We are told digital tax accounts are coming, and pre-population of SA accounts is already here, according the Agent Update 50 ( see page 12).
How do you think the digital tax account will help us as tax agents, or help the taxpayer?
Will the RTI data populate the digital tax account with such nonsense that the taxpayer and agents are completely confused and the HMRC phone lines melt down?
Or, will there be a seamless transfer of accurate data in real time, so every taxpayer is instantly educated about thier true tax position and a state of bliss is achived?
Please post your views and asperations for the digital tax account below. - Its for a thing, as they say on twitter
Replies (21)
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For " seamless transfer "
For " seamless transfer " read utterly brainless incompetent transfer of unrelated meaningless information ( which rather abuses the meaning of the word)
Chaos
I confidently expect further chaos.
HMRC just not up to it. Nor the majority of tax payers and agents.
HMRC Big Bang
I confidently expect further chaos.
HMRC just not up to it. Nor the majority of tax payers and agents.
"Yeah - that's entropy, man!"
Flanders and Swann
All the more need for accountants
With the Chancellor announcing that every individual and small business will have their own digital tax account by the end of the decade and 10m by 2016, this is coming whether we like it or not.
Surely, this is a big opportunity for accountants and bookkeepers to help their clients get this right. Client software is going to play a big part in this. I get the impression that HMRC are reluctant to build their own software, instead open their APIs and enable software providers develop tools to drive the digital tax account strategy.
There's a big debate about what 'real time data' means and HMRC will need to be realistic about this. Fundamentally, if small businesses can know what tax they owe at any point in time, that's a good thing in my book.
Paul Bulpitt
CEO of The Wow Company
& Head of Accounting at Xero UK
Nothing new
if small businesses can know what tax they owe at any point in time, that's a good thing in my book.
Paul Bulpitt
CEO of The Wow Company
& Head of Accounting at Xero UK
They can do this already. Its just a slightly different form of collection.
Wishful thinking at best
With the Chancellor announcing that every individual and small business will have their own digital tax account by the end of the decade and 10m by 2016, this is coming whether we like it or not.
Surely, this is a big opportunity for accountants and bookkeepers to help their clients get this right. Client software is going to play a big part in this. I get the impression that HMRC are reluctant to build their own software, instead open their APIs and enable software providers develop tools to drive the digital tax account strategy.
There's a big debate about what 'real time data' means and HMRC will need to be realistic about this. Fundamentally, if small businesses can know what tax they owe at any point in time, that's a good thing in my book.
Paul Bulpitt
CEO of The Wow Company
& Head of Accounting at Xero UK
I can't believe you said this "HMRC will need to be realistic about this" Since when have they ever been "realistic" rather that optimistic knowing that accountants will pick up the problem and deal with it as usual
As announced today, quarterly returns?
"We’re going to build one of the most digitally advanced tax administrations in the world. So that every individual and every small business will have their own digital tax account by the end of the decade, in order to manage their tax online.
From 2019, once those accounts are up and running, we’ll require capital gains tax to be paid within 30 days of completion of any disposal of residential property."
"The government will invest £1.3 billion to transform HM Revenue and Customs (HMRC) into one of the most digitally advanced tax administrations in the world. Most businesses, self-employed people and landlords will be required to keep track of their tax affairs digitally and update HMRC at least quarterly via their digital tax account, reducing errors through record keeping.
HMRC will ensure the availability of free apps and software that link securely to HMRC systems and provide support to those who need help using digital technology. This will not apply to individuals in employment, or pensioners, unless they have secondary incomes of more than £10,000 per year.
The government will publish its plans to transform the tax system shortly and will consult on the details in 2016."
