HMRC Confirms That Businesses Can Still Use Spreadsheets under MTD
Following the latest consultation on Making Tax Digital, it has been confirmed that spreadsheets can still be used, as long as they meet HMRC requirements.
The Government announced its £1.3 billion initiative on making tax digital in the 2015 budget, a programme that would revolutionise tax reporting. The plan, which is scheduled to be in place by April 2018, will introduce online accounts through which taxpayers can interact directly with HMRC.
The move is seen by most as a welcome step that will ultimately make the whole reporting system much easier. However, a key provider of local accountancy services in Peterborough noted that there have been some concerns, particularly among smaller businesses, that they would be forced to adopt new reporting methods and purchase specialist software in order to meet HMRC requirements.
The latest news that businesses can still use their Excel spreadsheets therefore comes as a relief to many smaller businesses.
The digital revolution
In December 2015, HMRC published proposals that fleshed out the Government’s budget announcement. In his foreword, the Chief Secretary to the Treasury stated that digital tax is part of Whitehall’s “digital revolution” and would “transform the experience of millions of taxpayers” by introducing a system that is easier, more efficient and more effective.
The Government went on to publish a number of case studies that discussed the effect of digital tax on a cross-section of individuals, including landlords, pensioners and small business owners.
The case studies provide a compelling case for digital tax and suggest that the new system will be far easier and less frustrating than the current tax reporting methods.
Fears of digital exclusion
The Institute of Chartered Accountants in England and Wales (ICAEW) has published a paper entitled “Digitalisation of Tax, International Perspectives,” in which it analysed similar projects in other countries around the globe.
The paper concluded that digital exclusion is the biggest obstacle to full implementation of such programmes and expressed concerns that many small and medium sized enterprises are not currently in a position to meet the 2018 reporting rules.
HMRC’s initial position appeared to be that businesses would need to use specialist bookkeeping software such as Clear Books or Xero, and that spreadsheets would be consigned to history. However, following the latest consultation, HMRC’s Theresa Middleton remarked: “Businesses will be able to continue to use spreadsheets for record keeping but must keep to HMRC requirements.”
Some commentators see this as a softening by HMRC, and fear that allowing businesses to continue to use spreadsheets is not really a full adoption of the best digital technology. After all, with the current cloud-based software and mobile apps, the “spreadsheet generation” does seem a little 20th Century.
Critics also fear that spreadsheets facilitate the kinds of problems that the MTD initiative is trying to solve, such as inaccuracy, typos and poor controls.
However, it is surely more important that every company is able to adopt to the new requirements, and there is a clear logic to undertaking this adoption in manageable steps.
HMRC is working with software developers to identify the minimum functionality of a free software package that would be available to all, but in the meantime, it can only be good news that those of us who are still in the spreadsheet generation will not be left behind.