Businesses ill prepared for digital flood

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A recent national survey conducted on behalf of the ICAEW has yielded some worrying results for the government’s Making Tax Digital (MTD) plans.

In short, businesses aren’t ready.

Five hundred UK businesses were asked in the survey how they keep their financial accounting records at the moment: Just a quarter of respondents currently maintain their accounts electronically using accounting software.

As the ICAEW noted, “The rest will therefore need to consider what changes they may need to make, almost certainly incurring considerable costs to comply with the new rules”.

AccountingWEB consultant tax editor Rebecca Cave also raised concern in a recent article: “[M]oving to a commercial software package will mean extra costs and data transfer problems for many businesses who have created their own bespoke accounting software, or who rely on Excel spreadsheets.”

In the same piece, accountant Della Hudson disagreed with the perception that paper records were necessarily inaccurate: “…I still have clients who have no internet connection or computer, but keep beautiful handwritten ledgers”.

ICAEW’s research shows that 82% of one-person businesses will need to shift to digital recordkeeping. The manufacturing and construction industries, in particular, will have to pivot: 41% still rely on paper-based records.

The Institute has gone on the record to say that while it supports MTD, it shouldn’t be compulsory. And from the survey results, it would seem UK businesses agree with them. More than half of those surveyed support the general trend toward a digital tax administration - but only 18% of businesses felt that it should be made compulsory.

MTD has started to take form. We know that from April 2018, small, non-VAT registered businesses will be the first UK businesses to have to comply with MTD. The rules will make digital recordkeeping compulsory, as well as the much vaunted “quarterly return”. By 2020, the aim is for the UK’s tax administration to be fully digital.

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There is a gem of an idea in the ICAEW proposal.

Guake tells us that reporting quarterly and digital will save tax payers time.

If (in the unlikely event) it is made optional to start with.  Then for those for whom it will save them time, they can do it quarterly right from the get go. I am sure people will be lining up for this. *coughs*

For those that it will not, they can carry on as now and do it annually. 

This will give the systems time to bed in, software to be developed etc, and once it becomes so much quicker to file quarterly 'as you go' then annually [airborne pigs etc etc], then there will be a huge shift towards it, then in (say) 4-5 years in they can turn off the old returns once everyone has seen the light and is just tapping a button on their smart phone and the books just do themselves. 

 

 

 

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15th Mar 2016 15:19

Doesn't this just provide an opportunity for firms to help?

Surely this provides an opportunity for firms to help?

Is it not ideal territory for the hand holding, supportive, insurance policy that is an accountant?

Fixed fee, clearly defined (and simple), record checking and filing? 

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I agree to an extent

rsergeant wrote:

Surely this provides an opportunity for firms to help?

Is it not ideal territory for the hand holding, supportive, insurance policy that is an accountant?

Fixed fee, clearly defined (and simple), record checking and filing? 

I guess you're right, but the challenge is how much can one help a business that's completely incompatible with a digital tax system?

I agree with the ICAEW, I think the target date should be 2025, and in the meantime have a blitz preparing the UK's small businesses. The digital transformation of tax OBVIOUSLY has to happen - it's just about when. 

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By KenKLM
16th Mar 2016 19:02

Cost

I doubt client's will want to pay . Some will just ignore it . I expect if accountants "take it off clients hands" some taxpayers will abuse that thinking thats another thing someone else has to worry about (us) . For some clients maybe it will get them more organised and it will represent a fee opportunity . The majority will not want to pay and will not bring in the records on time to process it . Do the politicians really think people embrace digital ?? Then there is finding appropriate software . Too ambitious a timescale and should not be compulsory - encourage business to take it on board with incentives maybe ? People are getting sick of this stuff being rammed down their throats in the past few years - RTI , iXbrl , no CT agent filing , new Companies Act accounts , Pensions legislation , etc .etc. it seems never ending and inevitably they will attach fines for non-compliance . Slowly becoming totally disillusioned and wonder if government employ too many people that need to justify their salary packages by coming up with this flow of stuff .

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15th Mar 2016 15:49

Why the surprise?

It should be no surprise that a large number of very small businesses are not ready.  It is known that the number using manual books, spreadsheets (or just bunging invoices in a carrier bag) is high.

So they need to buy software.  But which one?  Will it have to be in the cloud?  How can a decision be made until we know what needs to be submitted to HMRC?

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15th Mar 2016 22:26

Digital Tax
Would it not have been more helpful if HMRC was to put its own house in order first. To actually reply to correspondence and answer the telephone within half an hour
I forsee chaos. Many of my own firm's clients are small one man businesses and some have never used a computer/smartphone etc. Mention a tablet and they think it's paracetamol!
I believe digitalisation will be totally unworkable and it is high time that the Treasury understood that a small business is not one that employs two hundred workers.
It's a shame Whitehall does not look around the UK and visit some of the very small businesses - Her Majesty the Queen does find the time!

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15th Mar 2016 22:33

Digital tax

barrowbakers wrote:
Would it not have been more helpful if HMRC was to put its own house in order first. To actually reply to correspondence and answer the telephone within half an hour - imagine when the change takes place.
I forsee chaos. Many of my own firm's clients are small one man businesses and some have never, nor indeed wish to, used a computer/smartphone etc. Mention a tablet and they think it's paracetamol!
I believe digitalisation will be totally unworkable and it is high time that the Treasury understood that a small business is not one that employs two hundred workers.
It's a shame Whitehall does not look around the UK and visit some of the very small businesses - Her Majesty the Queen does find the time!
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16th Mar 2016 12:07

Agree

barrowbakers wrote:
Would it not have been more helpful if HMRC was to put its own house in order first.

