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Going to the House of Lords select committee

What are the key points to raise for MTDfV?

On the back of the recent call for evidence, I have been invited to the House of Lords select committe to give evidence at a round table discussion next week. 

I am going to get a couple of minutes at best, so what are the key points I should make on behalf of you horrible lot?

My key points are along the lines of:

1. We need a proper open pilot as was supposed to happen from this April. 

2. The switch over should be slow burn, to allow adoption when it suits business and when the benfits are clear. Ie soft launch, with a hard deadline some years into the distance. 

3. Penalties should be only levied if the tax is wrong, or paid late, not for how records are retained, so long as they are sufficient to work out the tax correctly.

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10th Oct 2018 14:33

MTD shouldn't be introduced until HMRC can prove without doubt that their software is ready for it and the information gathered is going to be put to good use. Not just used as an information gathering exercise not in the public interest

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10th Oct 2018 15:19

In my experience, a surprising number of businesses operating just over the VAT threshold (and particularly those over 50 years of age) still keep their records (perfectly adequately) on paper. These people are commonly working all hours just to keep afloat. Often they do additional work in the evening pricing up and appraising potential new work, chasing up overdue accounts, paying suppliers, doing the records etc etc.

The cost of new software is one thing - but their main constraint is time. These people simply do not have the time to acquaint themselves with accounting software and learning how to do something which is completely alien to them - by next April. There will be errors and general chaos - or perhaps mutiny!

Someone has to speak up for such people. Surely MTD for VAT should be voluntary at first - just as online SA Tax Returns were and still are - and slowly but surely the online take-up of SA has grown with very few issues.

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By Tornado
to John Stone
11th Oct 2018 13:43

"There will be errors and general chaos - or perhaps mutiny!"

I would plump for mutiny. They cannot make us all walk the plank.

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10th Oct 2018 15:38

One other consideration

MTD should be postponed until most of the large commercial software suppliers have compatible software
They cannot provide this until HMRC define exactly what they are looking for

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By DCR
10th Oct 2018 15:57

What will the procedure for error correction be.

Not that I am expecting clients cloud kept bookkeeping to be anything less than emaculate they are of course well versed in bookkeeping standards and VAT legislation.

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By DonDan
10th Oct 2018 16:29

They could also incentivise the take up of MTD like they did with the electronic filing of vat returns and RTI. This would at least provide some clear advantage to joining the scheme

For example they could take away the extra 7 day filing period for clients using the old system or even allow a small deduction from the vat liability each quarter to counteract the software cost

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10th Oct 2018 17:53

One could add that it seems ridiculous for businesses to have to introduce specialized software for VAT returns, when a new suite of software will be needed just one year later when MTD for income tax is introduced. How stupid is that? (not so relevant is the lack of publicity to enormous number of unrepresented traders, which is appalling in itself)

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10th Oct 2018 18:23

How things like PE and y/e adjustments are to be included in returns, on a practical level.

Group return.

Returns for periods that aren’t exactly 1/3/12 months (admittedly this is more of a software feature issue, but nonetheless is a consideration).

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10th Oct 2018 18:26

Jeez - where to start ?

The whole process has been rushed and needs to be slowed down. Some aspects of the pilot aren't even going to be included for testing until Jan 2019 - then going live less than three months later.

Get some reality into how micro businesses work. They don't have accounts departments which can cope with the training. It's generally just a bloke writing up his books with a biro when he's watching the soccer on the telly.

Accept that some stuff is just too complicated for digital links. Partial exemption, retail schemes, TOMS (Brexit may get rid of that one), fuel scale charges, a dozen other things - the One Man Business is going to struggle to cope with doing this by journal. In fact - just drop the mandatory digital linking altogether because that's actually one of the biggest issues.

Drop the John the Plumber attitude that this is all for the benefit of small businesses. It isn't.

If it's to be adopted, it needs to be adopted at the start of an accounting year, not a VAT period in the middle of an accounting year. Who wants two accounting systems on the go in the same year ?

