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Handwritten Accounts and MTD

Could HMRC stance be challenged.

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There's been a lot of discussion here lately about written accounts and MTD, and it got me thinking (always a dangerous thing!)  

Whilst I am not a big fan of snowflakes screaming human rights for the flimsiest reasons, I'm wondering if there is a case for it in relation to MTD?  I must confess that I'm surprised that written accounts are more prevalent than I realised, although still obviously a minority.  I'm wondering that if a business chose to challenge they had a right to rely on written accounts, as they have for xx amount of years, and that it would be a breach of their human rights to be forced into using excel or bookkeeping software, or having to employ a bookkeeper, whether they would be successful.

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By ijaz
07th Mar 2019 01:37

Don't Understand how so many accountants are joining the bandwagon of more advisory services and less compliance work in future. "Advisory services" is a very vague term and most SMEs and micro entities don't need them. They come to accountants for compliance,and tax planning. If new developments in AI will actually make all compliance work automated and so easy as making a phone call on a smart phone, then simply provision of advisory services won't safe very large number of accountants. This rhetoric that Accountants should embrace AI and focus on higher value activities and become business partner with clients, does not hold ground in reality. A large percentage of SME and micro businesses don't need another business partner.

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to ijaz
07th Mar 2019 13:17

ijaz wrote:

Advisory services" is a very vague term and most SMEs and micro entities don't need them. ...A large percentage of SME and micro businesses don't need another business partner.

If that's the case,m why do so many of them fail (40-80% in the first few years depending on who you ask)?

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By Mr_awol
to WhichTyler
07th Mar 2019 14:36

WhichTyler wrote:

ijaz wrote:

Advisory services" is a very vague term and most SMEs and micro entities don't need them. ...A large percentage of SME and micro businesses don't need another business partner.

If that's the case,m why do so many of them fail (40-80% in the first few years depending on who you ask)?

How many of those failed businesses do you realistically believe would have been saved by the 'advisory services' on offer?

I know a fair bit about most of my clients' businesses - but am I going to tell my farmers which crops they should be growing? My importers/exporters what goods they should be purchasing, from where, and who they should use for the shipping? My shopkeepers which stock is going to sell? These are the big decisions which might have saved many of that 40-80% - and what if some of them were just unrealistic dreams in the first place, doomed to an inevitable failure?

Accountants have been brainwashed by certain software providers into believing that we can promote efficiencies that make a real difference to our clients just by purchasing as much software as possible and it's b*llocks. Yes there are suggestions we can make in general areas, and advice we can give which will be valuable and help people new to business. Most of these firms offering 'advisory services' though are flogging the emperors clothes just to justify charging their 'gold service' fee.

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to WhichTyler
08th Mar 2019 13:19

Could be myriad reasons. Sorry to shout the obvious, but having an accountant doesn't guarantee business success.

Patisserie Valerie, Carillion, etc.

And in both cases you had both internal accountants running the business and external accountants auditing it.

As was said, most SMEs and micro entities simply don't need another business partner.

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07th Mar 2019 07:05

I have assisted various people in taking cases to the European Court of Human Rights including one which had accelerated proceedings and was declared admissable, but sadly was not won (RP v The United Kingdom).

To be a "human rights" issue it has to contravene an article of ECHR (you can try the UN charter up to a point, but it is the ECHR that is justiciable in UK courts and Strasbourg). I cannot think of a relevant article.

Article 14 is the one normally used for discrimination issues, but you would need to identify a protected characteristic that is relevant.

In any event I am making good progress with HMRC policy and the technical aspects of photographing Collins Books Accounts (they would have to be accounts with a good column structure) and analysing them through AI software to produce a balancing spreadsheet that provides the VAT MTD compliant digital records. It may be that using the columns nearest the hinge will be difficult (because of the way the image is distorted when the book is photographed), but at the moment it is likely (on the balance of probabilities) that this will be a practical option anyway.

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to johnhemming
07th Mar 2019 11:41

johnhemming wrote:

I have assisted various people in taking cases to the European Court of Human Rights including one which had accelerated proceedings and was declared admissable, but sadly was not won (RP v The United Kingdom).

Thanks John

I hadn't realised it had already been tested.

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to legerman
07th Mar 2019 12:27

legerman wrote:

I hadn't realised it had already been tested.


It hasn't been tested. I was merely explaining that, although I am professionally a computer programmer, I have some experience in litigation as a lay advocate (I have won cases in the Criminal Appeal and Civil Appeal courts as well as lower courts).

If you have a strong enough case for a particular individual or business it would be case to test from the perspective of an exemption anyway. I don't think it would stretch beyond those qualifications.

