Making Tax Digital: Tax administration

• AAT agrees that legislation should be amended to replicate current enquiry powers and that existing safeguards must be maintained, but we strongly differ with HMRC on the issue of how long customers should be allowed to familiarise themselves with the various changes before penalties become payable.  
• On the issue of penalties AAT believes that points should be immediately appealable.
• AAT strongly agrees with HMRC that a single points total that covers all of the customer’s submission obligations is the right approach. Having different points for different areas would make the system unnecessarily complex and bureaucratic.  
• AAT members do not agree with the HMRC proposal that 14 days is an appropriate length of time to allow customers to either pay in full, or make arrangements to do so before penalty interest is charged. 
• AAT firmly believes in a simplified tax system. As a result, it is AAT’s view that simplifying and aligning the rules around interest, making it clearer to customers when interest is due to or from them, is an opportunity that should not be missed. 
• It is clear that significant costs will be incurred by agents due primarily to the time consumed in familiarisation and dealing with these changes to the penalty regime. However, AAT believes that such costs specifically relating to penalties and interest are likely to be greater only in the first year or two of the MTD programme as agents and their clients get to grips with the new requirements.

General notes on the six Making Tax Digital consultations held in 2016

• AAT wholeheartedly supports the ambition to make our tax system the most digitally advanced tax system in the world. However, AAT is concerned about the timetable for implementation.  
• AAT is concerned about the costs MTD will place on businesses and taxpayers. A recent survey of AAT Licensed Accountants found that well over three quarters were concerned about software costs and time spent familiarising themselves with the new processes. Almost half are concerned about hardware costs and other as yet unknown costs. 
• It has been difficult to fully respond to each of the six MTD consultation documents given so much technical uncertainty remains. HMRC must delay implementation if significant technical difficulties arise rather than proceeding regardless. Proceeding under such circumstances risks both reputational damage and reduced compliance. 
• AAT favours a phased implementation programme for MTD. The threshold should be set at £83,000 (the current VAT threshold) falling to £11,000 (the personal allowance) over a three year period. This will help the business community whilst simultaneously helping HMRC achieve the best possible outcome.