ICAS calls for more realistic timescales for Making Tax Digital

While ICAS supports the overall objectives of MTD, which is set to become mandatory from April 2018, it has significant reservations about the planned rollout, timescale and the mandatory approach, particularly for small and medium enterprises.

ICAS is therefore calling for a slower and phased implementation of the programme over a three to five-year period.

ICAS is also calling for:

Charlotte Barbour, ICAS Director of Taxation, said: “We’re concerned that the Government has pushed HMRC on this unrealistic timescale.

“SME business is the life blood of the UK economy. It needs to be encouraged, supported and freed from administrative burden. The technology here is still in its infancy, and it will take time for most business and their advisors to work such systems into their current work process’.

“ICAS is calling for a slower phasing in of this project to ensure we don’t end up in a muddle for British business.”

ICAS said that rushing the process will risk high volumes of low quality data being submitted, and that the government should consider a more gradual introduction of the process.

Philip McNeil, ICAS Head of Taxation (Tax Practice and Small Business Taxes), said: “The introduction of MTD completely redesigns the way in which taxpayers will interact with HMRC, effectively altering everyday business life.

“This transition is not something that can take place overnight. An overhaul of businesses accounting systems will require a substantial amount of training and support to ensure accuracy.”

ICAS said that while it supports the overall objectives of MTD, it believes that a project so ambitious requires stronger risk management than has been undertaken so far.

An area of concern highlighted by the body is the mandatory undertaking of MTD by smaller businesses before the largest companies.

ICAS said: “In a very diverse market, some small businesses are ready and able to adjust to the change, but many have a long way to go before they will be ready to use MTD compliant accounting software.

“Larger businesses, are much nearer the starting block when it comes to more frequent tax reporting and digital record keeping, making it easier for them to link into HMRC’s systems.

“Once tested, the system could then be cascaded down to smaller businesses.”

ICAS instead called for a voluntary, not mandatory system more in line with the UK tax system which it said still depends on the good will on the part of most taxpayers, making it vital that there is a secure and fair system in place.

Mr McNeill added: “A fair, secure, user friendly and voluntary system will attract both businesses and individuals, encouraging compliance.

“The plans for MTD to be mandatory flies in the face of fairness and risks burdening the system with unwilling and reluctant users for whom non-compliance may become increasingly attractive.”

ICAS also said it was concerned about the potential costs to businesses of new book-keeping systems, staff training, and even hardware to meet the requirements of MTD, with many businesses needing help on an ongoing basis to comply with real-time record keeping and quarterly digital submissions.

ICAS warned that SMEs are likely to feel the weight of these costs the most. Commercial software providers are unlikely to be able to supply free products with adequate functionality to enable all small businesses to meet the filing requirements.

The body said: “If a free software package is offered to small businesses, it is likely that costly add-ons will be needed to ensure it delivers the functionality they need.”