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to johnhemming
07th Mar 2019 14:44

Hi John - we have been using OCR software to place bank statements into spreadsheets. Part of this is to sort out the columns etc. I believe that there is a good chance that manual account books ("D" books) would fit into this type of input software also.
Where we come unstuck is dealing with A3 sized books - but that may just mean an A3 copier with a large enough platten.

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to mfbrown185
07th Mar 2019 15:40

I have successfully done it with a Samsung 8 Mobile phone. That is quite a modern phone camera, but not the most recent model. The book I tried it on is over 2 feet wide and just under a foot high. That does not fit with the An series of measurements. It is in fact bigger than A3. The aspect ratio is also different.

The challenge is getting the OCR processing software to analyse handwriting. What I want to do is to experiment with photographs of this type of accounting record to see how practical it is to generate MTD compliant accounts.

As others have said it greatly depends upon the quality of the handwriting. If, for example, numbers are written on top of each other in some form of overlapping manner then often the software will get completely confused.

There is also the possibility if there were enough photographs of accounts (I would need at least 100) to retrain the AI software behind this to do a specialist job of reading column based accounting books.

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07th Mar 2019 09:34

Pfft, take a picture, convert to PDF.

You can then convert the PDF to excel quite easily.

Bridging.

Job done.

Of course in reality, you only need do that if HMRC inspectors call and enquire about your procedure. For all the other quarters, I imagine you can manage to type a couple of numbers into a spreadsheet and file the return.

Do remember you are only filing the same numbers as now, HMRC do not know how you got there.

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to ireallyshouldknowthisbut
07th Mar 2019 11:47

ireallyshouldknowthisbut wrote:

Pfft, take a picture, convert to PDF.

You can then convert the PDF to excel quite easily.

Bridging.

Job done.

Is it that easy? My experience with OCR software has not been that good, especially trying to convert a scanned pdf to excel, which doesn't successfully format to excel. I've had no issues if the pdf has been produced from software.

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to legerman
07th Mar 2019 12:30

legerman wrote:

Is it that easy? My experience with OCR software has not been that good, especially trying to convert a scanned pdf to excel, which doesn't successfully format to excel. I've had no issues if the pdf has been produced from software.


I don't think it is that easy, but some of the more recent OCR software which tends to be provided on an SaaS basis has potential on the basis of experiments I have done in the past few days.

OCR for handwriting is much harder than for text and if there are too many errors then you end up in a situation where any correction work means you might as well start from scratch. However, on my initial work I think this is worth trying.

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to johnhemming
07th Mar 2019 14:07

I have found importing works "ish", but it depends entirely on the handwriting. We do import things like hand written expenses from time to time and it save keying in.

In column books you have a decent chance.

The point of the post was really to show that you can probably make your data "digital enough" to pass muster with HMRC's yet to be formed hit squad of "record keeping police". Of course as they don't exist, we don't yet know their parameters, but if they are anything like the current VAT inspections, none too bright i would hazard a guess, and given you get plenty of notice of a visit, you could key the damn thing into a spreadsheet anyhow before they show up!

Id probably still trust my calculator and the handwritten ledger as prime data.

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to ireallyshouldknowthisbut
07th Mar 2019 15:47

ireallyshouldknowthisbut wrote:

In column books you have a decent chance.

The point of the post was really to show that you can probably make your data "digital enough" to pass muster with HMRC's yet to be formed hit squad of "record keeping police". Of course as they don't exist, we don't yet know their parameters, but if they are anything like the current VAT inspections, none too bright i would hazard a guess, and given you get plenty of notice of a visit, you could key the damn thing into a spreadsheet anyhow before they show up!

Id probably still trust my calculator and the handwritten ledger as prime data.

I am currently experimenting with a Collins Cathedral Analysis Book 150/4/16.1
I have written in it myself using a black pen (my handwriting is not particularly good) and photographed a two page spread in one go with a Samsung S8 mobile phone.

It is very clearly dependent upon how well written the
individual numbers are, but it does work on a practical basis. I am currently writing the code to create a spreadsheet from the analysis of the OCR service. That, with a bit of luck, will include the formulae so it can tell whether or not the page balances or not. (which is a good first test as to whether the figures are right or not).

It tends to go wrong when two numbers elide into each other, but it even sometimes gets that right.

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to legerman
07th Mar 2019 14:47

Hi legerman - we have been using Able2Extract and whilst you do have to define columns and check that decimal points haven't been changed to comma's etc on the whole the input from PDF bank statements to Exel spreadsheet has been really good and we are using for small clients who put all of their trade through their business bank account

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07th Mar 2019 11:09

Requiring someone to do something they don't want to do is not an automatic breach of their human rights.

