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Tax returns to go

Tax returns to go

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Appears he iis going to scrap then and move to a pay as you go system for the self employed.
I bought this up last year here as it was all to do with universal tax credit and was shor down.
Not sure how he thinks it'll work but then again he's never has any idea about the real world

Replies (66)

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By mrme89
18th Mar 2015 07:16

From what I have read they will not be scrapped. 

 

My understanding is that some information will be automatically populated from data already held, including employment income, pensions etc. 

 

The devil will be in the detail. 

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By 0098087
18th Mar 2015 07:35

Really that's not what wvery paper says. Self employed to pay tax monthly

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By 0098087
18th Mar 2015 07:55

Well I hope you are right. Seems to be done change in certain news organisations views. Sorry if I soubded rather loud. I hope it's not fir self employed as we will all be out of work

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By mrme89
18th Mar 2015 08:03

Like I say, Devil in the detail.

If it is how you describe above on a monthly basis, it will be interesting to see how HMRC handle it. For example, receiving monthly information - will this to enquiries into businesses with fluctuant or seasonal sales? HMRC already struggle to grasp how businesses are run in the real world.

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By 0098087
18th Mar 2015 08:08

Yes they do not have any idea do they

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By nogammonsinanundoubledgame
18th Mar 2015 08:14

I would not get too worried just yet

Historically, these sorts of changes end up with more work for the accountant, not less.

With kind regards

Clint Westwood

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By shogun
18th Mar 2015 08:17

without accountants they cannot

Hopefully small business owners will still need us to save tax. I doubt that they can scrap tax returns for traders because of the expenses. If they try to do that, it will create unprecedented chaos (see RTI) and more work for them, which they don't want. Let's remember that they have two objectives in everything they do: to collect more taxes and less work for them. And without accountants the tax system will collapse. 

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By MattG
18th Mar 2015 10:46

Loss of work for accountants? I think not.

I wouldn't worry about a loss of industry for accountants - digital self assessment returns have been around for years, yet there are still plenty of people who want nothing to do with them. Indeed I have qualified accountants as clients (who don't work in practice, or in tax) who pay me to do their returns for peace of mind.

It's speculation on the detail of course, but I suspect the sort of person who is happy to manage all of their own accounting software, interfacing to HMRC and/or go into the HMRC system and enter their own details would probably also happily do their own annual return - so no loss of business there.

The idea of PAYE details populating directly to the HMRC portal and being viewable by taxpayers and agents is long overdue, it always irritates me that I have to call to get copies of PAYE details. Whether or not the portal will actually work is another matter entirely!

Can't really see the monthly real time concept working very well for a lot of businesses. Businesses that basically just bill for a consultant's time in a fairly consistent manner may work, but anybody operating on the accruals rather than cash basis, with capital allowances, stock adjustments, etc. I just don't see it working.

On the subject of reducing complexity - most of the complexity in completing a tax return isn't actually shown on the return - it's working out what to put into the return. The self-employment pages only show a few figures, the real accounting and tax work is figuring out how much these figures should be - is that entertainment allowable? What proportion of interest on that shared use building is for business? What is the capital allowance for that car etc?

A simplified reporting model won't solve that, unless it is linked to an extension of the cash accounting model, perhaps in a flat rate VAT style - e.g. you are a mechanic, so you can deduct a flat rate of 60% of income as expenses etc.

Not much detail yet of course - so it remains to be seen what any of this will really mean in practice.

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By nogammonsinanundoubledgame
18th Mar 2015 08:30

Will be interesting to see ...

... the proposed time scale for implementation.  Sounds like a bit of a long haul.

Is UK a pioneer in this (perhaps guinea pig is better term), or are we following some other country's lead?

With kind regards

Clint Westwood

 

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By Bungo
18th Mar 2015 08:49

Pioneer or not

nogammonsinanundoubledgame wrote:

... the proposed time scale for implementation.  Sounds like a bit of a long haul.

Is UK a pioneer in this (perhaps guinea pig is better term), or are we following some other country's lead?

With kind regards

Clint Westwood

 

The Australian online tax system imports information from various places, employment summaries, superannuation, benefit information, private health insurance (it impacts tax in Australia).  That said, it is quite cumbersome to actually connect these systems together, which you have to do yourself and their tax forms are pretty hard to follow compared to a UK one.

There was also a pay as you go system for income not taxed at source, it didn't replace tax returns though, it was an estimate based on the previous year and then if the situation changed it was possible to write in and get an adjustment.

