Hello
I would like to ask for suggestions as to how best to adapt to quarterly reporting. As a Sole Practitioner who runs a practice comprising solely of clients who keep manual records I am a little worried to say the least.
I have looked at cloud accounting software but A) It would be a hard sell to my smaller clients who would not be able to justify the additional expense and would not go down this route unless it was absolutely compulsory and B) when I have discussed this option with some of my less tech savvy clients they just glaze over and I can see there is no way that they would manage.
I'm all for adapting but I am unsure as to how. Will I be able to ask clients to send all documentation over via Receipt Bank with spread sheets and bank statements being sent over via email and then process everything myself using whatever software HMRC provides?
Any advice would be welcome. I'd also be interested to hear from Accountants facing similar problems which I assume would be anyone who's Practice is not completely cloud based.
Many Thanks.
Replies (17)
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Is there enough detail at this stage to make any judgements?
I await fuller details and the modifications thereafter once the wrath of the smaller business owners has hit the Conservative party.
No idea
We don't know yet. Beyond taking a photo of your receipts on your Smartphone and press "send" every three months.
HMRC need to get on with this. People have plans to make. Though feedback suggests that the rank and file HMRC workers think it's as carp an idea as we do.
Software dependent - the great unknown
At the present time this "easy" app-based smart phone reporting can be no more than at the concept stage - the nitty gritty of how easy it will be to use and how reliable the software will be is a really big unknown, here's examples of (past year experiences) current state-of-the-art software going wrong:
Kashflow - client couldn't correctly code an equipment purchase to a fixed assets code (that was available) due to software constraints so it went to sundry expensesReceiptbank competence in question - eMail photos of receipts to Receipbank and there's a track record of multiple coding errors in the client's Xero accounting records as a result (VAT reclaims can be wrong as well as costs allocated under incorrect headings)
I name names above as these are factual occurences, but I expect these serious errors occur with other software too.
Do not rush in
The vast majority of my clients will not be able to maintain any sort of electronic record keeping themselves, whether cloud or desktop. This is my opinion of over 40 years experience in dealing with SME's and also as one of the first Practices to use Accounts Production Software and Word Processing way back in 1981.
The Government are way out of touch with reality here and need to realise that whilst many will be able to adapt to maintaining their records in this way, a large number of 'ordinary' traders do not have the ability or the inclination to do so and are happy to just provide information to their Accountants on a regular basis, probably in paper form, from which their Accountant writes up formal records of account. This has worked well for decades and is often the cheapest and most efficient way for some people to work.
I can understand why some people in Government may be influenced by their experiences with hi-tech Google and think that everyone runs their lives shackled to their phone and worship the god of IT, but this is not the case and never will be.
Based on my experience with IT over the years, I am not rushing in to make any significant changes yet as I believe that the Government will think again about this. Even the Budget Statement (1.184) suggests that 'from 2018 businesses, self-employed people and landlords who are keeping their records digitally and providing regular digital updates to HMRC will, if they wish, be able to adopt pay-as-you-go tax payments'. This statement can be interpreted in several ways but it does seem to suggest that the submission of data digitally will be optional, quite a different approach to the onerous mandatory obligations threatened in the earlier Making Tax Digital publications.
We also need to bear in mind that, in my opinion, software giants have a huge influence on what is going on. I see no reason why HMRC could not have developed universal payroll program and book-keeping software which could be used by all but instead we have to use commercial software of varying quality from dozens of different suppliers, some of whom seem to struggle to keep their software up to date. This coupled with increasingly slow access to cloud based products (it takes me two minutes now to log into my cloud based tax software even with superfast broadband) makes the digital future of tax much less exciting.
I have no problem with digital progress, but it has to be realistically introduced. The Government have set themselves a timetable that is simply not attainable and I can only see a lot of trouble ahead if they try and follow this timetable. There seems to be no account taken of the vast complexity of UK Tax and the need to have annual periods in which to assess tax liability. I happen to think that Self-Assessment works very well and should be retained. I also think the real reason behind the proposed changes is to get money in quicker which is OK, but there are far easier ways to do this than a massive change to the system. A system of quarterly tax payments would be relatively easy to arrange based on the current Self-Assessment system.
