HMRC’s Making Tax Digital climbdown — is truth the first casualty?

Adrian Pearson
Jul 20, 2017 · 3 min read

HMRC just moved the goalposts for their Making Tax Digital game (actually, they may have replaced them with jumpers) and not everyone is pleased, it’s fair to say. But, is it OK for those who are unhappy with the change to be mealy-mouthed in their public responses?

From what I can gather, via the trade forums and social media, most accountants are pleased that the authorities have backtracked on what they argued were unnecessary and over-ambitious plans. [For those outside the accountancy bubble, those plans were to make all businesses maintain their transactional records digitally and then file quarterly reports to HMRC online]. However, the specialist practice software companies, most of whom have spent a great deal of time and effort in developing products to meet the expected digital revolution, are, as one would expect, not going to be pleased at all.

At least that’s how I read it, but the practice software companies appear to be pretending otherwise; making a point of showing a brave face in public, and telling us that HMRC’s big climbdown “came as no surprise” to them. The message coming out of the practice software company marketing departments is that they are continuing as they were with the project and that accountants (and their clients) should do the same. Because this is only a postponement they say, mandatory digital record keeping is still coming and we should all use the extra time we now have to get ready.

In short, the message is “it’s not gone away, it’s just been kicked down the road a bit”. But this is a self-serving interpretation of the facts. For the smallest of businesses (those that are not VAT registered and have turnovers under the VAT registration threshold of £85,000) the requirements originally proposed by the Making Tax Digital regime have now been completely removed. That is completely removed not just “postponed”.

Only businesses with a turnover above the VAT threshold (currently £85,000) will have to keep digital records and only for VAT purposes

[Source: https://www.gov.uk/government/news/next-steps-on-the-finance-bill-and-making-tax-digital]

According to the official statistics, there are 5.5 million businesses in the UK and 4.2 million of them employ nobody other than the owner. It’s likely that 90% or more of the business population has a turnover below £85,000. So, probably, less than 10% of the 5.5 million UK businesses will see a postponement to an eventual mandatory compliance with digital record keeping. For the vast majority (almost everybody) Making Tax Digital now means nothing to them. That may change, of course, and I expect it will (no earlier than 2020 we’re told) but the truth right now is as stated by HMRC above.

Now, I have no problem with disappointed software providers wanting to put a positive spin on things; why wouldn’t they, that’s just business common-sense. However, I object to the apparent tactic of deliberate ambiguity in the articles they are putting out.

Come on guys, you may feel that you’ve just been mugged by the Government but lets not lose our integrity eh? Can I stop reading that Making Tax Digital has just been postponed?

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Founder of Checkmybooks and Movemybooks — productivity software for accountants. Happy family man, occasional golfer & regular dog walker.

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