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Does HMRC's MTD tool break the law?

Does HMRC's MTD tool break the law?

The Making Tax Digital (MTD) tool. It’s not had an easy development to date, and though, like many things, turning taxation into a digital process is foreseen as making things easier in the long run. The fact of the matter is it’s been a bumpy road so far, and it’s not even live and available yet.

But every new introduction has some teething problems, right? Well yes, to an extent. But breaking the law to check it works alright is another kettle of fish.

Now there’s a fair time to go until the MTD tool is introduced – April 2019 is the current scheduled date. But between now and then the General Data Protection Regulations (GDPR) come into effect.

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Our friends at CheapAccounting.co.uk have heard that HMRC will be collecting VAT data from April 2019. However, they won’t be using it. They’ll just be using it to check the new tool does its job.

But something doesn’t add up, as Elaine Clark, Founder and Managing Director of CheapAccounting.co.uk, explains in the company’s latest blog.

HMRC exempt from GDPR ?

“Article 5 of the new GDPR requires that personal data shall be, amongst other things, “kept in a form which permits identification of data subjects for no longer than is necessary for the purposes for which the personal data are processed. Personal data may be stored for longer periods insofar as the personal data will be processed solely for archiving purposes in the public interest, scientific or historical research purposes or statistical purposes subject to implementation of the appropriate technical and organisational measures required by the GDPR - in order to safeguard the rights and freedoms of individuals”,” she says. “I’m no expert on GDPR and it may well be that GDPR does not apply to HMRC but it seems that, following implementation of MTD in April 2019 HMRC will immediately be in breach of GDPR.”

By taking but not using this data actively, it seems HMRC will be in breach of the government’s new regulation.

But what are HMRC doing about it?  Well, as Diginomica reported, HMRC advertised in late 2017 for a Data Protection Officer.  A salary package in excess of £100,000 shows how seriously they are taking it, not surprising considering they hold in excess of 2.5 billion pieces of data relating to individuals and business within the UK.

Success of MTD

Though Clark thinks any initiative to encourage businesses to keep and manage their books is a positive move, she deems the MTD tool innately flawed.

“The Making Tax Digital project doesn’t seem to achieve anything other than impose a reporting burden on tax payers,” she says. “HMRC are not going to look at the figures reported. So they’ll just be a huge system filling up with data that no one is looking at. Just how that makes tax digital I do not know. It sounds like a flawed project to me.”

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More work needs to be done on MTD if it’s going be an effective tool, Clark believes.  There is the massive spend of £980million that is being thrown at its development which needs to be justified.

“Scope the project properly ensuring that real benefits to businesses and HMRC will be delivered as an outcome,” she adds. “Doing anything other than that just doesn’t make sense no matter how ever hard anyone tries to tell me otherwise.”

It’s always beneficial for contractors to keep an eye on HMRC initiatives around taxation. It will be interesting to see how MTD overcomes the various hurdles it will undoubtedly face between now and April 2019.

To read Elaine Clark’s full blog on MTD tool, click here.