My advice to the OP is to keep an eye on progress with this, keep your options open, but do not rush into making any decisions now. I think the Government will change course to something more practical and less obligatory which most of us will be able to deal with in an easier and more positive way. In the past I would have been the first to adopt new software and try out new systems, but I have learned from expensive and sometimes traumatic experience, that it is best to wait until others have sorted out the problems before committing to anything new.
Can be done
It can be done. Even if it means the accountant preparing quarterly updates.
But at what cost to the taxpayer ? And what benefit to the Government ?
For me, that balance is the issue.
Well said
Tornado, you have exactly echoed my thoughts on this. The government has tried to portray the (unspecified) forthcoming changes as a way of making life far easier for the small business, when I think we know that the reality will be the complete opposite. You only have to read the case studies published by HMRC in December to realize how out of touch they are with the way the average small business or self employed tax payer relates to his accountant. And subsequent references to getting rid of the chore of the self assessment tax return do make me wonder if they have ever talked to the profession about this. After all, filing a three line report on the SE page once a year, derived from a simple excel spreadsheet doesn't seem onerous to me.
I wonder if the profession as a whole is making a sufficient effort to convey our misgivings to the Treasury. How can we do more?
The catch
After all, filing a three line report on the SE page once a year, derived from a simple excel spreadsheet doesn't seem onerous to me.
I wonder if the profession as a whole is making a sufficient effort to convey our misgivings to the Treasury. How can we do more?
The catch for the profession advancing the "the existing system is simple" message is that it may sit uncomfortably with the level of fees some of them have been charging their clients.
The justification for the perceived high hourly charging rate is the training and experience of the practitioner, that could (certainly for some larger firms with eye watering fees) sit rather uncomfortably with the argument that the existing system is simple, and of course a fair proportion of those within the administrative echelons of the professional bodies started their lives within the very firms that may squirm.
It is likely going to be a nightmare if implemented as currently being discussed but I don't expect much help from the more traditional institutes.
Imho if the finished idea is a government inspired piece of hokum ( the perceived benefit is difficult for them to express without soundbites tends to be my criteria re such a judgement) the way to attack will maybe be smaller firms advising their smaller clients what is happening and using social media to get enough disgruntled small business owners (many will be natural Conservative voters) to suggest to their MPs that this may be a make or break issue.The great thing about social media is power and influence is no longer just in the hands of the few.
I do not want to pre judge the issue but to date what I have heard as the reasoning why we ought to go this way has been pretty poorly argued-then again maybe politicians are unable to articulate arguments these days as they do tend to prosper on soundbites and clichés and sadly the population appears often to be satisfied with such a level of debate.
I went along to the HMRC presentation at the start of February along with 6 other people, really well attended, so much interest... My practice uses sage and I have been told by the local rep that they are in close discussions with HMRC. So far nothing has happened. I doubt we will hear much until early next year. There will be another round of HMRC v Practice meetings later on this year. Go along and voice your opinion. It will make no difference but you will be able to vent your anger for what it is worth.
As for timing, George Osborne has got budget surplus target. One of the main drives for this change is that the self employed and companies pay tax when profit is earned, much like PAYE/NIC only quarterly. This will generate a large surge in income around the time of the predicted budget surplus. If you recall he could not state how this budget surplus would happen but it would happen at a given point in time.
But skinning cats
I went along to the HMRC presentation at the start of February along with 6 other people, really well attended, so much interest... My practice uses sage and I have been told by the local rep that they are in close discussions with HMRC. So far nothing has happened. I doubt we will hear much until early next year. There will be another round of HMRC v Practice meetings later on this year. Go along and voice your opinion. It will make no difference but you will be able to vent your anger for what it is worth.
As for timing, George Osborne has got budget surplus target. One of the main drives for this change is that the self employed and companies pay tax when profit is earned, much like PAYE/NIC only quarterly. This will generate a large surge in income around the time of the predicted budget surplus. If you recall he could not state how this budget surplus would happen but it would happen at a given point in time.
But skinning cats can be achieved by more than one route, introduce quarterly or monthly SA payments to account with YE balancing (and that could be in pkace by 2018) and he gets his cashflow without the hassles and economic cost to the country- politicians (even history graduate politicians) possibly ought to be able to grasp that if Self Employed Bert spends more time dealing with admin he has less time to actually create value added for the UK economy, it is not a difficult concept.
