MTD ITSA: What price is free software?
The swirling mass of information around Making Tax Digital for income tax has AccountingWEB tech editor Tom Herbert wrestling with some fundamental questions: when is free actually free? And when can you call software software?
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"For example, if you’re a hairdresser with a £20,000 turnover with £15,000 worth of expenses your figures are probably incorrect, with a rules-based nudge likely to state the equivalent of ‘if you submit this you’re likely to be investigated’. A useful tool without a doubt, but is this not… software? Or does software in this case mean the quarterly submissions, EOPS and final declaration filings?"
This is an interesting one which we have encountered before early on in Self Assessment. The parameters for this type of message seem to be initially set too broadly so these anomalies are flagged up in their tens, or even hundreds of thousands and HMRC will have no significant numbers of staff to look at them all let alone investigate any of them. The threat of investigation will have no teeth and probably not frighten anyone, particularly in the current circumstances where there is no normal whatsoever to any trading results due to the pandemic and anomalies galore are common.
Of course there are quite a few scenarios when £20k t/o and £15k costs might occur.
For example they just opened a new shop and have a lot of overheads for which 100% CA's are claimed.
Which is why 'rule based' nudges like this are essentially useless.
There are wide variations of cost and income and general metrics wont help you tell if the tax is right or not, only by looking in detail at the specific business will you find this out.
Moreover if HMRC publish the "we accept this number" parameters within 3 months there will be an under the table "HMRC cost guide" on the maximum numbers you can put into your expenses without triggering HMRC. Essentially legalising tax evasion...........which is presumably why they don't publish such a thing now as its really really really dim.
"download this it's free" Yep the download is free but you have to pay to make it work. "Upgrades" another scam and the list goes on. It's all a ruse to get you to pay for something that may or may not be needed or indeed be suitable.
I really can't see this going live in two years. I also think there will be many business drop out of VAT come April this year.
The Price of nearly everything is going up. Insolvencies increasing. HMRC can't either answer phone or reply to post at same time. England rugby not good. Still with the warm weather coming we can sit in the garden with half a beer instead of a pint.
The initial free or cheap offerings fot MTD VAT slid away very quickly
But in fairness to the suppliers it was really just onboarding and hope the clients are too inactive to move on
Some cheap offerings went way over 100%
There is no free option for someone keeping ledgers of their income and filing their tax return on paper every year because they don't own a computer or know how to work one.
Free software on it's own does not make the filing free, or comparable with the current process in cost. I recognise it's a very small subsection of the tax returning population, but they undoubtedly exist. My father does not use a computer and files his own tax return on paper every year. How are HMRC intending to offer him a free option per their ministerial commitment?
For the "don't own a computer or know how to work one" people, I don't see that digital record-keeping/filing is going to improve accuracy. If anything, using an unfamiliar system is going to increase the risk of errors.
Let’s start with software. HMRC is adamant it has no intention of offering its own MTD ITSA software
In my view, this is essentially where it where it started to go wrong.
HMRC should have created software for all of us to use for free that was designed to do exactly what HMRC wanted it to do and could be updated and improved as they went along so the same updates were sent to all users at the same time. HMRC could have used commercial developers to do the work for them but just ONE version of the Software for all of us to use is all that was required.
Interesting.
Whenever I attended an MTD event/webinar HMRC were adamant there would be free to use software available to gen-pop.
HMRC people delivering webinars are just told what to say and are not part on the process
Logically how can HMRC mandate developers to give away free stuff
As a reference I came up with this suggestion nearly six years ago -
https://www.accountingweb.co.uk/any-answers/universal-free-tax-accountin...
Let’s start with software. HMRC is adamant it has no intention of offering its own MTD ITSA software
In my view, this is essentially where it where it started to go wrong.
I agree that would have been nice, of course we were already part way there with SATRs, yes there is a free HMRC product but not if you are an agent and anyway the HMRC version is pants and your accounts prep software that you already have probably does the SATRs for not very much more money.
And thats the problem with HMRC providing free software, its probably not going to be very good (basic tools anyone?)
In the 1990's the taxman issued estimated assessments, taxpayers appealed, and the day before the commissioners hearing the accounts were delivered to the taxman. Then someone decided to simplify things and they came up with Simplified Assessing, where taxpayers submitted their own tax return by a certain date, or paid a fine. The taxman got loads of advertising paraphernalia printed that had SA in big letters all over it. Then it slowly dawned on them that this was not simplified. Quick huddle, few meetings, simplified was dropped, and the name was changed to Self Assessment so as they could still use the SA advertising posters.
I wonder when they will change MTD to Making Tax Difficult.
Find software for Making Tax Digital for VAT (via HMRC)
563 "Five-Hundred"
Find software that's compatible with Making Tax Digital for Income Tax
3 .... Three ( have to giggle at this)
Self Assessment commercial software suppliers
43
seems we have a long way to go.
