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MTD - MPs tried their best...

5th Sep 2016
AccountingWEB
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Call me sad but over the bank hol weekend (I know it seems a long time ago now) I sat down with the intention to work out the impact of MTD on my practice and clients. Husband was away and there was thunder and lightning outside so it seemed as good a time as any.

I was looking to create an 'information sheet' to give to my clients when I see them to go over their accounts or send to those whom I don’t see and also to place on my website. I met Tony Margaritelli at the Acctext earlier this year and he stressed the point that time is running out ( https://www.accountingweb.co.uk/tax/hmrc-policy/mtd-accountants-are-the-...)

There has been such a lot of bombardment of information since MTD was announced that I decided to go back over the more important documents. I started with the petition, the research briefing (pack) that attending MP's of the debate on the petition were given (Number CDP-2016/0015, 22 January 2016) and viewed the committee meeting debate online where MP's questioned David Gauke (now Chief Secretary to Treasury) https://petition.parliament.uk/petitions/115895.

I was looking for the answer to the question – why – what was the real reason behind the 4 quarterly tax return submission. Because we all know that however it's dressed up that is what it will be. What is the 'end game'?? All the way through my review HMRC kept coming up with the same comments - that taxpayers had been asking for certainty in the amount of tax they pay, that taxpayers were making what they term 'errors' and 'failure to take reasonable care' and because of this the tax take was much reduced. It was all about 'how customer service can be improved' and how wonderful everything is going to be and little about the impact on staff. The impact is now well known - significant savings will be made by closing down its remaining 170 offices and transferring to 13 large, modern regional centres. If you are an HMRC employee and do not live near one of the 13 ... then 'tough'. HMRC are expecting 23 million phone calls less under MTD.

So you have to look hard to find the real reason behind MTD and I found it in the Debate pack issued to MP's before their debate on the petition:

 "to simplify the payment of taxes, including whether to align payment dates and bring them closer to the point when profits arise, so that taxpayers make a single regular payment that covers all their tax affairs" and "The government is changing the tax system so that it operates much more closely to ‘real time’".

In other words, RTI on taxes which in the end will include VAT and CT. They are looking for monthly payments in a similar vein to the way payments are made to the utilities by using estimates until the final return is submitted. You can see why – they get their money spread over the year and won't have to spend so much on the DMB chasing debts.

Teresa Pearce (MP Erith & Thamesmead) went straight to the jugular in the Treasure Committee meeting on 25 March 2015 by asking George Osborne "Is that just the extension of RTI for everybody"? She never received a reply.

In the 'pack ' submissions by other bodies were quoted. Nothing from ICEAW or ACCA; CIOT were no help at all – they seem to be all for it. FSB are the ones fighting and the Business for Scotland group (never heard of them until now) were brilliantly scathing.

The viewing of the debate on Parliamentary Live was fascinating. I was pleasantly surprised as to how venomous the attending MP's were. Caroline Lucas (Brighton Pavilion) went straight to the point and asked for evidence that taxpayers weren't doing it right. Peter Kowle (Hove) in particular made a powerful and heartful speech against. Sammy Wilson (East Antrim) wanted to know what was the point?  A number queried the statistics saying 'it doesn’t all stack up' and nearly everyone asked for a delay.

So MP's are well aware of the problems and presented every single point that Accweb members have made. They tried to get the scheme roll out delayed. HMRC were made aware of the upset they are causing including the fact that broadband is not available for all but nothing is going to stop MTD. There may be tinkering about the edges but the result is that there is nothing we can do. MP's tried and they got no where.

David Gauke came across as a nasty bit of work, determined to get his own way. All he did was read out what we have all been told before (all 'errors' and 'helping clients know their tax bills' etc etc – the text being the same as in the consultation documents 'certainty', 'target guidance', etc etc) and mostly ignoring questions. In his closing statement he commented that under MTD seasonal taxpayers 'may be due a tax refund during the year'. Although he said that there had been no decision made but they were thinking about monthly payments. So there we are. RTI and monthly payments by the back door.

I will be finish my review later this week by considering the consultation papers and looking at the comments made by other Accweb members to find out what they are doing.

