By Michael Steed Annual Conference Steed on: Making Tax Digital: what about the Luddites? 30 Mar 2017 We’ve been trying out new personal tax software this year – it’s on the HMRC approved list and it’s called Andica. We’re fairly happy with the output and it’s not at all expensive. Sure, we have a few glitches, but they’re normally solved by turning the computer off and on again (80% of all IT work, I believe). So we are firmly in the digital age. Or are we? The end of tax-return season was marked by a big announcement from HMRC about the Making Tax Digital project (MTD). The bad news is that there does not seem to be any change in the basic timetable. The launch is still scheduled for April 2018, but the government has promised an extensive test phase starting in April 2017. Here are the highlights of the announcement: Businesses will now be able to continue to use spreadsheets to record receipts and expenditure, which they can then link to software to automatically generate and send their updates to HMRC. Free software will be available to the majority of the smallest businesses. Businesses that cannot go digital will not be required to do so. All self-employed people and landlords with a turnover of under £10,000 a year will not have to keep their records digitally or make quarterly updates (although they can do so if they wish). The option to account for income and expenditure on a simple ‘cash in, cash out’ basis will be extended – the thresholds are to double from April 2017. Charities will not have to keep their records digitally or make quarterly updates. Customers will have at least 12 months to become familiar with the changes before any late submission penalties will be applied. HMRC will pilot these digital systems with hundreds of thousands of businesses before rolling them out, to ensure the software is user-friendly, and to give businesses and landlords time to prepare and adapt. That’s what HMRC is currently saying. HMRC also confirmed that the government will need to consider further issues, such as the initial exemption threshold. It is looking, too, at deferring the changes for some small businesses, alongside their cost, with final decisions to be made before legislation is introduced later this year. Think of the technophobes If there’s anything here that really intrigues me, it’s the statement that businesses that cannot go digital will not be required to do so. We all have clients who can’t even turn a computer on, let alone fill out an online assessment. So I still have major reservations about this element of the plan to make tax digital. And we all also know that there are large areas of the UK where you can’t get a decent digital signal. There’s an interesting VAT case of relevance: LH Bishop Electrical Co Ltd v HMRC. This was a victory for taxpayers: the tribunal found that HMRC’s requirement that taxpayers file their VAT returns online was a breach of their human rights if they were disabled, elderly or had a bad internet signal. It will be interesting to see how commonly the Bishop defence will be invoked once MTD goes live, and what alternatives HMRC will offer. There are still lots of uncertainties. We still don’t know, say, how the very smallest businesses will be treated. What concerns me and many others is how few clients have even the slightest idea what MTD is, or what it will involve. Michael Steed is co-chairman of the ATT's tax Technical Steering Group and columnist for Accounting Technician magazine.