Drop the whole idea of this being mandatory for a long time.

Spread the start dates out a lot more. We're asking folk to do proper accounting now, whereas we only asked them to do bookkeeping before. There's a big difference. I don't have time to educate dozens of folk over a three month period.

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to lionofludesch
10th Oct 2018 19:30

lionofludesch wrote:

If it's to be adopted, it needs to be adopted at the start of an accounting year, not a VAT period in the middle of an accounting year. Who wants two accounting systems on the go in the same year ?

Totally agree with this, and is a no brainer to us but seems to have passed HMRC by.

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to legerman
10th Oct 2018 22:15

legerman wrote:

lionofludesch wrote:

If it's to be adopted, it needs to be adopted at the start of an accounting year, not a VAT period in the middle of an accounting year. Who wants two accounting systems on the go in the same year ?

Totally agree with this, and is a no brainer to us but seems to have passed HMRC by.

To be fair, it works well in their Dream World.

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to lionofludesch
11th Oct 2018 08:01

“It's generally just a bloke writing up his books with a biro when he's watching the soccer on the telly.”

Erm, I think there’s a typo/autocorrection error, I’m sure you meant “football”. And don’t make excuses about confusion with Gaelic.

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to atleastisoundknowledgable...
11th Oct 2018 08:33

No - I meant soccer.

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By Briar
to lionofludesch
12th Oct 2018 13:19

No - you meant association football (the slang term for which is soccer)

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10th Oct 2018 19:03

And another thing .....

Ask HMRC how much training their staff get when they're given a new piece of software. Is it real training or a three minute youtube video along the lines of "Take a photo on your phone and upload it using the free app"?

If all this is going to benefit HMG, why aren't they prepared to pay for it ? Why are small businesses clobbered yet again with costs ? What happened to the promise of cutting red tape ?

There should also be a statutory reasonable excuse of "HMG insisted on me buying this crappy software which I can't understand." I would imagine that there will be a huge number of late returns in the summer of 2019 (and probably autumn and winter too). Not to mention the on-time returns which are wholly inaccurate.

Try not to swear during the meeting.

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By Tornado
11th Oct 2018 00:03

You could give them this URL

https://www.accountingweb.co.uk/

and suggest that they read the thousands of comments on MTD from people who really know what they are talking about, and then postpone the project indefinitely until it has been properly thought through.

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to Tornado
11th Oct 2018 07:59

Or just this link, which is the most succinct unemotional thread on it.

Actually, print it out, make everyone read it then say “Any questions? Let’s discuss”.

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to Tornado
11th Oct 2018 08:36

Tornado wrote:

You could give them this URL

https://www.accountingweb.co.uk/

and suggest that they read the thousands of comments on MTD from people who really know what they are talking about, and then postpone the project indefinitely until it has been properly thought through.

Yeah - why has it taken HMRC four years to get ready if they expect traders to train themselves up inside five months ?

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11th Oct 2018 08:37

How many words can you say in two minutes, ireallyshouldknowthisbut ?

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11th Oct 2018 09:59

Have you all read the report that Hammond may reduce the VAT level by 50% in his Nov Budget Statement. Imagine the chaos that will cause when/if it is approved in the Finance Bill and comes into law July next year when large numbers of small business have to register for VAT and MTD

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to bernard michael
11th Oct 2018 10:14

bernard michael wrote:

Have you all read the report that Hammond may reduce the VAT level by 50% in his Nov Budget Statement. Imagine the chaos that will cause when/if it is approved in the Finance Bill and comes into law July next year when large numbers of small business have to register for VAT and MTD

There'd be no chaos as it would be impossible to achieve in the timescale. It would double - maybe triple - the number of taxpayers I would have to nurse onto software. I doubt if there is sufficient slack in the profession to take up such a huge spike in demand.

