Mark Purdue tax product manager at Thomson Reuters discusses the key implications of the Autumn Statement for accountants.
If the accountancy profession was hoping for some reassurance about the imminent arrival of ‘Making Tax Digital’ – or ‘MTD’ – in last week’s Autumn Statement from Chancellor Philip Hammond, it was sorely disappointed.
But, with the consultation having closed only a few weeks ago, it was always likely that we would have to wait until the New Year to see the Government’s (hopefully) considered response.
Many in the industry, including AAT and its members, have been calling for small businesses, below the VAT threshold, to be excluded from MTD. Indeed, it is a key ask of AAT that the qualifying threshold for MTD should be initially set at £83,000 (the current VAT threshold).
Research by Thomson Reuters found that 80% of accountants think that MTD (deferral to 2019) should be aligned to the VAT threshold of £83,000. And there was an expectation that Hammond would respond to these calls and confirm the threshold limit.
That said, investment in digital infrastructure – a key tenet of the Autumn Statement – is welcome, as was the somewhat surprising news of the abolition of the Autumn Statement.
In practice, this means the Chancellor will still be standing up twice a year, but we’ll have an Autumn Budget and a Spring Statement, rather than the other way round.
The Budget, of course, is when tax rates and allowances are normally set for the year ahead, with Royal Assent for the changes happening usually in July. With this being moved now to Autumn, it will provide us with a welcome extra few months and it will mean changes can go through parliament in advance of the tax year.
In essence, it’s making it a bit more organised and there’s certainly no harm in that. We’ll find out about rates November instead of March, and we’ll be able to brief clients further ahead of time.
There was indeed ‘no rabbit out the hat’, in the Chancellor’s own words, nor any real content when it comes to tax changes of any sort. In fact, MTD only got a one-line mention in the supporting Autumn Statement documentation – to state that we’ll all now have to wait until January 2017 when the Government will publish its response to the MTD consultations and share details regarding the provision and implementation of MTD.
But moving the date of the Budget will have a practical impact on Making Tax Digital – given that this is focused around providing in-year notifications on likely tax liability, and this would be difficult if rates and allowances are only set in the March prior to the beginning of the tax year.
Moving the Budget to Autumn (2017 will see a Spring and Autumn Budget) will also allow the necessary time for new rates and changes to legislation to be implemented in software, which people will rely on to help them keep track of their tax liabilities.
Hammond spoke about ‘confronting challenges head on’ and ‘recognising the need for investment’. He pointed out: “There is technological progress and the tax system needs to keep pace.”
MTD is going to happen – and I personally believe it will be a positive thing once the dust has settled.
The accountancy profession will need to get on board with its own new vision when it comes to embracing digital innovations and new ways of working; one which keeps in pace with the vision the Government now espouses.
Mark Purdue tax product manager at Thomson Reuters, has spent over 25 years' working in tax and specialises in Personal and Capital Gains Tax.