 

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Stepurhan
By stepurhan
18th Mar 2015 09:22

POAs and pipe dreams

Bungo wrote:
There was also a pay as you go system for income not taxed at source, it didn't replace tax returns though, it was an estimate based on the previous year and then if the situation changed it was possible to write in and get an adjustment.
So payments on account, but on a more regular basis?

Is this a serious proposal, or just a bit of fluff to excite interest in the lead up to the election? With a possible change of government in a few months time, Mr Osborne cannot guarantee even having the opportunity to implement this system. Given the trouble HMRC has dealing with every day reporting now I cannot see this going ahead. If a letter can take six weeks or more to get a response, surely a system that expects to receive two lots of information in that time is going to be unworkable. I expect this to be either scrapped if an opposing party gets in, or let fade away if the Conservatives take power again.

 

 

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By Expat24
18th Mar 2015 16:51

The French - in part

Bungo]</p> <p>[quote=nogammonsinanundoubledgame wrote:

... the proposed time scale for implementation.  Sounds like a bit of a long haul.

Is UK a pioneer in this (perhaps guinea pig is better term), or are we following some other country's lead?

With kind regards

Clint Westwood

 

The French system also pre-populates tax returns (paper or online) with information relating to gross salary, some investment income, CSG/CRDS tax paid etc so this does work but it doesn't fully replace the annual tax declaration.

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By Adrastea
19th Mar 2015 12:32

Some experience from The Netherlands

A Dutch client told me that The Netherlands tried pre-populating tax returns with details of bank interest etc.  My client received details of someone else's bank interest - a common occurrence, apparently.

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By 0098087
18th Mar 2015 08:34

I believe Sweden does pre populate from bank accounts. 

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Jennifer Adams
By Jennifer Adams
18th Mar 2015 08:39

How does this link in with the new penalty points system??

May I direct everyone to the consultation paper HMRC issued a few weeks ago on the proposal to withdraw the £100 penalty to be replaced with a system of penalty points.

https://www.accountingweb.co.uk/article/demise-100-penalty/572092

Under that article many accountants voted for retaining the £100 penalty on the assumption that the 31Jan deadline will remain.

How will the supposed none submission of tax returns link in with this proposed new penalty system?

I'm off to one of those Working Together meetings next week - I think I'll ask.

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By leicsred
18th Mar 2015 08:54

Can't see will change much

I can't see it will change much even if you do decide to link your accounting software, most people who come to us fall into two camps

1) Have no accounting software and don't want any - they want us to do it all for them - no interest at all in online accounting etc

2) People who do their own accounting but want someone to check it and make sure they haven't done something ridiculous.

I can't see how this will change that much, except maybe move away from the annual rush to a more review approach based on the 2nd groups accounting software. If that was the case that it is something I would welcome.

As said previously the devil is in the detail....

 

 

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By Michael C Feltham
18th Mar 2015 09:46

It's obvious, really!

Gideon's announcement today is simply a precursor to a Government desperate to get their profligate little hands on self-employed trader's tax monies, monthly!

Fact is whilst all leading politicians pay lip service to "entrepreneurs" and self-employment, in reality, they hate it and desire everyone to be captured by Schedule E.

Linking disparate streams from wholly different systems is never easy: let's face it HMRC failed dismally to integrate the income tax and NIC systems. Conversion protocols are extremely tricky: as we know from cross-system compatibility problems between say Mac and Windows OS. Once these host Office Pro, for example, data corruptions frequently occur. System-Integration is one of the most demanding IT disciplines.

The roll out of Self Assessment and the Current Year Basis took quite some time: as did self-employed taxpayers struggle (and still do!) with advance payments against the following year. One wonders what monthly payments and direct debits would be based upon?

Still, selfishly I shall have finally retired, well before the systems are actually (if ever) rolled out.

 

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By mgandc
18th Mar 2015 10:09

Reduction in time

I can't wait for clients to get on their high horse when looking at fees, well you charge me £x per year and it only takes 10mins now from 40 mins, was reported in the 'Sun/Times/Guardian'.

I want the fee reducing by three quarters......

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By MattG
18th Mar 2015 10:50

Harrumph!

mgandc wrote:

I can't wait for clients to get on their high horse when looking at fees, well you charge me £x per year and it only takes 10mins now from 40 mins, was reported in the 'Sun/Times/Guardian'.

I want the fee reducing by three quarters......

