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Podcast: Making Tax Digital Special

25th Aug 2016
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Tom Herbert speaks to HMRC’s Oliver Fisher, Rebecca Benneyworth and the AccountingWEB team to discuss and analyse the government’s digital tax plans. This podcast is supported by Sage.

The government’s plans for digital taxation have come in for a fair degree of scrutiny since the release of the consultation documents designed to outline how the scheme will work in practice when it is rolled out to unincorporated companies, landlords and the self-employed in 18 months.

Naturally the accounting profession had plenty of questions about how the system will function in when faced with the complexities of real life they deal with on a daily basis, so to find out more AccountingWEB put some of these questions to Oliver Fisher, deputy director of Making Tax Digital.

Fisher staunchly defended the plans, stating that the USP for Making Tax Digital will be around the end of the annual tax return, replaced by digital record keeping. This will provide taxpayers with “a more effective and efficient” way of engaging with HMRC, allowing businesses to focus more on what they do best and less on “doing tax”.

AccountingWEB also spoke to accountant, tax lecturer and head of an independent advisory group on Making Tax Digital Rebecca Benneyworth. While Benneyworth has a number of reservations around the plans, particularly concerning the admin burden the quarterly reporting scheme, she was also positive about the opportunity it will give accountants in the ‘digital future’.

A full version of the Oliver Fisher interview will be on the site shortly.

Apologies for the sound quality of some of the audio, which is due to a faulty setting on one of the microphones.

Replies (10)

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Chris M
By mr. mischief
27th Aug 2016 23:01

Mostly drivel from Fisher. Apart from that, it would have been good to pin him down on what the HMRC definition of "accounting software" is - specifically I estimate 90% of my client base would assume that it includes Excel and similar spreadsheet packages. So does HMRC share this view of 90% of small business owners or disagree with it?

Thanks (4)
Chris M
By mr. mischief
28th Aug 2016 13:14

I feel I should add more detail than just "drivel". First off I want to deal with the use of "customer" which annoys me more every time I hear it. No buiness requires customers to wait 15 or 20 minutes on the phone and then at times cuts off 30% of them. Until this stops HMRC should cease using the term customer. In my view the terms taxpayer, victim, and mug punter are all more accurate.

Then we get - yet again - the drivel that businesses will see "benefits". I wish to raise a specific example:

I have a Lake District hotel client, run as a partnership. Sales roughly £750k, very profitable. Year end is 30 April. It has some bank funding and reports under GAAP to the bank every October.

The current system was set up by the client in Excel and has succussfully dealt with various VAT visits in the 10 or more years this partnership has run. The Excel system is robust and reconciles exactly to the bank statements each quarter.

Being a Lake District hotel, this client is flat out at this time of the year, rammed full of true customers not mug punters or victims. Yet of cours HMRC wants this client to file its first quarterly return right in the middle of this busy period.

The way I see Making Tax Diabolical, it can only result in extra expense for this client. More than that, if this client is forced to move its systems to "accounting software" then there is always the risk that the current well-understood and robust system breaks down, or balances are not accurately moved over.

So we are looking at higher costs and the risk of error when currently there is not cost or error. Will HMRC be footing the bill for this?

Because let me tell you HMRC that when I suggest system "improvements" to clients I do it on a risk-sharing basis. In other words I get extra fees if it all works, but if it actually went wrong I would be refunding some or all o the cost to the client.

That is what the word "customer" really means.

Thanks (7)
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By LAC47
29th Aug 2016 11:06

If the Exemption figure is to be based on turnover, it needs to be much higher.
The £10K figure would be fine if it related to profit instead.

Thanks (1)
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By LAC47
29th Aug 2016 11:09

The idea of HMRC insisting that details of property income be submitted per property is most disturbing.
It is hard enough to get clients with a small property portfolio to keep any records...they usually still rely on us for that.
The extra work and cost involved in submitting this info per property far outweighs any useful benefit this could provide.

Thanks (1)
Chris M
By mr. mischief
29th Aug 2016 19:11

Another key aspect of this is that the HMRC database can't cope properly with existing data volumes. For example, it is not capable of transferring data to the Tax Credits system and ditto the Student Loan system. So I have some clients who have to file the same data 3 times and get asked the same dumb questions 3 times.

