On page 71 of the Autumn Statement booklet it states
"by 2020, require most businesses, self employed people and landlords to keep track of their tax affairs digitally and update HMRC at least quarterly via their digital tax account" ".
Classic HMRC. Take a once per annum task and make it at least 4 times per annum!
Free apps as well so who needs software providers or indeed accountants.
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No need for accountants, nothing could be further from the truth
Many small business clients struggle to make it through the door once a year and we are all now thinking about little other than 31 January.
We now read that in 2020 that all self employed businesses will have to report quarterly?!?
If they are seriously suggesting all such clients need to come and see us every 3 months (very very few will do it themselves based on discussions with our clients) then we either need more staff or we need to get more businesses incorporated.
Accountancy costs will rise not fall.
That I think we will find is the real world! 31 January happening 4 times a year.... no thank you!
To translate it perhaps:
"update HMRC at least quarterly via their digital tax account" = more opportunities to fine
A long time ago..
A long time ago when I was a junior my old boss said to me that whenever the Government changes anything it always means more work for accountants.
Looks like our workload will increase four fold!
Also if this new pre-populated digital tax account is going to work then dividends need to find their way in there. I expect that before long there will be a revamped CT61 procedure whereby each quarter you have to list out all dividends and interest paid to individuals together with NI numbers etc. Probably a similar experience to Form 42. You heard it here first!
I am begining to feel
how some practitioners felt in 1965 when CGT and CT were introduced. Now where is that number of the accountancy broker?
Accruals, provisions, bad debt provisions, for example, feature for IT but not VAT. Much more difficult to (properly) do quarterly accounts for IT, I would have thought.
VAT is quarterly. Nobody dies.
Think of the transition year
I remember the introduction of Self Assessment - 2 years accounts for one tax return.
Coming up in 2020 then we have, pretty much, the same again so perhaps income to 5 April 2019 to be declared by 31 January 2020 and then income to 5 January 2020 to be declared by 5 April 2020.......
There's the reality.
Once everyone's up to date then, in theory, its the same work on a quarterly basis albeit at the moment those of us that prepare balance sheets reconcile all the figures just once a year and now that will happen four times.
Or, plan B, abandon balance sheets and doing a "proper" job and it will be income and expenditure accounts for all but the larger clients......
Probably time in 2019 to put fees up by 50% and hope that the 25% of clients that don't like to tow the line drift away.
Monthly reporting already announced for Universal Credit claims
Quite some time ago MONTHLY reporting was announced for those self-employed who will be claiming Universal Credit.
So I suppose quarterly reporting (at same time as quarterly VAT return, I hope) is to a certain extent a relief. I do wonder if the intelligence exists within those in charge of imposing this new burden such as to be aware that not all clients have calendar quarterly VAT returns, so I hope non-calendar quarter reporting will be allowed for those clients.
There will be extra work (+fees) created for accountants where the burden of quartlerly reporting is too much for some self employed people (not all of whom are computer literate).
Quarterly reporting
Will it be a lot like VAT returns?
Many of my clients do it themselves. Some ask me to do the VAT return though.
I will do the annual accounts and tell them of any material differences.
So you prepare your rental accounts quarterly with the statement your lenders gives you - annually. And the 9 months or so you currently have to do the SA work becomes ?, weeks after each quarter end? I suspect most buy to let owners are people with jobs and one property so not set up as businesses with regular reporting cycles. If George is trying to discourage BTL that's fine but be upfront rather than this and the interest restriction. Strange that housebuilders are being paid by Gov't to encourage building rather than being taxed on their landbanks which might have achieved the same end but to the Treasury's advantage rather than cost.
Haven't read any detail but how does quarterly accounting help, anyway? There's already a system of payments on account to keep the cash coming in, which you would have thought was the most immediate concern for the Treasury.
Quarterly Payments
So you prepare your rental accounts quarterly with the statement your lenders gives you - annually. Haven't read any detail but how does quarterly accointing help. There's already a system of payments on account to keep the cash coming in, which you would have thought was the most immediate concern for the Treasury.
It's so you can make your new quarterly payments.
Next thing they'll be wanting tax paid in advance. It would be far easier to pay 1/4 of previous year's tax with relevant anti-avoidance but that might not create sufficient additional legislation ....
So you prepare your rental accounts quarterly with the statement your lenders gives you - annually. Haven't read any detail but how does quarterly accointing help. There's already a system of payments on account to keep the cash coming in, which you would have thought was the most immediate concern for the Treasury.It's so you can make your new quarterly payments.
Quarterly
So you prepare your rental accounts quarterly with the statement your lenders gives you - annually. Haven't read any detail but how does quarterly accointing help. There's already a system of payments on account to keep the cash coming in, which you would have thought was the most immediate concern for the Treasury.
You can ask your lender to send statements quarterly.
Even if they are not set up to do it automatically it would make sense to do it. Oh, I forgot - most of them are idiots!
You can
You can ask your lender to send statements quarterly.
