Poor communication and redundant bookkeeping processes mean HMRC’s goal of digitised tax by 2020 is a pipedream.
In little over three years, HMRC is aiming for all businesses to comply with its Making Tax Digital mandate, yet 47 per cent of companies are currently using methods of bookkeeping which aren’t fit for purpose. Shockingly, 22 per cent aren’t using software at all, instead handing over a bag of receipts to their accountant to work through.
HMRC’s Making Tax Digital consultation response is due in January and neither businesses nor accountants have a clear idea of what the initiative will look like. Unsurprisingly, the voice of the profession survey shows 98 per cent of accountants feel the government has failed to inform UK businesses of the upcoming changes, while only 14 per cent believe Making Tax Digital is achievable within the proposed timescales.
David Rees, partner at accountancy firm J Gareth Morgan believes there is a long way to go before Making Tax Digital becomes a reality.
He says, “95 per cent of our clients are currently not tax digital. They have used books, paper, and in some cases spread-sheets for their entire working life. Typically this can be over 25 years and for some clients it is approaching 50 years. For any interaction with HMRC they will have always relied on agents and will expect that to continue. The issue therefore will not be the availability of software but the ability and confidence to use it.
“There is also a major issue with the nine month rule as it is simply not workable; the bulk of the current 31 January deadline work revolves around 31 March and 5 April financial year ends. The nine month rule simply moves the 31 January deadline issue back to 31 December – and this will cause huge problems around the festive break.
“UK Government underestimated the cost in money and time Auto Enrolment caused small businesses. It’s vital the impact of Making Tax Digital isn’t underestimated in the same way.”
Sion Lewis, CEO Accountancy Division at IRIS Software, says, “Making Tax Digital is the single most disruptive force in the accountancy industry for decades, but to fear it is to admit defeat. The HMRC must engage and listen to the industry, digest the feedback from the consultation documents and carefully consider the next steps. Our customers are saying slow down, consult more, share more information and look at the exception criteria.
“Accountants have the opportunity to position themselves as indispensable financial advisers to UK businesses to support their digital journey, or face a future of irrelevance. Accepting carrier bags of receipts from clients simply isn’t the way forward in a new digital world.
“Those firms which bury their heads in the sand and ignore the digital initiative will not only harm their own business, but the next generation of businesses in the UK.”