I fail to understand why any developer would offer a free product
As you started Tom, no-one is offering it. Why would they? I don't offer free tax returns. My customers don't work for free either.
Its seem to be yet another HMRC claim that holds no water but is either (a) raised in naivety due to the general lack of any sort of business acumen of their top bods, or (b) more likely utterly cynically to depress the costings of the project.
HMRC also widely claimed there would be free VAT tools for the VAT filing. They don't exist either and the VAT is infinitely simpler to program.
Similarly the chances of filing quarterly income tax filings in 6 minutes is clearly rubbish, We wont have time to do any more than open the software, shrug at the data and press file.
Which I guess is why Google don't offer free search or email software or why Spotify don't offer free music subscriptions (to name but two companies).
Which I guess is why Google don't offer free search or email software or why Spotify don't offer free music subscriptions (to name but two companies).
But can you imagine:
I'm DoNoEvil Software Company Ltd and I offer free software and a portal to allow you to submit your MTD information.
I also have my customers who actually pay me.
Consider the letter:
From: High End Bespoke Kitchens Ltd
To DoNoEvil Software Company
Dear Sir,
Please could you provide a quote for details on all taxpayers who show a net taxable income exceeding 25K in any MTD quarter in the last 36 months.
or
Please could you provide a quote for sending our marketing information to all taxpayers who...
I am VERY concerned about where this is going and HMRC really haven't thought it through properly although it will probably be 5-10 years before the excrement hits the air moving equipment. Prior to that there will be some (easily dismissed) complaints until finally a whistle blower comes forward.
(Or there will be no free software at all - in which case there's going to be millions of very angry taxpayers in Q1 2024 instead...)
I looked at the three offerings as well when looking at the other thread
But given that HMRC seem to be stuck on the problem of partnerships and probably cannot even comment on jointly owned properties in various proportions, no software will pick up sensible figures without lots of human corrections if bank apps are the start point.
I also worry that suppliers are expecting more footfall than will happen until penalty demands start falling through the letter boxes of the currently unrepresented
An awful lot of tax returns go in on HMRC freeware with no logic review
'no logic review'......should be written on a post it and taped to the head of the whole of the HMRC senior mgmt team (and probably the cabinet minister responsible)
HMRC might get what they want with "free" software.....everyone being unrepresented taxpayers.
John the Plumber will sign up with "mickey mouse free software" and then find out that no accountant will help him with the year end.
Already we are seeing Accountants, using only QB, Sage or Xero and others withdrawing from the sole trade/landlord market.
And the tax take will only go one way.....and that's down.
Free Software would be great. Unfortunately, every software supplier coughs when I ask do you do one for cash traders with a restricted business bank account. I would be grateful if anybody out there knows of one
My plan was to scrape the API documentation to create a json file, from that auto-generate spreadsheets for uploading information and basically try to automate everything and leave the taxpayer with the sole job linking the cells in the spreadsheet to whatever external records system they had.
But I've shelved it for now for several reasons.
1. HMRC regularly and gratuitously make random changes to their api documentation that are completely non-functional but mean that I have to spend hours fixing the parser each time.
(Why they cannot publish a machine readable documentation of the API is beyond me - I suspect they already have it for generating the website!)
2. They've got a completely daft idea of how security should work, which means either the software supplier has to provide a portal (so that they can sniff all the data being sent to HMRC - I presume this is why HMRC were convinced to go with this model) or every taxpayer will have to register their own copy of the software. (The third solution is to (effectively) publish the key that the software uses)
I don't really care about this - and perhaps 4 million people trying to register their copy of the software/key with HMRC and do the "conformance testing" might make them see sense. I'm not willing to (try to) provide a portal.
3. While I was still wary of a possible early general election, I cannot see that happening now - which means MTDfIT will go live in April 2024 and there's a general election in May 2024. I cannot help but assume it will be delayed or scrapped in the run up to the general election (or there will be a promise to scrap it)
4. I'm only really interested in a very simple case - jointly owned property - which, itself, is still up in the air about how it should work, and while it won't be hard for me to provide spreadsheets to access all of the endpoints for everything, I don't pretend to understand what everything is about, let alone whether an auto-generated spreadsheet can actually do what is required to submit to all of the endpoints.
5. I have other interests. While we were in lockdown I had lots of spare time. Less so now so I'm not willing to spend time on this until I'm sure it will be useful.
FWIW, you can see my json description of the API (autogenerated from the website around August last year so possibly a bit out of date) here https://www.making-tax-difficult.uk/
Given the slow and user unfriendly interface of HMRC PAYE Basic Tools I am actually glad HMRC aren't trying to produce their own free software. I am however not glad about anything MTD related at all.