You can but I suspect most aren't geared up to do that. Is interest on most loans not charged annually? I used to think big operational changes to deliver processes like this was easy - until I was involved with them! Despite their own systems being so dire, it always amused me how HMRC would in all seriousness ask for large amounts of information in a specific format and think it was a question of pressing a few buttons and handing it over on the spot.
Funding housing the issue
. Strange that housebuilders are being paid by Gov't to encourage building rather than being taxed on their landbanks which might have achieved the same end but to the Treasury's advantage rather than cost.
Just to pick up on the above, some of us in the real world are sitting on land for housing that is currently not being built because we cannot raise funding to build. Excepting say Close, a few other niche lenders and the smaller scale peer to peer lenders,there are few banks/lenders out there prepared to offer lending to the smaller house builders/developers; the quoted housebuilders went to the market and issued shares to dig them out of the hole they were in, the private developers mainly withered and died, just a few of us with more sold balance sheets having survived.but without the depth of liquid resources to fund developments.
So rather than lambast the greedy developers for not releasing land to build and hence housing shortages, as is the spin we keep hearing, maybe Westminster ought to look up a little beyond the horizon of the southern bubble and take a real look at the housebuilding/development market for the whole UK..
So to complete my rant,if the UK wants a contribution from the smaller private sector developers it needs to assist with a funding channel.
Have another go
Just to pick up on the above, some of us in the real world are sitting on land for housing
I don't know who told you that tax was "fair", but they lied. And if you believe that taxes are crafted with any regard for "the real world" then you are equally misinformed. I don't know if you work for Persimmon, Bellway, Barrett, Bovis, Redrow, etc., so you are probably not the main target of a landbank tax but there is always collateral damage (ie "unintended" impact), as anyone who knows anything about tax will realise. This country is suffering a severe housing crisis and, if you read my post, I find it ridiculous the idea that taxpayers will be giving money to builders to encourage them to build rather than discouraging them (through taxation) from sitting on land until prices go up,
PS My friend, who isn't a builder, has planning permission and bank funding to build several houses in his garden - and it's not in a particularly fashionable area - so you might want to review your business model, if you are struggling, consider selling the land to someone who will use it.
To be honest, I doubt the Government gives a monkey's about "smaller private sector developers". They want/need very large scale and fast development to accommodate a population growing organically and by 336,000 of net immigration in the year to June 2015.
Probably they do not care
Just to pick up on the above, some of us in the real world are sitting on land for housing
I don't know who told you that tax was "fair", but they lied. And if you believe that taxes are crafted with any regard for "the real world" then you are equally misinformed. I don't know if you work for Persimmon, Bellway, Barrett, Bovis, Redrow, etc., so you are probably not the main target of a landbank tax but there is always collateral damage (ie "unintended" impact), as anyone who knows anything about tax will realise. This country is suffering a severe housing crisis and, if you read my post, I find it ridiculous the idea that taxpayers will be giving money to builders to encourage them to build rather than discouraging them (through taxation) from sitting on land until prices go up,
PS My friend, who isn't a builder, has planning permission and bank funding to build several houses in his garden - and it's not in a particularly fashionable area - so you might want to review your business model, if you are struggling, consider selling the land to someone who will use it.
To be honest, I doubt the Government gives a monkey's about "smaller private sector developers". They want/need very large scale and fast development to accommodate a population growing organically and by 336,000 of net immigration in the year to June 2015.
Probably they do not care for the mid sized developers, they ought, we used to account for a significant percentage of completions. but frankly I am pretty fed up after x years of ill informed bleating about nasty developers being the problem re the housing shortage, the problem is funding, the industry is not the same as it was, the market is fractured.
From 1996 to 2007 we built 61 units and obtained planning on another 354 units which we sold to others to build. Since 2007 we have obtained planning for 35 units on one site, have an uneconomic mindful to grant for 25 units on another site, and have built no units- pretty much says it all.
Now development is not our lifeblood, it was thankfully the add on to the business (we are mainly a private property investment group- we let property though these days virtually all commercial, we have sold the residential portfolio), but a significant reason why housing is no longer built in Edinburgh by the smaller/ mid sized developers is :
a. They went belly up- vast list of those that are no more.
b. The survivors/ new entrants cannot readily get funding- where are the 25-50 unit developments outwith those built by the larger builders, they are few and far between.
Now it is not house prices that are the issue, Edinburgh prices are well ahead of their 2007/2008 highs, it is not land, plenty of sites in North Edinburgh, it is the fact that in the main it is only the larger builders who are doing any speculative residential development and most of the other development is furnished holiday lets and student housing-banks will lend for these but not for speculative house building.
p.s. Your friend has no doubt either other assets he/she has pledged to the bank or secured existing house to raise the funding, try it when the site to be developed is the only available security.
Nowt to do
The Government must think small businesses have nowt better to do all day that the Government's work.
Mind you, the Government don't seem to be doing it with a great deal of success.....
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For VAT clients we already report turnover, expenses and VAT.
It depends how much further they want to go.
The end game seem to be having everyone report all income monthly, and pay taxes monthly, which to be fair would suit a lot of our clients.
