The Chancellor Philip Hammond’s nickname is ‘Spreadsheet Phil’ due to his love of analysing numbers. With the introduction of Making Tax Digital in 2018/2019 Spreadsheet Phil could have an extra 16 million spreadsheets a year to look at.
When Making Tax Digital is introduced all self-employed people, businesses and landlords will have to send 4 ‘tax update’ a year to HMRC. These ‘updates’ will show all of their incomings and outgoing and will be used to work out how much tax they have to pay. When Making Tax Digital was first being planned the idea was that there would be free software available to all self-employed people and businesses so that they could send these updates quickly and easily. Unfortunately, this free software does not exist so now the government are considering good old spreadsheets as an alternative.
Death by Spreadsheet?
When Making Tax Digital was first proposed spreadsheets were explicitly ruled out as a way for small businesses and self-employed people to keep track of their finances. Letting businesses keep their figures on spreadsheets was seen as old fashioned and too prone to errors. Businesses and self-employed people would use free accountancy software instead which would communicate directly with the HMRC computer systems and send them the correct information in the correct format.
All of the sums around Making Tax Digital hinge on there being free software available. Without it the whole Making Tax Digital scheme becomes pointless. So having a free, or cheap, way for businesses to update HMRC is essential. This is why spreadsheets are being reconsidered.
No real detail is available yet on what format these spreadsheets will need to be in or how HMRC will process them. With the original Making Tax Digital plan businesses would just send the correct figures and these would arrive in the correct place in the HMRC system. If spreadsheets are going to be used instead then potentially they could be automatically uploaded to HMRC, assuming everyone uses exactly the correct format. But with 4 million individuals and businesses being moved to Making Tax Digital, and each of them filing 4 ‘tax updates’ a year, HMRC are going to have to process 16 million spreadsheets a year. If even a small percentage of those 16 million spreadsheets can’t be processed automatically by HMRC someone is going to have to sit and do a lot of manual data entry. Maybe Spreadsheet Phil will deal with them himself.
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