Having just dealt with a wholly fictitious PAYE demand for some £4600, I couldn't agree more.

The pace of change is such that HMRC can't cope themselves, let alone small business.

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16th Mar 2016 09:29

In short, businesses aren’t ready

Well said, but then neither is HMRC!

Until we have more information about the nuts and bolts of MTD we don't know what we are preparing for.  It's pointless wasting time, effort and money putting in a digital solution when it may turn out to be wrong.  It may be that a digital system that isn't currently available is the best answer.

At the moment MTD is pie in the cloud as far as businesses are concerned.

HMRC indicated that lots of traders wanted to know about, and pay their tax as they go.  Let these folks start the ball rolling if they are that keen.  I do, however, suspect that the respondents didn't realise the full implications of the proposal.

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16th Mar 2016 12:52

Another omnishambles

I agree with all that has been said here. The very high proportion of very small businesses shown by the ICAEW survey is astounding but no surprise to me as it coincides with my own practical experience with my clients.

This may present an 'opportunity' for accountants do more handholding and help their clients with what is being proposed by the Treasury in MTD but do many, or any, of us have the very considerable spare capacity needed to do this effectively and will many, or any, clients be ready to pay the significant additional fee cost that will inevitably be involved?

Unless the Treasury slows the process down and thinks again about what is practically possible this is all set to be yet another omnishambles.

Making the MTD proposals for small businesses voluntary rather than compulsory would be excellent. And, of course, the probably less than 1% of very small businesses that volunteer would be a welcome wake up call to HMRC and the Treasury. 

 

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By Ammie
16th Mar 2016 12:51

HOMEWORK SYNDROME

.........that's what I refer to it as.

Many take the view, why do it now, it's not compulsory yet, tomorrow will do. Why else do we have the January mayhem that we do.

A large number of micro businesses, mainly sole traders and one man bands, will only act when they have to and the "big stick" and fines are looming close. Until then it's procrastination all around.

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16th Mar 2016 12:59

The 'big stick' and fines are not appropriate

In my view the 'big stick' and fines are no way for the Treasury to seek to impose a system that is patently unworkable, ill considered and not properly thought through. 

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16th Mar 2016 13:01

Definite

It's a definite vote loser.

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By DMBAcc
16th Mar 2016 13:32

Vote loser

I would like to pick up this point.  I am in the throes of writing to my local MP.  I will lay down a few bullet points including the Gov'ts promise to make things easier (and thus cheaper?) for businesses to file tax returns and then suggest that if I only get a pat answer then my 50 clients will be contacted with his response.  I supsect in a marginal constituency like ours he might like to think again before he loses his seat.

Voluntary HAS to be the way forward - certainly a small pilot MUST be undertaken BEFORE imposing such a life affecting change on us all.  I do not have the capacity to deal with the changes 50 clients will be facing.  Likewise there is not the spare capacity around where I live for these 50 to find support from elsewhere.

This feels like a gun to the head with no where to run

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By Peter-S
18th Mar 2016 11:07

MP

DMBAcc wrote:

I would like to pick up this point.  I am in the throes of writing to my local MP.  

 

I emailed my local MP about this nonsense back in January, he represents the party bringing all this in and is also a chartered accountant. Apart from the standard auto response I've heard nothing more although I have received a letter asking me to volunteer to provide free tax assistance to the under 60s on low incomes!

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By SXGuy
16th Mar 2016 14:39

Simply can't work for us and maybe others
It's not been thought through at all. We have over 200 clients most of which are businesses with turnovers of less than 15k. I can tell you now they will not want the added cost of supplying invoices each quarter when they only need do it yearly. Forgetting that for a second. Are they seriously saying that instead of dealing with our clients spread across the year we have to manage them all every 3 months? Are they really taking the proverbial? Ok fine how about this then. Let's all just make up silly figures for 3 quarters of the year and correct them all on the final quarter. See how they like that. Hmrc are not making it easier they are clearly making it harder. Most of our clients don't even want an email address let alone quarterly filing online. Doesn't matter how easy they appear to make it, it won't be for them. What I need to know is how will it work? If some year ends are April and some are March, will each quarter run from then or is everyone going to be moved in line? It simply isn't workable for them or us. Sure I'd love the added fees, but it would only go towards paying extra staff to handle the work load surely?

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By KateR
16th Mar 2016 15:29

Simply can't work for us too

It is not only year ends of April or March, but what about June, July, August, September and December. Obviously June and December, for example, can fit with quarters starting from April. but which year?  Will we have overlapping periods as we did when self-assessment was introduced? I'm getting a headache already, which looks set to last for the next 2 years.

 

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By SXGuy
16th Mar 2016 15:51

Please not
Another overflap relief lol

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17th Mar 2016 13:55

Too much change, too fast.

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17th Mar 2016 19:48

Paper returns - I might have to do this
send a paper return for 31-10 or if i can't then for 31/1 and Accept a £100 fine. Pay tax 31/1. Let them process aS many paper returns as we can and agree to file online again when they drop this nonsense. Start 16/17 year. Submit tax refunds cases online of course.

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