By bringing forward tax receipts 6-12 months it would make quite a reduction to the government debt as they don't accrue for tax revenues in the figures.
Dont forget our friends in government are big on cash accounting, so presumably 'proper accounts' go out of the window and we just cash account for everything.
There is certainly going to be a lot of work for everyone to get this happening.
Some compromise
I would expect that they will compromise on the quarterly reports - eg. no accruals.
Then when the accountants do the year end they would do things properly. Maybe it would be some kind of nightmare scenario where the accountant has to make the last quarter include corrections for errors in the previous three quarters.
As The Innkeeper implies, HMRC will be issuing a lot of penalties. We are becoming a penalty culture. I've had problems with RTI in the past which have been near to impossible to correct compared to how things used to be before RTI was introduced.
I think the problem is the way things are changed. The government makes an announcement which could mean practically anything yet is dressed up as a great improvement. When the details are released they are seen as totally impractical so they introduce various staged changes. The rules are changed because they are too difficult for taxpayers and HMRC alike. The rules end up being illogical but easier to implement.
Wait a few years when everybody is complaining that there's not enough accommodation to rent. Government will introduce measures to reduce stamp duty for buy to lets and allow interest on mortgages. It's all so predictable.
There's one big issue everyone is overlooking... Overlap relief
Remember when Self Assessment came in and then we tried to get all client's year ends to coincide with the tax year?
For those that didn't we calculated an overlap profit amount which, should have been, recorded in the return every year ever since.
How will you then bring those individuals into line for quarterly reporting? I have a client I have looked at this morning with a 30 April year end, huge profits of circa £70k per annum but obviously when he started the accountant gave him a 30 April year end for an initial easy ride and the overlap is only £6k!
So to bring him in line he has to declare 23 months and claim the overlap - that's £70k divide by 12 times by 23 and deduct £6k = £128k!
I am wondering if anyone has thought of that scenario at the Treasury and what the solution will be!?
Or does that client gets to report 11 months behind those with a 31 March or 5 April year end.
Surely you can't enforce undoing of the overlap? In the above scenario (including loss of personal allowance due to the transition period being more than £100k) you could be looking at additional tax of around £28k based on a quick rough calculation. That would be completely unfair.
No one would have foreseen this scenario when choosing a year end which did not match the tax year.
Given the TV program a few days ago
The builders don't care what rubbish they put up.
We bought an old house and completely refurbished it. We brought in workmen and made sure the work was done to an acceptable standard. It's the only way to make sure you don't have a nightmare scenario.
PeterSaxton
Because all previous attempts to make us give in and seek early retirement or a career change have failed!
Cynic!
Because all previous attempts to make us give in and seek early retirement or a career change have failed!
Cynic!
Or .....
Because all previous attempts to make us give in and seek early retirement or a career change have failed!
Cynic!
Or realist.
I don't think anybody is overlooking overlap relief - it's just that with zero information about the actual manner in which quarterly returns will be implemented, it seems a little premature to be talking about the minutia of this and that. Who knows what brooms the legislation will bring in to sweep up the past.
I agree
I don't think anybody is overlooking overlap relief - it's just that with zero information about the actual manner in which quarterly returns will be implemented, it seems a little premature to be talking about the minutia of this and that. Who knows what brooms the legislation will bring in to sweep up the past.
The problem will be that the changes will be made piecemeal without any understanding of the overall picture.
It will be a big issue though for those affected
It is one of many "unusual" scenarios though that will complicate the picture and potentially then cause a tax spike for those affected. 2020 is four years away, consulting begins next year so by the time the final proposals are in place how much notice would those affected have?
Not much in my opinion.
I'd rather they fix the blindingly obvious shortfalls first starting with CIS.
Why is it that CIS contractors submit all detail online each month of deductions made, quoting the reference numbers of those they stop tax off and yet it does not then link into the online HMRC records of those that suffer the deductions.
HMRC then raise their voice if an overclaim is made but keep quiet if the sub-contractor underclaims.
Morally wrong!
If all the info was available online through the digital tax account (fingers crossed) then we have an improvement to look forward to and a lot of time wasted each year for us and HMRC will be saved!
The Digital Tax Account can be a powerful tool as long as everything is swept into it - and swept in correctly! To quote HMRC from a phone call a couple of weeks ago when we rang to query a demand issued to a client "I'm not surprised our demand doesn't match what you are seeing online - don't pay any attention to the figures on the website they are normally wrong!"
Perhaps time would be better spent fixing what is currently there first?
Where can I sign for it?
Why is it that CIS contractors submit all detail online each month of deductions made, quoting the reference numbers of those they stop tax off and yet it does not then link into the online HMRC records of those that suffer the deductions.
If all the info was available online through the digital tax account (fingers crossed) then we have an improvement to look forward to and a lot of time wasted each year for us and HMRC will be saved!
By doing that HMRC will end up processing CIS tax suffered repayment claims within 25 days or so (as they claim they already aim to) and will need to let staff go.
What all these officers who are now dealing with CIS repayment claims do then?