Have to have a good response ready I suppose, how about:

"But now I'm submitting/reviewing 12 monthly returns rather than one yearly one so......."

Or we could talk about value based pricing until their eyes glaze over and they give up!

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By Pavilionaire
18th Mar 2015 10:50

I see the proposed timetable for the phasing out of Tax Returns coincides with the staging dates for auto-enrolment for many small businesses.  Good luck with that everybody!

To me it seems too may reporting changes in too short a space of time. HMRC's track record on tax credits, RTI is already not good, yet that could be a drop in the ocean compared to the tax carnage that could result from the abolition of annual Tax Returns.

 

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By Pavilionaire
18th Mar 2015 10:54

I was also considering acquiring a local practice for 1 x Gross Recurring Fees.   The owner might like to reconsider his price in view of the fact it is a personal tax-heavy, paper-based practice.

 

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By Jekyll and Hyde
18th Mar 2015 10:54

If consulted, implemented and .............................

............... administered correctly and fairly I feel that something along monthly/quarterly filing lines would be far better than the present once a year return.

If we think along the lines of VAT returns and not RTI returns, then I can see a positive to every business producing a quarterly tax statement of account, with the final return of the year mopping up any adjustments. Each quarter a tax liability is calculated and payable (no different to VAT). Lets go the whole hog and make every business vat registered!

From an accountancy position this could end a lot of January work load issues by spreading work load throughout the year and it will provide a real opportunity to highlight the benefits of in year planning and advisory (although I suspect most one man bad businesses will not take this service up). Lets go further it will spread the costs of accountancy cover the year. 

In principle I am in favour, however I do see that penalties will increase as a result and also interest as well. Oh and the final issue for the poor performing businesses is that if the government administer it right, the figures presented to HMRC on a monthly/quarterly basis can also link to credit agencies and real time credit score adjustments made, or provided to the banks as part of future financing requirements.

Yes, more people will deal with their own figures with HMRC, but then again isn't that happening now anyway under the current system. With monthly/quarterly reporting (prefer quarterly) then I would argue there is more of a benefit to an experienced accountant helping the business. 

Having said all the above, just received an email stating that for a rate £5.30 per hour I can have all my book keeping and annual accounts (including dealing with all issues and submitting to HMRC and companies house) done including a free trial so I can understand the process and check the quality at the same time. So any change to the current system isn't going to stop changes to our industry sector.

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By Jimess
18th Mar 2015 14:48

Re: Jekyll and Hyde - End of deadline workload?

If you are thinking along the lines of quarterly returns are you not replacing the once a year January workload issues that currently have a 9 month effective lead time from end of tax year to latest submission date, with four quarterly workload issues? Or however many accounting periods HMRC think up?  If you look at the VAT model you have only a 30 day(possibly?) effective lead time from end of accounting period to latest submission date - how many clients still bring their information in the day before the filing deadline and expect the return to be filed on time? With the 9 month lead time you can spread the workload with a certain amount of planning.  I can't see HMRC giving a 30 day (plus 7 days concession for online filing) filing period for VAT and not try to apply similar logic to regular online filing of tax information. HMRC took the opportunity to shorten the end of year reporting for payroll from 19 May to 19 April with the implementation of RTI, so it is highly likely, in my humble opinion, that the filing deadlines for tax information will go the same way.  Lets hope they don't introduce some totally unworkable rules along the lines of the "on or before the date of payment" rules we have under RTI. 

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By vince8
18th Mar 2015 11:34

Quarterly tax payments??

As already mooted paying tax quarterly based on receipts, using a flat rate of tax after deduction of flat rate expenses, based on the type of trade. It will do away with POA's but balancing payment at year end (whatever that is) Annual accounts and an electronic tax return still required.

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By David Beaumont
18th Mar 2015 12:37

Am I missing something here?

If a small business submits a monthly return and claims say entertaining as an expense how will this be spotted and adjusted unless their adviser is sitting on their shoulder ? Will there be an annual 'mop up' return, a tax return by another name ?

Also say that the aforesaid business submits monthly returns and makes payments on them. If in one month they purchase a piece of 'kit' for say £20k and claim the AIA in that month. This could leave to an overpayment in the previous months which will need to be repaid by HMRC. This could become very unwieldy in very short order. Good luck to one and all on the HMRC 'helplines' 

 

 

 

 

 

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By 0098087
18th Mar 2015 12:44

Makes me laugh when they this govt has helped small business. Total joke

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By 0098087
18th Mar 2015 13:23

There we go. Tax returns to go. Man has gone mad

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By 0098087
18th Mar 2015 13:26

Wonder what trade I should go into.

