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So, the tax gap for SA has been based on 100 to 200 random enquiry partly estimated undiscovered tax adjustments. The basis for MTD is as flawed as the plan itself. Mucho egg coming your way Harra, Ellison and Gauke.
Well it *may* have been - but there may be more and better information we haven't seen yet. Hence the Freedom of Information request.
My assumption would be that sole trader clients who do their bookkeeping at least quarterly claim a lot more expenses than those than do it annually.
Simply due to remembering more stuff they have spent.
Indeed this time of year I often berate clients for the paucity of their claims, and spend ages playing the "what have you missed?" game to save them some tax.
In this run up to the filing deadline, it always becomes apparent where the tax gap is likely to originate. Many of my clients interpret taxable income their way and if it were not for the fact that I assist them with the completion of their Tax Returns, then I am sure that a lot of income and gains would be missed from their Returns if they did it themselves.
There is no intention to evade or avoid tax, it is just ignorance of the tax system and they do the right thing by getting a professional to assist them with their Returns.
It is undeniable that Accountants are key in 'policing' the Tax Administration system and the Government's plans to sideline Accountants is at their own risk.
In my mind, the tax gap is predominately created by the increasing encouragement by the Government for people to complete their Tax Returns themselves. It takes a lot of skill and experience to complete a Tax Return properly and although the average person can deal with basic tax, anything a little more complex defeats them.
I see this particularly with Capital Gains which is almost a voluntary tax. Unless the gains on some transactions are reported on the Return, the chances of the lost tax being discovered are slim.
I happen to believe that the Self-Assessment system is an excellent way to capture tax data, and some improvements to this system would make it perfect in my view. If the Government realised that their belief that everyone is a tax expert is just a delusion which is simply fuelling the tax gap and did something about that, then the situation would improve dramatically.
I think I can confidently say that those people who seek the assistance of professionals to complete their Tax Returns contribute very little to the Tax Gap.
Making Tax Digital will not solve the problem of people doing it themselves. As with the assumption that everyone is capable of filling in their own Tax Return, the assumption that everyone is capable of learning how to use accounting software is equally absurd. As with do-it-yourself tax, there is a tendency for people to completely ignore something if they do not understand it and just forget it. This will be the same with the accounting software that people will be forced to use. And who is going to police this? HMRC will not cope and Accountants and Software developers will not be interested unless there is a fee for the time involved.
The bottom line is that we already have a very good system of tax data collection through Self-Assessment and this has the potential to be enhanced with complimentary digital services. We can move towards digital tax services confidently and successfully by building on what we already have.
What madness is it that the tax administration system has to be completely renewed at enormous financial, business and social cost when this is completely unnecessary.
Note the consultation responses, published today (31/1) include an updated impact assessment (here: https://www.gov.uk/government/publications/digital-reporting-and-record-...) and the figures for exchequer impact remain the same: £945million by 2021 including £625m in 20-21 and (presumably) each year thereafter. Interesting times!
Note the consultation responses, published today (31/1) include an updated impact assessment (here: https://www.gov.uk/government/publications/digital-reporting-and-record-...) and the figures for exchequer impact remain the same: £945million by 2021 including £625m in 20-21 and (presumably) each year thereafter. Interesting times!
Although less interesting when you completed 138 tax returns and 50 companies on your own last year. Daunting, yes, worrying, yes, selling up, distinct possibity.
Be very interested to hear the response to your freedom of information request Wendy and to understand the substance behind these figures.
As well as reducing the tax gap, the impact assessment you mention goes on to suggest that MTD will actually save business money rather than cost it money in the long run for complying? I would dearly like to see the workings behind this nonsense too as all we have is a pretty little graph. The treasury select committee certainly don't agree.
How can moving from doing something once a year to five times a year possibly take less time and save business money however simple the process may be (which I'm not convinced it will be)? It will either cost business more accountancy fees or more of their own time both of which have a cost associated to them.
Interesting to see if they send it. They will have to type something up from the back of a fag packet calculation they have done.
Let's say the home office decide that to catch all criminals they are introducing a self submission process whereby the criminal has to submit a quarterly report of all the crimes they have committed. Just a 3 line summary nothing too complicated. Reports received=Nil.
You catch criminals by having detectives working cases to a conclusion.
Same for tax. You catch cheats, fraudsters and fiddlers by having inspectors investigate them.
Unfortunately the entire tax system is set up to pick on the easy targets who at least try to comply and ignore the people who don't bother. A lot of people will look at MTD , think why bother and drop out of the system.
We all know that tax gap figure is pie in the sky, but it is revealing to hear how it actually came about. Just 5 minutes basic arithmetic on the back of an envelope would have made it blindingly obvious that it can't possibly be true. The FOI response will make interesting reading indeed.