Making Tax Digital may not make it easier for everyone.

What do you think:

  • Doing tax returns on line is a breeze?
  • No need to worry because your accountant does it all?
  • Perhaps you might need to tell HMRC if digital tax is going to be difficult?

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Her Majesty’s Revenue and Customs (HMRC) is planning a new approach that should end all that form filling each year to tell them about what you’ve earned, received in interest and other income so that your tax can be worked out.    By getting regular information from employers, banks and building societies, they will have lots of the information already so that you just need to add anything extra – and all this will be possible through a computer or smart phone – meaning that you can see at any time what you might need to pay in tax.  Self-employed people and businesses will also have a better and up-to-date idea of their tax situation by sending HMRC regular information and getting their own tax forecasts –again, all possible on-line.

You can read about their proposals in a series of consultation documents.  I recommend “Better use of information” for anyone and “Simplifying tax for unincorporated businesses” and “Bringing business tax in to the digital age” for those running their own businesses –they give examples of how the new system will work. There are other documents too for those who want to look at more detail.

But sending and getting financial and tax information on-line may not suit everyone – especially if using computers or smart phones is difficult because of a disability or other circumstances so it is worth checking out their proposals and telling HMRC what you like and what you don’t.  You can send comments to them until 7 November 2016 by e-mailing:  processtransformation.mtd@hmrc.gsi.gov.uk.

Below are the comments I have sent in – if you are short of time, feel free to use any of this in your own response.

Overview:  The concept of MTD has many merits but the paucity of equality (and especially disability) considerations places the initiative at risk.  It is not clear how current proposals and potential law will satisfy the judgement in Bishop & Others v HMRC Commissioners [2013] 522 UKFTT).  If these changes don’t work for “ordinary working class people”, the Department will undermine the Prime Minister’s statements and, probably more importantly, fail to produce the increased tax, lower costs and public endorsement needed.

The following comments relate to the principles of five of the 6 MTD consultation documents (plus some comments on delivery detail).

  1. Better use of information.

Principles.  It is very surprising that HMRC has already concluded that MTD will not have “a significant or disproportionate impact” on people with protected characteristics when the Department has neither undertaken an equality impact assessment nor specifically asked questions about such in any of the consultation papers.

The stated percentage of people with access to digital tools is without reference to the source data or context and appears, wholly erroneously, to be linked with whether customers are digitally excluded.  While the MTD principles are sound, they are substantially undermined by the lack of data and detail about those customers who will encounter most difficulties (for whatever reason) in adopting MTD.  In this post-Brexit fragile economy, giving high priority to those most likely to be disadvantaged is likely to improve the system for all and make better political, social and economic sense.

While increasing numbers of people have access to digital devices, many avoid using such in relation to their finances due to the very high level of on-line fraud.  HMRC needs to present a stronger description of the security measures before such is convincing.  Likewise, personal security of passwords and security codes is increasingly risky as people now have so many – security alternatives or guidance on secure storage using IT should be available.  Ideally, customers should have one code for all interactions with Government.

Delivery detail.  Frequent system-generated prompts have a high risk of being ignored by customers who have to separately find and enter passwords/security codes just to discover information of little value/action. Customers should be able to switch off prompts except those requiring action to comply with the law but with options to receive prompts that are to their benefit, for information etc.  Many will not want any contact unless something has gone wrong.

Third party information (including that from other Government Departments) should always include specific account details and payment dates, percentages attributable to joint account holders and should be in the standard format contained in their own Equality Act-compliant notifications to customers to facilitate checking by those customers.  Employees should be able to confirm that current NI is being paid by their employers.

Obviously MTD requires testing with various adaptive soft and hard ware of varying vintages across the full spectrum of broadband speeds.  On-line instructions and guidance should be capable of downloading in various formats (e.g. large print from a Word document) for ease of referral.  Use of on-line links and text boxes can be difficult with some adaptive software.  For some people, transferring a security code to a screen text box will be very difficult – the option to receive via e-mail should be available.  Digital tax account displays should be very simple and accessible with all types of adaptive software.

HMRC must also utilise the same short-cut key strokes as Microsoft e.g. Control P to print – otherwise, they would be requiring those using such with adaptive software to learn yet another keyboard “language”.

  1. Simplifying tax for uninc businesses.

Universal Credit (UC) is mentioned in this document (and elsewhere) but full implementation  may be subject to further delays hence MTD should take account of interactions with Working Tax Credits, Housing Benefit, ESA “permitted work”, New Enterprise Allowance, potentially Access To Work and possibly other benefits/payments.  The proposals would be significantly strengthened by DWP and HMRC commitments regarding payment reporting and timescales both before and after full UC implementation – again, giving high priority to those most likely to be disadvantaged.

  1. Simplified cash basis for uninc property business.

(Not read)

  1. Bringing business tax in to the digital age.

With self-employment at an historic high  plus the post-BREXIT economic uncertainty and recession risk, considerable care is needed to avoid many small businesses (regardless of legal status) failing due to the pressures of MTD – and so increasing the numbers of unemployed/benefit claimants.    If MTD becomes just too difficult and/or too expensive, people may just give up – creating unacceptable political, social and economic risk.

