Who would have thought that the Government would kick off an IT Project which would breach new UK Law?
Well surely that’s exactly what Making Tax Digital will do when it’s introduced in April 2019.
Why MTD beaches GDPR laws
I’m told that HMRC will be collecting VAT data from April 2019 but not using it. They’ll collect it just to test out that the Making Tax Digital systems all work tikitiboo.
Let’s put aside the utter absurdity, let alone the unnecessary cost to VAT registered businesses and individuals, of this for a moment. Frankly it’s all a bit of a cock up given that HMRC haven’t even decided if they are collecting the data by quarters (31 March, 30 June, 30 September and 31 December) or according to when the VAT returns are filed which can of course fall at the end of any month depending on VAT registration; just don’t get me started!
What is perplexing is that the new General Data Protection Regulation (GDPR) comes into effect from May 2018.
Article 5 of the new GDPR requires that personal data shall be, amongst other things, “kept in a form which permits identification of data subjects for no longer than is necessary for the purposes for which the personal data are processed; personal data may be stored for longer periods insofar as the personal data will be processed solely for archiving purposes in the public interest, scientific or historical research purposes or statistical purposes subject to implementation of the appropriate technical and organisational measures required by the GDPR in order to safeguard the rights and freedoms of individuals”.
I’m no expert on GDPR and it may well be that GDPR does not apply to HMRC but it seems that, following implementation of MTD in April 2019 HMRC will immediately be in breach of GDPR (implementation May 2018).
For data collected from VAT registered individuals (e.g. those operating a business as a sole trader) it would seem that by storing the VAT data for no particular purpose whatsoever would contravene the basic GDPR requirement that data should not be stored for longer than is necessary for the purposes for which the personal data are processed.
The VAT data being stored isn’t even being processed. So why does it need to be collected in the first place?
What is the Making Tax Digital Data being used for?
It’s almost impossible to find any meaningful reason for HMRC collecting the VAT data. Making Tax Digital does seem like a sensible thing to do assuming that the project to deliver digital to tax payers is well thought out, with clear objectives and benefits to HMRC and those who will have to suffer the implementation of the new regime.
My Objection to Making Tax Digital
I’ve often been criticised for objecting to Making Tax Digital; many times by those consultants and advisers who will derive benefit from the project and / or those who do not take the time to properly read my blogs and articles.
So for clarity …
I am a great supporter of technology; after all we live in a digital world. I wrote a Cloud Accounting system way back in 2007 before most of the Cloud Accounting suppliers even started on their systems. I’m all for educating businesses to understand their finances and knowing what they need to put aside for tax.
I’m not a fan of wasting money though
Keeping the books up to date empowers business owners to make better decisions. Being in control of finances, budgeting for tax and knowing if you’re doing profitable business only comes from your figures.
So of course any project to encourage and support business owners to keep and manage their books is a good thing.
So in theory I should be a fan of HMRC’s Making Tax Digital project.
But I’m not – why?
Well very simply the Making Tax Digital project doesn’t seem to achieve anything other than impose a reporting burden on tax payers.
HMRC are not going to look at the figures reported
So they’ll just be a huge system filling up with data that no one is looking at.
Just how that makes Tax Digital I do not know. It sounds like a flawed project to me.
It gets worse – Making Tax Digital is predicted to cost £980m
That’s a lot of money to spend on any project, let alone one delivering a system that no one would look at or use.
If HMRC said that there were going to spend £980m on implementing an environment of education and systems that encouraged small businesses to report regular figures to be used by HMRC to make the collection of tax digital, within realistic timescales, then I’d be right on board with that.
But that is not what Making Tax Digital does.
Yes make tax digital but no to the Making Tax Digital (MTD) in its current guise.
Stop MTD now – right idea wrong project
Scope the project properly ensuring that real benefits to businesses and HMRC will be delivered as an outcome.
Doing anything other than that just doesn’t make sense no matter how ever hard anyone tries to tell me otherwise.