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11th Oct 2018 10:01

I hope the session will be on Parliament TV Channel. I watched a session last year when MTD was discussed, a lot of critical remarks were made, but in the end I suspect it was the surprise GE that caused the postponement rather than any defects in the proposed system

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11th Oct 2018 12:46

Why the lack of publicity direct to taxpayers for such a major change .
One tweet a few weeks ago is just not good enough.

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11th Oct 2018 13:40

Hi thanks for all your comments which all help in terms of framing my comments.

I should point out I am not invited to the full select committee, this is a private meeting feeding into that process, I don't know exactly what I will be asked about right now.

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to ireallyshouldknowthisbut
11th Oct 2018 13:59

Re: your point 2.

Would it not make sense to have larger companies (graded by turnover) to start off with this - i.e those more likely to have accounts + IT departments - so as to test out any real-scenario gremlins? Then a gradual roll-out later on.

Good luck!

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to ireallyshouldknowthisbut
11th Oct 2018 15:39

Armed with these points, I'm confident you'll make a big impression, and be asked to appear before the full committee. You will let us know how you get on, won't you!

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to ireallyshouldknowthisbut
11th Oct 2018 15:59

ireallyshouldknowthisbut wrote:

Hi thanks for all your comments which all help in terms of framing my comments.

I should point out I am not invited to the full select committee, this is a private meeting feeding into that process, I don't know exactly what I will be asked about right now.

Oh.

So you're not going to be on t'telly.

I'd put together some notes for a short oral presentation and a longer piece that you can hand in for them to look at later.

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11th Oct 2018 19:58

I've just read the notes of a lords economic affairs meeting, held this afternoon, part of which was all about MTD. Most of our usual criticisms were aired

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By Tornado
to Jo Nokes
12th Oct 2018 09:38

I think they took my advice from an earlier post and read through the MTD osts on AWEB, even down to suggestions long ago that HMRC should be providing the software for MTD.

I am still certain that MTD for VAT will not be mandatory from 1st April 2018, see what you think -

https://www.parliamentlive.tv/Event/Index/1790e456-2970-4d5a-8488-800b5b...

EDIT : I am also still certain that MTD will not be mandatory from 1st April 2019!

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to Tornado
12th Oct 2018 09:18

Tornado wrote:

I am still certain that MTD for VAT will not be mandatory from 1st April 2018, see what you think -

I think you can be confident on that one.

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By Tornado
to lionofludesch
12th Oct 2018 09:39

lionofludesch wrote:

Tornado wrote:

I am still certain that MTD for VAT will not be mandatory from 1st April 2018, see what you think -

I think you can be confident on that one.

Yes I was right on that. Thanks for pointing this out.

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to Tornado
12th Oct 2018 10:45

I was surprised that no-one mentioned that HMRC can't get their existing systems to calculate folks' tax right.

How many SA exceptions are there now ? Well over a hundred.

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12th Oct 2018 19:31

Now, I promise, I am not denigrating you, however, if you do not already know, then ought you to be giving evidence in the first place?

"I am going to get a couple of minutes at best...".

Is it therefore really worthwhile?

No one could cram into a few minutes, a structured, viable and valid representation explaining to non-accountants and non-business owners how and why MTDfb is such an appalling concept.

Ergo: as before, one has to conclude, the H of L's Select Committee is a typical Government whitewash exercise.

The blind leading the purblind, I fear...

My written submission was filed before the cut-off date; as it was also submitted in 2017.

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to Michael C Feltham
16th Oct 2018 09:06

Thats a very negative attitude Michael.

There are 8 people giving evidence and a 1 hour session, that is the format we have, so by definition I will need to be succinct and to the point, and concentrate on core issues and not extraneous points. I wont be giving a presentation, but answering specific questions.

If you actually look at some of the recorded sessions you will see the Lords are pretty knowledgeable and well read on the subject and taking a very keen interest in matters. This is one of a number of sessions on the topic they have been having. This is one of the few bodies actually taking HMRC to task.

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to ireallyshouldknowthisbut
16th Oct 2018 09:25

Unfortunately, we've not seen much evidence of HMRC listening over the last three years.