Consequently, every aspect of MTD introduction should be tested at the level of the most vulnerable businesses – rather than the scenarios currently used.

Many of these businesses will barely use IT for business, may need to purchase new hard and software and, most importantly, learn how to use it.  This represents burdens in time, cost and business owners’ confidence and commitment.  The proposals in this area are not yet sufficiently developed with cross-Departmental input.  For example, there is no mention of how all New Enterprise Allowance providers (or similar other projects) will be required to deliver MTD training, how Access To Work funded support workers will be upskilled or on how other agencies (local Councils, Skills Funding Agency and more) will support the implementation.

HMRC can obviously identify those self-employed and other businesses that currently have no or very limited IT interactions   with the Department but it is not clear how this consultation or any concept testing has been undertaken directly with such customers.  This would also provide a more meaningful assessment as to whether the proposed £10K threshold for mandatory MTD is meaningful and realistic, how it relates to WTC, Housing Benefit, UC, personal tax allowances and how it will be automatically adjusted in line with the wider economy.  Direct concept testing with the most vulnerable would also amplify the “other reasons” justifying MTD exemption.

Recognising the Government’s goal of halving the disability employment gap and that working disabled people are more likely to be self-employed than their non-disabled peers, there is little evidence that their needs have been sufficiently addressed.  It is not evident that Government has been successful in achieving compliance with the Equality Act regarding reasonable adjustments, accessibility or information available in alternate formats across either its own digital products or the external software developers with which it works.  This tends to undermine any suggestions that systems will be fully inclusive for those with additional needs –whether due to low literacy, numeracy or IT skills or reliance on adaptive technology.

Overall, it is disappointing that HMRC does not report what evidence it holds showing that MTD will have no significant or disproportionate impact on customers with Equality Act characteristics.  Proliferation of SMART phone ownership is surely not a convincing basis upon which to rely upon in gauging those owners’ ability to use such for MTD?

  1. Tax administration.

Setting aside the issues of deliberate cheating or aggressive tax avoidance, it might be expected that an aim of MTD to reduce the levels of non-compliance, errors, late submissions/payments etc. would be supported by evidence of current performance and goals set for improvement.  These would seem to be basic measures for assessing the value of introducing MTD and its long-term effectiveness.

Additionally, compliance data relevant to different groups of individuals (for example, by protected characteristics) and/or types/sizes of businesses plus current means of filing would demonstrate HMRC Equality Act duties while highlighting risk areas for non-compliance by volume, value and such characteristics.

This would then assist MTD design to mitigate risk and improve performance.

  1. Voluntary payment.

The business finance rationale of voluntary tax payments far in advance of their due date requires strengthening if reductions in working capital, loss of interest and demonstrable assets is to be justified.  For those with most need to budget for their tax, there is a risk that such payments could become analogous to pre-payment utility meters with the associated adverse publicity

Penny Melville-Brown OBE

Disability Dynamics ltd www.disabilitydynamics.co.uk

Helping disabled people to work since 2000

Self-employment test disadvantages disabled

Did you know? • Self-employed may need to show “commercial and profitable, genuine and effective” businesses to get Working Tax Credits. • Self-employed may need to pay themselves the minimum wage for 16-30 hours per week to get Working Tax Credits.

Following the Chancellor’s 2014 Autumn Statement, I raised the following query with HMRC:

From April 2015, self-employed WTC claimants will need to register with HMRC as self-employed.  Those declaring income less than the equivalent of working 24 hours per week at the national minimum wage will also be required to provide evidence to HMRC that the work they are undertaking is “genuine and effective”.  My concern is around disabled people who are working fewer hours – some will be doing so on “permitted work” and still receiving benefits while others may be getting their businesses started or may never work over 16 hours due to their health

The following response has been recently received:

“The Autumn Statement 2014 announced the introduction of a ‘genuine and effective work test’ to ensure that only people meeting the conditions of tax credit entitlement are able to benefit.  In the 2015 Budget the Government has announced that, after further consideration, a revised test will be applied so that in order to qualify for WTC a self-employed claimant will need to be carrying on an activity which is “commercial” and “profitable” or working towards profitability, and is organised and regular.

The test will be applied to the working hours requirement used to qualify for working tax credit as a self-employed claimant.  The working hours requirement will vary between 16 and 30 hours depending on a claimants circumstances in line with the current working tax credit rules. The hours requirement is 16 hours for those entitled to the disability element of working tax credit.

If earnings from self-employment fall below an amount equivalent to the working hours requirement x National Minimum Wage (NMW) per week, claimants may be asked to provide evidence to HMRC that their work is commercial and profitable, organised and regular.    HMRC may ask to see business records and, or further supporting documents such as a business plan, future cash flow and profit projections, trade specific documents or information on what work there is in the pipeline.”

Newly self- employed will need to demonstrate how they intend to carry on their self-employment on a commercial basis and how their self-employment will become profitable, organised and regular.