Unbelieveable
"We’re going to build one of the most digitally advanced tax administrations in the world. So that every individual and every small business will have their own digital tax account by the end of the decade, in order to manage their tax online. From 2019, once those accounts are up and running, we’ll require capital gains tax to be paid within 30 days of completion of any disposal of residential property." "The government will invest £1.3 billion to transform HM Revenue and Customs (HMRC) into one of the most digitally advanced tax administrations in the world. Most businesses, self-employed people and landlords will be required to keep track of their tax affairs digitally and update HMRC at least quarterly via their digital tax account, reducing errors through record keeping. HMRC will ensure the availability of free apps and software that link securely to HMRC systems and provide support to those who need help using digital technology. This will not apply to individuals in employment, or pensioners, unless they have secondary incomes of more than £10,000 per year. The government will publish its plans to transform the tax system shortly and will consult on the details in 2016."
Do the y actually believe this garbage. It'll be us again who has to sort the mess and the clients you pay for HMRC problems
Every right to be disbelieving about this. What I've observed is a noticeably different approach from HMRC with their digital strategy. I guess we'll all have to wait and see. What we can know is that things are changing and yes accountants will definitely have to change what they do as a result!
Quarterly Digital Tax Accounts
I'm afraid I don't understand how you can pay the right amount of tax quarterly on income that is calculated over a whole tax year. Large repair bills on Buy to Let properties at the end of a tax year will surely result in tax overpayments in the earlier part of the year - how will these be dealt with?
The same with CGT on property disposals - what if you sell a property at a profit and pay CGT within 30 days then six month later in the same tax year sell shares that make a loss - how will the loss be offset against tax you have already paid. How will you even know what rate of CGT to pay ie how much at 18% and how much at 28% when you don't know your other income for the tax year at the time the tax is payable?
The same will apply to small businesses with seasonal income, there will constantly be a cycle of trying to reclaim overpaid tax when income fluctuates. Perhaps in future these types of "in year" losses can only be carried forward which would make things nice and simple for HMRC but which would fundamentally change the way tax is calculated. Perhaps GO is thinking of doing away with the concept of tax years altogether and you just pay what you owe for each quarter in isolation?
HMRC don't understand timing of small business transactions
This simply won't work because HMRC don't understand timing of small business transactions or the steps involved in preparing even management accounts. They proposed similar with tax credits and universal credit and backed down when it was pointed out how unworkable is it for all but the smallest/simplest of small businesses with steady incomes and for whom the simplified cash basis is appropriate.
It will NEVER work for businesses who can't or don't use the simplified cash basis.
Even for simple cash basis businesses, it will cause huge swings as stock is bought/sold, assets bought, etc.
HMRC will cause small businesses and their accountants to suffer huge amounts of wasted time and money, only to find that they get bombarded with constant fluctuations which they have to deal with, and within a year or two, they'll introduce all kinds of exemptions and reliefs to cut their workload, all in the name of "we're listening" and we'll be back where we started.
All at a time when more businesses will be sole traders or partnerships due to the new dividend tax making many companies disincorporate and making incorporation in the first place less attractive. A perfect double whammy that HMRC simply won't be able to cope with. Another meltdown on the way.
Will people please stop saying it won't work. The same was said about SA, ELS, FBI, CIS, RTI, AE and every other thing HMRC have ever imposed.
Yes it may not work well, and it may not be to our liking, but HMRC are going to do it, and the fact that they may not be able to cope with it is also not relevant because they'll do it anyway. And the point is that somehow or other it WILL work because Johnny and Jane business owner and Mr Muggins the accountant will spend many a sleepless night somehow getting it to work.
Time and money wasted no doubt, but not HMRC's time and money, so we'd best just crack on and make the best of it.
Doesn't work
Will people please stop saying it won't work. The same was said about SA, ELS, FBI, CIS, RTI, AE and every other thing HMRC have ever imposed.
CIS doesn't work. You can never find out how much HMRC have in your kitty.
RTI doesn't work. I have clients getting bills for tax they don't owe.
AE doesn't work. Small employers just can't afford it, so it depresses the pay increases employees get. Mostly low paid workers already struggling. Labour voters so the Government doesn't care.
It's how it works. If you show that you owe tax for a given period they expect it instantly. If you latterly have a cumulative repayment - wait 7 months and you might get it
That's the point, even when it doesn't work it's still the way it is and we have to work with it.
This is how I see it...