You need to identify what right you think has been breached, and I suspect you won't be able to. The exemptions have been included to cover those for whom a specific human right would otherwise be breached, such as religious freedom.

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to Duggimon
07th Mar 2019 11:52

Duggimon wrote:

Requiring someone to do something they don't want to do is not an automatic breach of their human rights.

You need to identify what right you think has been breached, and I suspect you won't be able to. The exemptions have been included to cover those for whom a specific human right would otherwise be breached, such as religious freedom.

Thanks. My thinking was along the lines of a mature business person, having used handwritten accounts all their life, suddenly finds they have to use a spreadsheet as a minimum. That's fine for the likes of those of us who learned when we were younger, but I guess a real challenge to those that haven't.

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to legerman
07th Mar 2019 15:56

I don't disagree with you that for many it will be a challenge, and an unreasonable one at that. The issue is just that it's not unfairly prejudicial against anyone other than people who do not use a computer, and the right to not use a computer just because you don't want to and never learned is not a basic human right that is protected.

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07th Mar 2019 11:16

HMRC would refuse to accept the accounts as having been delivered and penalise you with larger & larger sums and CT assessments until you comply - it's called the Barnier system

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08th Mar 2019 11:54

I do not wish to seem too naive, but is there any statute that bars the use of written accounts ...
or is it just a 'wish' of HMRC that we are impotent to challenge?
Even after all these years I still have no clear understanding, when I get to the heart of it, of the precise weight of Statute vs statutory instruments vs [HMRC] regulation vs [HMRC] guidance vs [HMRC] opinion.
For example, the justification for the current rather vicious retrospective attack on freelancers seems to be justified by HMRC on the basis that HMRC 'gave its opinion' some years ago.
Regardless of the ethical/moral views, is HMRC's flouncing of 'opinion' [which may well have bypassed individuals outwith the finance professions] a legal basis?

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to dgilmour51
08th Mar 2019 15:32

I shall try to keep this short.

What matters is what has the force of law. Some international treaties do have the force of law in the UK other than those relating to the EU or Council of Europe. I am currently suing the UK under the Aarhus Convention over a matter relating to Litter for example. That case is being heard by the UN.

Mainly, however, there are four sources of law that can be used. Primary legislation that goes through the three arms of parliament, Secondary legislation, delegated legislation or statutory instruments (all the same thing). This is normally an order by a minister, but subject to resolutions of the Houses of Parliament (either positive or negative). Unlike primary legislation SIs can be struck down by the courts. Then, of course, there is common law from the courts of record and finally you can from time to time take out cases of judicial review under departmental guidance. (Legitimate expectation etc)

The heirarchy is that statute (primary legislation) trumps the rest, SIs trump guidance and there is a complex interplay between common law, international treaties, guidance and SIs.

The rules for MTD as far as I know are a mixture of primary legislation, secondary legislation and departmental guidance (such as the VAT notices). What is relevant to developers and MTD is that a recent SI means they face fines of 3K if they don't send anti-fraud information to HMRC when MTD APis submit tax information. That comes into force soon (March or April)

Hence there is a law and to get more details you should read VAT Notice 700 22

https://www.gov.uk/government/publications/vat-notice-70022-making-tax-d...

However, I am in communication with HMRC policy about what processing is needed on manual records for them to the turned into "Digital Records" and will feed back on this on another occasion.

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By DJKL
to dgilmour51
09th Mar 2019 01:16

http://www.legislation.gov.uk/uksi/2018/261/regulation/7/made

see 32A re requirements re records requirements.

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to DJKL
09th Mar 2019 07:29

There are two important aspects of this from the perspective of scanning manual accounts:

The Value Added Tax (Amendment) Regulations 2018 wrote:

(8) The information specified in paragraph (3) must be entered in the electronic account for the relevant prescribed accounting period no later than the earlier of the date by which the taxable person is required to make the return or the date the return is made for that prescribed accounting period.


The original records can be made by hand, but must be transferred to an electronic account before the vat return is made.

and

The Value Added Tax (Amendment) Regulations 2018 wrote:

(5) The electronic account must be kept and maintained using functional compatible software.

(6) The functional compatible software must take a form approved by the Commissioners in a specific or general direction.

(7) A direction under paragraph (6) may also specify the circumstances in which functional compatible software may be used or not used.

Whereas scanning and analysing the records is in my view likely to fit with the above (because it will have a reconciled total) just scanning the records is in the long term and probably the short term unlikely to be enough.

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24th Apr 2019 23:17

Ive never seen such nonsense in my 40 year carear. The world has gone mad . Goodnight

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