Meanwhile – do I have enough information to tell clients? Will telling them worry them? Most don’t even know they have their 'own' digital account and an 'information sheet' is too much at this stage I think. It has been confirmed that as well as a full consultation there will be practical testing so overall it's best to wait until that has been done before saying too much. It is also for that same reason that any response to the consultation needs to be submitted as late as possible (so long as the actual submission date is not missed).

So I will be tentatively mentioning MTD to my clients - trying not to frighten them too much. See how much they know so far. I can't see what else can be done at the moment. 

Replies (15)

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By RobertD
05th Sep 2016 22:02

I wrote to the financial secretary to the treasury (then Gauke) and received a reply. Interestingly within all of the guff about businesses having a hunger for digital and 5.3 million businesses using digital already the reason for MTD was given as mistakes in record keeping costing the treasury £6.5b. The tax gap was attributed largely to taxpayers not using agents. Funny as their new plan will, in their view, create more face to face dealing with the taxpayers. More errors then!
Interestingly, I was informed that "The government has made it clear that the annual nature of profits, taxes AND STATUTORY PAYMENT DATES WILL NOT CHANGE". A lie then?

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bike
By FirstTab
05th Sep 2016 20:17

Brilliant Jennifer. Thank you. You saved me the pain of reading on matters MTD. Even if I did, I would not have been any wiser.

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By cstwragby
05th Sep 2016 22:21

My own MP is also against this, he contacted the Treasury and got a "cut and paste" response about how wonderful it would all be. Disgraceful.

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By Martin B
06th Sep 2016 16:47

Good article- Although have had to really work hard to find out what MTD stands for.

Making Tax Digital = (MTD)

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By ming_the_reasonable
06th Sep 2016 20:14

Bravo. What a fantastic article!

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By Barry S Smith
07th Sep 2016 10:47

Excellent article. I think it justifies those of us of a more cynical nature who always believed that this was an attempt to have non PAYE earners paying on a more regular basis.

In reality the supplying of vast amounts of information to the Revenue on a quarterly basis has little credibility - are the Revenue going to employ thousands more staff to examine this data?

It is disappointing that the Revenue cannot be honest and admit that this venture is the first step in having these businesses paying on a more regular basis - why not extend the corporation tax quarterly payment system (based on the previous year as self assessment) to all companies and have the self employed pay 4 times a year instead of twice. That achieves the aim without intruding on businesses methods of bookkeeping and the likelihood that many businesses will simply "disappear" from self assessment.
As accountants we can sell more frequent payments to our clients (without undertaking more work - and increased fees which we will struggle to recover) and avoid the enormous disruption that MTD will inevitably create both inour lives and those of our clients.

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By draccserv
07th Sep 2016 11:40

Having read numerous emails and articles about quarterly reporting, I feel I am none the wiser.
When asked about the proposed changes, I am tempted to reply " how long is a piece of string?"

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By chatman
07th Sep 2016 11:57

Thanks for the article Jennifer.

BTW the MP for Brighton Pavilion is Caroline Lucas (not Carole).

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By North East Accountant
07th Sep 2016 12:39

Great article indeed.

Having just returned from their long summer recess, the lot making the rules have no clue at all of what it takes to run a small business.

A few self employed I have mentioned it to (none clients at this stage) said they'll officially cease and carry on as before but not bother putting any returns in as the government are making it too hard to earn a living.

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By Kernowlive
07th Sep 2016 14:20

I sent information about MTD to all my clients last April. Only four responded. Two said they would retire, and two that they would leave it to me to deal with when the time came.

Many of them will be badly affected but for now I expect it is too distant an issue to be a major immediate concern.

Whilst the longer the delay in implementation the better as far as I am concerned, the critical issue to my mind is how it is introduced. Too suddenly and there will be no way to cope with the extra work, and the outcome will be disastrous for many of the smallest businesses - and not good for the government either if the number involved turn out to be large.

If it can be introduced more gradually, whilst it might not be welcome, it may at least be more workable.

I did e-mail my MP ahead of the debate you refer to. I received no reply.