The revised test aligns more closely with principles already established in tax case law on whether a person is self-employed and also the self-employment test used for both Tax Free Childcare and Universal Credit.”

Over recent years there has been an exceptional increase in people becoming self-employed – and many may have been claiming WTC.  There is already concern in some areas that these micro-businesses may have limited sustainability due to individuals’ lack of preparedness (inadequate market research, marketing, business planning, ability to manage financial records and more).  This additional requirement for those claiming WTC may increase the pressure – and test how effective New Enterprise Allowance and other business support provision has been in creating sustainable businesses.

Penny Melville-Brown

Disability Dynamics ltd www.disabilitydynamics.co.uk

Helping disabled people to work since 2000

Parliament reviews Access to Work

Did you know? Parliament is checking on the funding that helps people with health conditions/disabilities to work.

I’ve just sent in comments for Parliament’s Work and Pensions Select Committee for their inquiry in to Access To Work support. This is the extra help/funding available for disabled people in work covering adaptive equipment, some travel assistance, support workers and more. Having talked to our own clients and from personal experience, I know just how vital this can be. The inquiry is particularly timely when there’s so much criticism of the flagship Work Programme and its poor record in assisting disabled people to get work that lasts. Alongside, the “Benefits Cap” is likely to have most impact on unemployed disabled people – so we are being squeezed in every direction, under pressure to get work but assistance is just not successful enough.
For the Access To Work debate, I’m plugging two main issues:
Firstly, we need much more transparent processes, criteria, documentation, customer service, appeals and complaints guidance that is used consistently – both across the country and for the long term.
Secondly, although only a tiny number of disabled people use support workers for long periods during their working week, they are now under pressure to use ATW funding to employ them themselves rather than use agencies. Is it realistic to expect those facing most difficulties in their employment to then take on all the complexities, responsibilities and risks of becoming an employer? What is really clear is that those pushing this policy don’t themselves have enough understanding of all the employment law: HMRC restrictions on self-employment, ACAS guidance on TUPE, new pension rights and more.
Hopefully, the Select Committee’s scrutiny will mean that Access To Work focuses more on the goal of helping people to work rather than making it even more difficult.

140624 Flowers4Bouquet of the week.
I was at Lauro’s in Fareham this week for another of their fabulous special international gourmet dinners – modern Japanese this time. These are wonderful evenings of exceptional food and great service where the whole rest restaurant follows the same menu of new experiences and tastes. I often go with another former naval Commander, Maggie, and other friends. The next one is the Arabian banquet in July and Mediterranean in August. It’s really good to have such an outstanding facility in our small town.

Penny Melville-Brown

Welcome

I had over 20 great years in the Royal Navy doing loads of different things: from photos with a dead turkey (public relations in the Ministry of Defence!) to intelligence flights over the Mediterranean. Nearly everyone was hugely helpful when my eyesight started failing – and the security guards regularly fished me out of the bushes when I got lost in Portsmouth naval base.

I’m hoping that what I’ve learned over the last 15 years working in the disability, equality and diversity fields will be helpful to others. The Disability Dynamics website has just been re-vamped and includes lots of resources for you to download – for example, I know that our Disability Etiquette guide is used on one Government Department’s intranet. Please feel free to grab whatever you can use – but include some accreditation.

Did you know?
Working disabled people are more likely to be self-employed than others (Census 2011).
We have been getting phonecalls from all over the UK following the re-runs of BBC TV “Saints and Scroungers” programmes featuring our clients with long-term health problems who have set up their own businesses. We have a whole selection of their success stories on http://www.businessability.co.uk.
Self-employment has been booming since the recession – producing employment for about five times the number of people who have gone in to jobs (see my notes on the recent Resolution Foundation report).
Growth in self-employment and business start-ups is a recognised result of recessions as people make best use of their abilities and flair when jobs are scarce. And the New Enterprise Allowance with its volunteer mentors, transition funding from benefits to trading income and access to loans will have contributed. But it’s still not clear how well NEA plus all the business information available via HMRC and Gov.uk meets the needs of disabled people – there’s probably still too much “one size fits all approach” that isn’t sufficiently tailored to people with additional needs. When self-employment is such an important route to work for people like me, there seems to be a real gap in the market that projects like our Work for Yourself programme in Derbyshire try to fill. But there is still more demand out there.
Just as examples, I recently had phone calls with two highly vulnerable people in London: each have good business ideas that they want to progress but there is just no suitable specialist help available.

Wall aftermath

Wall aftermath

Grumble of the week.
A neighbour ran into one of my garden walls so I’ve been sorting out the claim. But my insurance company picked the wrong person when they asserted that failure to provide information in accessible format isn’t discrimination! Those who know me will understand the speed with which I gave them the relevant bit of legislation. I do find the financial sector really problematic on this score so perhaps I’ll have to escalate their failure to handle the complaint higher – perhaps the Financial Conduct Authority?

Penny Melville-Brown

Disability Dynamics ltd www.disabilitydynamics.co.uk

Helping disabled people to work since 2000