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to lionofludesch
16th Oct 2018 09:47

Well quite, but its the job of the select committees to take them on, and they can only do that with evidence supplied by us lot.

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to ireallyshouldknowthisbut
16th Oct 2018 09:58

The evidence is overwhelming.

But it's being ignored by people with their own agenda to pursue.

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15th Oct 2018 11:55

Consider a longer lead in period for traders already registered. Particularly those who have been registered the longest.

New registrations wont then pick up the bad habits of paper and pencil

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15th Oct 2018 12:52

Point out to HMRC that being able to order a book off Amazon doesn't make you a Xero partner.

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16th Oct 2018 09:37

The committee met yesterday, I saw the whole thing on Parliament TV. It seemed to be a marketing session for Sage, who had a big cheese there. The guy from OTS was hopeless, and only one person voiced the kind of criticisms that you read on AW. Yes, some of the lords seemed to be clued in, but it was all very gentle and nothing was said that might suggest any kind of rethink was going to happen

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23rd Oct 2018 09:27

I feel that we have to move away from criticism and give ideas etc to make MTDVat work. So I agree much more publicity. Cost of software is really a non-starter if ones turnover is £85k+, just too small.

Softly softly approach for those who try. Those that dont penalties.

Whether we like it or not this is going to happen so in my view much better that the time be used to improve the experience

All new VAT registrations must go straight in does not matter about turnover. This means that those having trouble are old school.

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to pauljohnston
23rd Oct 2018 09:41

pauljohnston wrote:

All new VAT registrations must go straight in does not matter about turnover. This means that those having trouble are old school.

So anyone starting a new business from April 2019 will know how to use accounting software ?

That's a hell of an assumption.

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23rd Oct 2018 09:44

No rethink is going to happen because HMRC think this is the cure for its problems.

So now we have to make it work and all efforts should be directed at that.

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to pauljohnston
23rd Oct 2018 09:53

pauljohnston wrote:

No rethink is going to happen because HMRC think this is the cure for its problems.

So now we have to make it work and all efforts should be directed at that.

That doesn't justify your assumption.

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23rd Oct 2018 09:50

I did watched last night the Committee grilling the HMRC, in particular the lady in charge of MTD for business.

Lots of the complaints mentioned on AWeb were put to HMRC

- How is MTD for VAT going to close the tax gap. Answer - Arithmetic errors in manual records?????. Unrecorded sales.
- Has the OBR audited their figures on the expected costs to businesses of MTD for VAT. Answer - no but they have audited our tax gap figures
- When are the tax payers going to be told about this - letters are going to be sent - but no mention when.
- It is not a proper pilot as you not testing whether it is going to raise any more tax. Answer - the pilot is only to test the software. We are going to monitor the tax take from April next year.
- Six months can't be a serious timeframe to get everything ready, would April 2020 be much more sensible. Answer - we will be ready for April 2019, a significant number of software companies will be ready and our evidence is that businesses will be ready
- Isn't the six months deferment only for big business. No - Answer - not for profits are included which includes charities and local sports clubs.
- How are unrepresented businesses going to choose the most appropriate software - Answer - eventually the list of software is going to be structured so that you will know software for large or small businesses, industry specific software etc.

Regardless what was said to them, in their mind there isn't any problems and MTD for VAT is going ahead.

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30th Oct 2018 09:03

I note Lions comments but what I should have said is that all new business owners "will have to know how to use accounting software ".

HMRC have decided this is going to happen and my view is that if new businesses have to follow the new rules then this will make our job in bringing older businesses on board easier if only because we can spend more time with them

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to pauljohnston
30th Oct 2018 10:16

pauljohnston wrote:

I note Lions comments but what I should have said is that all new business owners "will have to know how to use accounting software ".

HMRC have decided this is going to happen ....

That's easy to say, Paul, but it's rather like insisting that every house owner must be a competent plumber, electrician and gas engineer.

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