If HMRC really cared about their "customers" they would be devoting system resources to sorting out this sort of thing instead of making things diabolical.

By their own numbers 42% of SA taxpayers filed their 2015 returns in January 2016. By definition these people, for whatever reasons, are struggling to submit data at current deadlines.

So the utter numpties in HMRC bring the deadline for the first submission forward 18 months and think that is going to work out OK?

It's just so dumb you are left lost for words.

Thanks (1)
Replying to mr. mischief:
Chris M
By mr. mischief
01st Sep 2016 11:29

In my view the way to reveal the HMRC false claims for what they are is to get specific not general. So I am going to post some specific examples from my own client base. In the absence of a credible response from HMRC, I am going to send these examples to Andrew Tyrie and invite him to raise them in the Treasury Select Committee.

My next client example is a husband and wife property business. They both have senior roles in the nuclear industry and in 2009 bought a down at heel building and refurbished it into a high specification Lake District bunkhouse. Annual sales roughly £25k, and in the next year or two the tax losses arising from the initial investment should be used up.

Records are kept on Excel by the clients and are robust and accurate. As with the hotel above, unless I am missing something this client will be looking at BOTH increased accounting cost and business risk if records are forced to be moved to "accounting software".

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Chris M
By mr. mischief
03rd Sep 2016 14:01

My next example is a Lake District restaurant, which has been successfully in business for over 20 years. It is VAT registered in the flat rate scheme, sales of about £120k per year.

When I got this client, it was clear to me that the owners had an excellent handwritten book-keeping system, and also were not internet or computer savvy. This remains the case, we have face to face meetings and I am careful not to routinely communicate by e-mail.

Once again, I can see no benefits whatsoever for this client in being frogmarched onto accounts software. I can see extra costs, and I can definitely see risks that a robust system goes wrong if the clients decide to "have a go" at the software themselves.

This thread up to now is notable for the complete absence of any response from HMRC. Note I will presume then that HMRC concurs with my view on the impact of MTD on these clients and I will emphasise this when I contact Mr Tyrie.

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Chris M
By mr. mischief
07th Sep 2016 18:13

Today's example is a successful physiotherapist, sales of £100k. One of her best friends does the books. She keeps an excellent manual cash book system which always balances to the bank and is well analysed every year. However she has a big phobia with computers and my suggestions to automate the system have been politely declined. I've not pressed the issue because the records are excellent.

So as I see it a business like this now faces a TRIPLE WHAMMY:

1. Higher accountancy fees.
2. Needless business risk in moving to software.
3. Needless relationship risk when the staff person is told about the change. She will get very upset about this.

I can see NO benefits whatsoever for a busines such as this, only risk and upset and higher cost. Where are HMRC in this thread? They were full of verbose drivel in the webinar, they must surely be looking at the responses of those valuable customers of theirs?

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Chris M
By mr. mischief
13th Sep 2016 15:20

Today's example is a business which in fact is exactly where HMRC would like it to be - fully on Xero. I hasten to add this is not on my advice, I am doing the corporation tax return for a book-keeper friend of mine.

The director of this £300k company has set things up with the help of the book-keeper. It's a bit of a car crash.

Obviously payroll is a bit dodgy, that goes without saying as it is Xero we are talking about. It's very unclear what VAT returns have been done, the Xero menu lets you look back a year and I want to look back 2.

There was a £10k credit to fixed asset disposals which turned out to be sales!!

The owner had taken it upon himself to reclassify the Corporation Tax charge account from profit and loss to the balance sheet. So that improved net profit by £20k or so, so at least I have to give Xero full credit for delivering their marketing pledge to help business profitability!

This stuff is just the tip of the iceberg. In my view MTD is going to result in us seeing a lot more of this, as clients decide to "have a go". On the one hand our quotes will be pretty steep for doing a proper job, on the other you've got cowboys saying it is "easy peasy" with their slick marketing gimmicks and flashy dashboards.

The dashboards look great. It's when you look under the hood the trouble starts.

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Chris M
By mr. mischief
14th Sep 2016 06:59

Oh and I have just spotted the owner got confused with the way Xero explained the flat rate VAT scheme and underpaid £7k. But I am sure HMRC will be just fine if every small VAT-registered business forced into dodgy software at gunpoint pays £7k less VAT every year.

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