Why anyone would go into accountancy now is madness.

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By darrenwilliams
18th Mar 2015 13:45

Reading the press release on HMRC website, just sounds like a nightmare for most of my business I act for, which are small business.

Import straight from software, just once a year. Does not sound much different from current but being sold as making like easier, how weird!

 

 

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By BKD
18th Mar 2015 13:52

Import what from software?

Calculations showing private use restriction to capital allowances, disallowed entertaining, expensed capital costs etc etc etc? I suppose that I can see it working - sort of - for small traders using the cash basis. But for everyone else, completely unworkable. What about those keeping manual records? (Yes, there are still quite a few of them out there.)

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By petersaxton
19th Mar 2015 01:50

Software

BKD wrote:

Calculations showing private use restriction to capital allowances, disallowed entertaining, expensed capital costs etc etc etc? I suppose that I can see it working - sort of - for small traders using the cash basis. But for everyone else, completely unworkable. What about those keeping manual records? (Yes, there are still quite a few of them out there.)

The bookkeeping software will need to take these into account.

There are some keeping manual records and they, or their accountants, will have to enter the information into the monthly accounts information with HMRC. That's getting rid of the yearly tax return and replacing it with a monthly return.

I think the sensible bit is having the tax account accessible to clients and agents and populated from employers and bank but there's still a lot that needs to be done other ways such as property rental income.

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By Matrix
18th Mar 2015 13:53

No change in information

HMRC will still require the same information calculated under the same rules, it is just the method of receiving that info.  I agree it will be a lot of work for us to learn at same time as AE.  Clients who already need help with tax returns will still need help since it is the calculation of the tax payable which is tricky for them, not populating the figures.  And many of my clients don't use HMRC online to check their taxes so would still need me to do that unless I educate the non-techy ones in the process.

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RLI
By lionofludesch
18th Mar 2015 14:15

Notion

I like the notion that every business has accounting software.

 

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By petersaxton
19th Mar 2015 01:53

No such notion

lionofludesch wrote:

I like the notion that every business has accounting software.

Every business would need accounting software in the future or have to input information directly to HMRC on a monthly basis.

The yearly tax return is dead.

Long live the monthly tax return!

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Locutus of Borg
By Locutus
18th Mar 2015 14:25

I'm really puzzled by this announcement

For over 10 years, people have been able to file their tax returns online using HMRC software at any point in the year.  Do it before 31 January and you don't get fined.

I acknowledge that HMRC's software didn't cater for all types of return, but it could deal with 80% + of cases that I came across.

HMRC's software has also pre-populated the state pension information for years.  Great if it populates the salary from RTI, but that's hardly a revolution.

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By pmcivor
18th Mar 2015 14:29

TAX RETURNS

Depends upon the detail of scheme . Accountants have been crying for years to end the 31January deadline nightmare. Impossible to access given lack of detail of the implementation but certainly interesting if not predictable!

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By paulb
18th Mar 2015 14:35

I want out, and this is just the kick up the AXX I needed - even if I think that it will be a mess. They will use us to clear up after them and train the general public for free at the cost of our own jobs, good bye to the small one man band accountants!

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By Simon Alderson
18th Mar 2015 15:00

Not much change in practice?

I can see them just saying they want the final details on taxable profits X months after the current year end date. Probably 9 months after to tie in with the limited company filing deadlines. In practice this isn't going to make much difference from an accounts point of view - most small non-incorporated businesses don't use dedicated software and so can't file like that anyway. Most other returns will have some complicated items that people can't file themselves - dividends on family company directors, property income etc and so in theory this should make our lives easier as we don't need to worry about P60s etc. In practice, I smell disaster on the wind.

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By buttinski
18th Mar 2015 15:48

P60s

Are these really a problem that justifies this nonsense?

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By petersaxton
19th Mar 2015 02:12

There's more to it than that

buttinski wrote:

Are these really a problem that justifies this nonsense?

There's a lot more than P60s that will be unnecessary. Everything will be done monthly.

Can they really expect the education system that churns out morons to be responsible for getting people who can get their accounts right? It will result in a lot of incorrect numbers flying around.

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By petersaxton
19th Mar 2015 02:00

Monthly?