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By Riddler
07th Sep 2016 15:49

I never ceases to be amazed at how stupid politicians are, and how out of touch with the real world HMRC are.

The whole object of MTD is to get more tax in, and get it in quicker. Contrary to what those in HMRC's ivory towers might like to think, most taxpayers do not have a nice little savings account with next years tax liability saved away in it.

Of course if tax is paid earlier then it can't be spent in the High Street, with the obvious affect that HMRC will receive more tax, and less VAT.

HMRC will run around like headless chickens, totally unable to cope with the vast amounts of information flooding in. With any luck their system will overload and crash.

Cash trading will become rife, and honest taxpayers will be alienated by the stream of "fines" issued wrongly by HMRC.

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By rockallj
08th Sep 2016 13:51

If HMRC want earlier or more regular payments, then fine; but they should be honest enough to say so. I'm actually okay with this for myself and clients.

Let's pay quarterly or monthly on a voluntary basis (at least to start with) and give incentives, say interest, or 1% off the tax bill for doing so.

But leave the filing, reporting etc.. as it is, at least for another five years. Let the UK work its way through Brexit and the economic effects of that first.

I'm not against MTD in theory, but the timescales are unreasonable and unworkable as they stand for the smallest of businesses. Let the multinationals & plc bombard HMRC first with MTD and see how the HMRC IT system copes with that. Only at that point, should be "lower" levels of businesses to considered to be brought into MTD.

And finally, would HMRC PLEASE!!!! listen to agents' concerns and not either ride roughshod over, dismiss or ignore them. We KNOW our clients and the additional work and problems it will entail. Please HMRC work with us, not against us.

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By Vaughan Blake1
13th Sep 2016 14:15

My suspicion remains that it is Universal Credit which is behind this, as it was for RTI. I have seen in a number of places references to filing monthly, rather than quarterly in some cases.

Who are these taxpayers that would like to know their liabilities sooner? They are not my clients, or they would be knocking on my door in April with their records!

I suspect the question asked was a fluffy one along the lines of, "would it help you to plan your finances if you knew your tax liabilities sooner?" Answer, yes of course it would. I bet it didn't spell out the quarterly reporting bit though!

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By cfield
14th Sep 2016 11:23

Good analysis Jennifer. I watched that debate and they were my sentiments exactly, especially about David Gauke. It was a big disappointment seeing him promoted in the new Government. I had hoped Theresa May would get rid of him as an Osborne man.

What galls me most is the sheer hypocrisy of it. All this rubbish about the death of the tax return and how it's a natural progression that's going to make everyone's life easier like internet banking or booking holidays online, when the exact opposite is true.

I see now they've finally admitted that there will have to be a "catch-up" exercise once a year. Sounds very much like a tax return to me. These quarterly submissions will inevitably be rough and ready and simply sweep errors under the carpet. Instead of reducing errors, they will merely have the effect of facilitating and perpetuating them, or even hiding them as they will be difficult to spot.

The £6.5b tax gap figure is a load of hogwash. You've only got to to sit down and do some maths for 5 minutes to realise it can't possibly be true, given the estimated number of self-employed people and average incomes.

Most people are still in the dark on this. Interesting that there has been such little publicity outside accountancy circles given the short time-frame for implementation. I think they are trying to rush MTD through before too many people become aware of it. Make it a fait accompli.

However, I think it's a bit defeatist to regard MTD as a steamroller we can do nothing about. When it does become common knowledge, there will be such uproar from the public that the 100,000+ signatures on the petition will sound like a mere squeal of protest.

When that happens, I think there's a fair chance we may be able to get it made optional rather than mandatory, at least for an introductory period. It will then live or die by market forces. If people think it's the greatest idea since RTI, they will flock to it and enthusiastically download the app and take pictures of all their receipts (can't wait to do the next submission). But if they think it's a waste of their time and money, they will stick to their current methods. And why not.

Our other best hope is Theresa May. She seems a sensible woman not afraid to challenge previous policies. Perhaps she'll see our point of view on this and kick it into the long grass before it goes too much further forward.

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By 0098087
30th Sep 2016 16:07

Is this just the continuation of the Tories [***] the little guy. Nothing changes with them.

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