including personal service companies.