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We need a cohesive plan for MTD for income tax
What is the significance of the decision that businesses under the VAT threshold will be able to send simple three-line reports under making tax digital (MTD) rather than having to break down income and expenses into their constituent categories? At first blush this is a major simplification, but is it? As I read it (and it is not easy to piece everything together) they will still have to keep a digital record of every transaction even if they don’t have to allocate it to a specific category. There will still have to be a digital journey from record to final submission and somebody – whether the individual or an agent – will presumably still have to make the necessary tax adjustments. So, unless I am reading this wrong, it won’t make much difference in practice.
When MTD was announced in 2015 there was a clear vision of what it was meant to achieve and how it was to work. Some people may not have liked it, but they could see where things were headed. But seven years later we have lost that clarity. There have been so many delays (understandably given recent turmoil), compromises have been made and, crucially, the digital world has moved on enormously since 2015. MTD has been drifting and has in my view lost its way.
This is not, I must stress, a call for HMRC to abandon plans for digitisation. It must be right that in an environment where the benefits of digital technology are all around us, we should expect the tax system to bring those benefits to taxpayers and HMRC alike. Going backwards is not an option. But please can we go forwards rather than wander along on what seems more and more to be an aimless meander with no real sense of where we are trying to get to.
If you do one thing...
Will yours be our 20,000 Reader’s forum question? We’ve had some good ones in so far but there is still time to submit a question. See ‘Readers’ forum’s 20,000th query’, Taxation, 23 June 2022.