Simon Alderson wrote:

I can see them just saying they want the final details on taxable profits X months after the current year end date. Probably 9 months after to tie in with the limited company filing deadlines. In practice this isn't going to make much difference from an accounts point of view - most small non-incorporated businesses don't use dedicated software and so can't file like that anyway. Most other returns will have some complicated items that people can't file themselves - dividends on family company directors, property income etc and so in theory this should make our lives easier as we don't need to worry about P60s etc. In practice, I smell disaster on the wind.

Where does this 9 months come in? Isn't the announcement going to be that accounts information is going to be filed monthly?

If self employed accounts are going to be filed monthly then it makes sense to do limited company accounts monthly. This will show dividend information.

They will still need the property rental income, etc. to be filed monthly, too.

You say there will be a disaster but I think the way things are heading HMRC will be receiving a lot of nonsense and wont care.

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By cparker87
18th Mar 2015 15:08

Positive

Well being only a few years into practice and early stages in my career I feel quite positive about the massive changes afoot. There are just too many variables to see that tax / accountancy advice won't be required. May be a good decade to buy out retirees at good rates. 

At least our headaches are little less than business' like Taxfiler!

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By ChrisScullard
18th Mar 2015 15:10

One minute George is saying 'the end of tax returns'.  Within 5 minutes 'the first £1k of interest income is tax free, unless you're a higher rate tax payer and then it's £500'. 

How on earth is this managed without some form of tax return?  I can only see that no tax is deducted at source (surely virtually everyone with enough savings to generate £1k of interest spreads it around), and so there would be tax deducted where required later.

The ideal mechanism to do this would be a tax return, but then there won't be one?

And how to HMRC automatically update online records for dividends, rental income, etc, etc?

I foresee either a watered down version or a total shambles.  Or both.

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By cparker87
18th Mar 2015 15:13

.

ChrisScullard wrote:

One minute George is saying 'the end of tax returns'.  Within 5 minutes 'the first £1k of interest income is tax free, unless you're a higher rate tax payer and then it's £500'. 

How on earth is this managed without some form of tax return?  I can only see that no tax is deducted at source (surely virtually everyone with enough savings to generate £1k of interest spreads it around), and so there would be tax deducted where required later.

The ideal mechanism to do this would be a tax return, but then there won't be one?

And how to HMRC automatically update online records for dividends, rental income, etc, etc?

I foresee either a watered down version or a total shambles.  Or both.

 

See https://www.gov.uk/government/uploads/system/uploads/attachment_data/fil... for a very brief idea. 

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By petersaxton
19th Mar 2015 02:05

Monthly

ChrisScullard wrote:

One minute George is saying 'the end of tax returns'.  Within 5 minutes 'the first £1k of interest income is tax free, unless you're a higher rate tax payer and then it's £500'. 

How on earth is this managed without some form of tax return?  I can only see that no tax is deducted at source (surely virtually everyone with enough savings to generate £1k of interest spreads it around), and so there would be tax deducted where required later.

The ideal mechanism to do this would be a tax return, but then there won't be one?

And how to HMRC automatically update online records for dividends, rental income, etc, etc?

I foresee either a watered down version or a total shambles.  Or both.

Bank interest income will come directly from the banks. The payment of tax would be calculated on a monthly basis by HMRC.

If companies have to submit data monthly then dividends would come from this.

Rental income could be reported monthly, too.

It will be difficult for clients and agents to ensure that the correct information is submitted on a monthly basis.

 

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By harvs123
18th Mar 2015 15:27

Get an Accountant!

Ex Pat wrote:

I notice this is all to be done online. Already RTI, VAT are online only. It seems that the government is making being online compulsory for all businesses and self employed. What exactly do they suggest for the one man computer illiterates? 

Get your accountant to do it for you?! It may be the only ones we have left to do so thank God for the computer illiterates I suppose!

 

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By petersaxton
19th Mar 2015 02:07

accountants

Ex Pat wrote:

I notice this is all to be done online. Already RTI, VAT are online only. It seems that the government is making being online compulsory for all businesses and self employed. What exactly do they suggest for the one man computer illiterates? 

Get an accountant!

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By justsotax
18th Mar 2015 15:17

Ex pat...

enter the local accountant...I would suggest

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By cparker87
18th Mar 2015 15:18

.

justsotax wrote:

enter the local accountant...I would suggest

Something there sounds wrong.

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By justsotax
18th Mar 2015 15:24

well the

government are asking us to bendover I suppose....

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