By all means encourage/facilitate the option of using software to facilitate reporting, Adam Smith's invisible hand will then direct whether it is economic for business entities to adopt the reporting approach or not, if there is an economic advantage then Darwinian theory will let those who embrace prosper and those that do not wither, but as a Conservative he ought to believe in the market not the Commisar's decree.
Not Everyone is Digitally Savvy
Without making any political point, it is well reported that Jeremy Corbyn (Leader of the Labour Party) not only filed his 2014/15 Tax Return late on paper, but that he also missed off one or more pensions. Apparently he does not use an Accountant.
The point that I am making is that he either has a general disregard for the law or he is not 'equipped' to deal with the complexity of completing a Tax Return on time and online. Naturally assuming the latter, then he is probably no different to hundreds of thousands of other taxpayers who find it difficult to complete their Tax Returns accurately and on time and who really could benefit from assistance (perhaps from an Accountant) no matter how straightforward their affairs may be.
It is the people like Mr Corbyn who might just challenge the arrogance of the Government into realising that not everyone will be able to deal with the digital tax revolution and also how valuable Accountants can be to the calculation and collection of taxes. Some genuine co-operation from HMRC with Accountants (and other agents), such as letting us see our clients PAYE accounts online, is well overdue. These are matters that need to be addressed first before pursuing unattainable pipedreams.
Maybe ....
Without making any political point, it is well reported that Jeremy Corbyn (Leader of the Labour Party) not only filed his 2014/15 Tax Return late on paper, but that he also missed off one or more pensions.
Maybe he was making a point .......
See Taxcalc blog...
... I asked this question a few weeks ago on Accweb and received only one comment in reply saying the same as above - we can only wait and see. But I would direct you to a blog from Taxcalc which states that the new procedure plans are coming from 'on high' - higher up than HMRC. I suggest that everyone looks at this as it tells you more :
https://www.taxcalc.com/blog/hmrc-making-tax-digital-what-you-need-to-know
Having submitted responses on behalf of Accweb members for the last couple of years I can tell you that the proposals will go through in some form of another.
I am looking to go to Accountex where I am hoping that the software providers will be able to advise more. It must seem to be a nightmare for them.
I am concerned for my clients - many dont know how to turn on a computer.
Insulting Video Clip
I have watched the three minute video of John (was that his name) The Plumber & how "simple" it is all going to be, I find it insulting to be presented with something in the format you would show to kids of 5 at school. How many of our small clients still don't have a smartphone - a lot. It should not be compulsory to buy one. And they took a photo of one invoice and pressed the button and off it went
I run my own small payroll company, have another self employment, one employment and a couple of small pensions.I am fairly computer literate and type up 350 self assessments each year so have a good grasp of the requirements. As it stands at the moment I would have difficulty doing what they want in the way that they want it
@ Tornado
Well said. Seems I could ha written that too, having embraced computers from 1981 and using accounts production, word processing, payroll and VisiCalc (spreadsheet) from then. You echoed my thoughts.
It's going to happen..
Have just been to a course where the lecturer said - it's going to happen so you may as well get used to it.
For those who are not electronically savvy (e.g. 85 year old farmer who does not have a smart phone let alone internet) - tough! Get an advisor. "It should not cost much"!!!! (Government view)
For those that won't try there will be penalties and they could be harsh.
Educate your clients now as this is going to happen, like it or not.
Sure
Have just been to a course where the lecturer said - it's going to happen so you may as well get used to it.
For those who are not electronically savvy (e.g. 85 year old farmer who does not have a smart phone let alone internet) - tough! Get an advisor. "It should not cost much"!!!! (Government view)
For those that won't try there will be penalties and they could be harsh.
Educate your clients now as this is going to happen, like it or not.
I'm sure you're right.
Watch for a big increase in the Black Economy.
It's sad....
... that the Gov't didn't do more research. I just want one senior civil servant to work with one of my B&B clients during the height of the season just for a week. Up at 5. Prepare breakfast and sort out invoices/receipts etc. for those checking out. Prepare for those leaving and then clean and prepare rooms for those coming in. Run errands including shopping etc. Manage diary/bookings etc. Receive new guests. Prepare evening meals. Prepare for next day. Get to bed at midnight. And of course just before you get into bed you had better do your MTD !!!! Everything always looks rosy when you sit in Whitehall whilst the "minions" labour out in the "sticks". The word "contemptable" comes to mind.