Making Tax Digital for Income Tax will raise costs for business and will not reduce the time spent completing tax returns
An overwhelming majority (79%) of SMEs and tax agents believe that the move to Making Tax Digital (MTD) for Income Tax will increase the time spent and costs incurred in keeping records. Over half (58%) stated that this increase will be significant, according to the latest survey into HMRC by the Administrative Burden Advisory Board (ABAB).
Only 4% of respondents felt that the change would reduce costs or time.
However, there were high levels of awareness about the upcoming changes with 80% of respondents knowledgeable or somewhat aware about the new rules.
Currently HMRC plans to introduce MTD for Income Tax from April 2024 for self employed and landlords with income over £10,000.
There were also calls for HMRC to produce guidance well in advance of introduction of the new rules, with many wanting full details at least two years before the scheme goes live, while 43% they wanted to be fully informed of the process a year before launch.
ABAB said: ‘Most businesses are aware of this change to some extent, although more publicity is needed to engage the widest audience. As the time impact on these businesses is expected to be significant, HMRC helplines may need to be ready for greater demand, which may reduce the risk of significant levels of initial non-compliance.’
Once again the quality of HMRC’s telephone helplines were criticised by respondents with 38% stating that the services were ‘poor’. Only 7% said that their experience of engaging with HMRC during the last 12 months had improved, while 46% that the quality of their interactions with HMRC had worsened over the same time.
When asked if the legislative burden regarding tax compliance had changed over the last 12 months, 59% stated that this had worsened, 39% stated it had not changed and only 3% said that the burden had improved. In general, 58% of respondents stated that in the last 12 months they felt they had been impacted by legislative changes regarding tax compliance.
‘Businesses are not feeling any let-up in the increase in regulatory burden, with a large minority feeling that the customer experience had worsened over the last year (despite the positive feel around covid response),’ the ABAB report said.
‘This year-on-year trend is worrying as the effects are cumulative and look to increase with the extension of MTD. We will continue to work with HMRC to influence change where possible.’
In terms of advice, a third of SMEs said they turned to their accountants and tax advisers for help while 48% of respondents used HMRC’s website to source information.
The research also focused on the impact of the covid-19 support schemes and their ease of use. While there was general satisfaction with the application process for the various measures, 40% of respondents said that HMRC’s service was ‘poor’ when dealing with amendments or changes to submissions, particularly relating to the Coronavirus Job Support Scheme. Only one in four described HMRC’s approach as good or excellent.
In terms of the quality of HMRC’s covid-19 guidance, 59% thought it was useful and timely.
‘HMRC handled the information and online processes around Covid well,’ ABAB noted. ‘Those who could deal with it online were very satisfied, but those who had difficulty and needed to contact HMRC, felt poorly served.’
The survey also considered the quality of forms and the administrative burden with calls for more standardisation of forms, a function to all forms to be saved when partially complete and the language should be clearer. Respondents also said that all forms should be available online (and processed online) without the need to be printed off and posted in.
‘Overall, this is not unexpected. It shows where work may need to be concentrated earliest to minimise the increasing burdens expressed in earlier answers,’ ABAB said.
Source: https://www.accountancydaily.co/mtd-extension-will-raise-costs-smes-says-abab