Delay digital accounts by a year, taxman told

A new commitment by ministers to delay the digital tax accounts consultation until after the EU referendum on June 23rd does not go far enough, accountants warn.

In fact, to avoid limiting the time that micro-businesses have to respond to the five-part consultation, the entire digital tax accounts system should be delayed too, says ATT.

If the system is not put back “by at least a year,” the likely upshot is that all five documents will be issued in one go, rather than in stages, if HMRC is to keep to its April 2017 test date.

“The existing timetable is overly-ambitious,” added the Association of Taxation Technicians (ATT), which envisages that responses to all five will have to reach HMRC by September.

“We believe that it will be impossible for HMRC to adequately consider the views and constructive points raised in each consultation in just this six-month timeframe.”

Within the six months, taxpayers would have to submit their views on all the consultation topics expected – including the system’s scope, penalties and, red-flagged last month; its software.

“This [short timeframe] will have a detrimental impact on the eventual design of the digital system,” said ATT’s technical steering group co-chair Yvette Nun.

“[It] will impact on HMRC’s ability to have the whole digital system ready to use, not to mention how it will have time to build the add-on systems needed for those who will need assistance to comply”.

In March, an ICAEW survey about the digital accounts found that 82% of one-person traders will be forced to change the way they keep their business and tax records in order to comply.

"The Making Tax Digital Project represents the biggest change to the way taxpayers will engage with HMRC since the introduction of PAYE in 1945," reflected Nunn.

"Rushing ahead with this project without allowing adequate time for the consultation and testing phases could put at risk the many potential benefits for taxpayers and HMRC which greater digital working can bring. That would be a tremendous mistake and in a worst case scenario could result in a system that was not fit for purpose."

She warned HMRC that the risk of embarrassment its officials face if the project crashes is “huge”, as it is for the government, which has approved £1.3billion of taxpayers’ money to be spent on it.