There seems little doubt that radical change is coming and I feel accountants have every right to have concerns given HMRC's record in implementing change and the complete lack of understanding policymakers have regarding self employment.
We haven't seen any substantive detail yet, but the phrase from the Autumn Statement press release: "self employed people will be required to keep track of their affairs digitally and update HMRC at least quarterly reducing errors through record keeping" is meaningless tripe.
Further twaddle was spouted by Jim Harra (HMRC Director General Business Tax) in the interview published in Taxation magazine with this great line: "Digital accounts will simplify and in many cases remove the reporting burden for taxpayers". Really? So quarterly returns (no doubt with an annual reconciliation as well) will remove any burden from dealing with HMRC. Great news!
The only possible way I can see this working would be through the introduction of some sort of flat rate expense deduction system (a variant on VAT flat rate) based on cash accounting, with quarterly tax payments made on this basis.
Alternatively and perhaps more likely, there is actually a grand strategy to categorise accountants (see Taxation article 26/11/15) so that in reality only "approved" accountants will have the necessary "enhanced status" to access HMRC systems fully in order to facilitate this change.
So HMRC will be able to cut staff numbers and office numbers (already happening), wash their hands of understanding the absurdly complex tax system we have (already happening), focus their compliance work on agents and get quarterly tax receipts.
Tim Vane and others may well be happy to play along, but other accountants may well take the view that being effectively coerced into becoming a quasi privatised part of HMRC wasn't what they signed up for and they'll consider other options.
Digital
So will it be digital or DIGIT ILL.
The older I get the more cynical I become. It seems to me that to strive for something that will have so many flaws is a complete waste of time, money and effort. I have no confidence in HMRC's ability to run this system. The time spent on the telephone waiting for an "advisor" often as much as 40 minutes, yes 40 minutes, will no doubt lengthen.
OMG, do I have to look forward to even more frustration?
Please can the powers that be just get real.
Have HMRC thought of a cunning plan
So will it be digital or DIGIT ILL.
The older I get the more cynical I become. It seems to me that to strive for something that will have so many flaws is a complete waste of time, money and effort. I have no confidence in HMRC's ability to run this system. The time spent on the telephone waiting for an "advisor" often as much as 40 minutes, yes 40 minutes, will no doubt lengthen.
OMG, do I have to look forward to even more frustration?
Please can the powers that be just get real.
You're wishing for the moon
How will HMRC treat clients who are useless at keeping records and rely on their accountants to sort the messes out once a year. Will they expect us to do this work 4/5 times and not get paid extra. An interesting thought just came to me after writing this. If we do more work,which is an allowable expense against the client's taxes HMRC get less tax from the client BUT because the accountants overall income rises we pay more tax but at a higher rate. Could they be have been devious enough to have thought of this. Conspiracy theory perhaps
The conspiracy
So will it be digital or DIGIT ILL.
The older I get the more cynical I become. It seems to me that to strive for something that will have so many flaws is a complete waste of time, money and effort. I have no confidence in HMRC's ability to run this system. The time spent on the telephone waiting for an "advisor" often as much as 40 minutes, yes 40 minutes, will no doubt lengthen.
OMG, do I have to look forward to even more frustration?
Please can the powers that be just get real.
You're wishing for the moon
How will HMRC treat clients who are useless at keeping records and rely on their accountants to sort the messes out once a year. Will they expect us to do this work 4/5 times and not get paid extra. An interesting thought just came to me after writing this. If we do more work,which is an allowable expense against the client's taxes HMRC get less tax from the client BUT because the accountants overall income rises we pay more tax but at a higher rate. Could they be have been devious enough to have thought of this. Conspiracy theory perhaps
The conspiracy could be more re the penalties to be generated, give it enough time and hardly anyone will pay tax they will merely pay penalties for not performing within some set timescale as required by "The System"
Voluntary Taxation
The conspiracy could be more re the penalties to be generated, give it enough time and hardly anyone will pay tax they will merely pay penalties for not performing within some set timescale as required by "The System"
Thought that for a long time.
It gives the Government chance to say "Ah well, we didn't want to charge you penalties. We just wanted you to fill in the forms."