If it moves, tax it. I am sure HMRC would love to tax the billions in the drugs industry as well. In fact in many cases I am sure they actually do.
Stupid All Answers: an immoral person will always want to avoid actual taxes due with nonsense, not suprised they keep trying. Laughable how they thought going back to their "contract" and amending it, would change the result when clearly the substance of the transaction hadn't changed.
I recall being groomed to purchase a practice by a retiring accountant 10 years ago (I was a manager at the firm and I did want to own my own practice). I did want to buy it, but I really had no money/home to re-finance to even purchase the necessary first third value of the block of fees which was over £100k. In the end, I just set up on my own and managed after 5 years to have 2/3 of the value of the prior firm (money worth - not pinching clients!). I did purchase a small block of fees a few years later after starting, for £30k, just to see what it was like after a local accountant presented me with the opportunity - I saw it as a good way to get experience of the process for when I one day sell out. I must say, it was highly stressful taking on even just £30k of new business, with a sudden rush of lots of extra new clients to keep happy and move over to our systems, go around and meet and so forth all within say a month, all the while lookiing after my existing client base, even though it was done out of season: February. I am so glad I never did purchase the original much larger firm I was offered. It also meant I got to take on the clients I wanted, get my own name rather than taking on someone else's name and problem clients who had been groomed, or allowed to behave in certain ways I wouldn't put up with.
It must have been earlier than that, perhaps that is when they increased to £3k a year, in 98/99, I recall feeling lucky I didn't need the larger £3k loans that came out shortly after I graduated. I had a student loan for each year: 95/96, 96/97 and 97/98. In all three years I took the maximum, which was £1k a year! Seems so funny now. I remember feeling so sorry for those who studied for 4 years and ended up with £15k student loan debts in the early 2000s, that seems on the lucky side too now!
Taxable P11d benefits reimbursed so no tax due, or s336'd so no tax due. These no longer need reporting on form P11d. However, that was about 5 years ago! I think most of their time is spent thinking about and requesting things which are refused for good reason.
Our tax system is generally complex to create fairness and reduce the opportunities for tax avoidance.
There is a reason the previous owners sold out: they were making losses year after year (see their prior sets of accounts if you don't believe me), so unless they were going to get private equity backing (which some have - but many wouldn't want the stress) selling was the only option. Fundamentally, they hadn't learnt how to price the software properly and thought the price needed to be absolute rock-bottom, far below everyone else. On the plus side, having a rock-bottom price helped them get a higher sale price, as they then had more customers, so a more appealing purchase to the likes of IRIS. So in a sense, the fact that you are buying software that is really too cheap means of course it is going to be sold, the owners are building up a business for it to be sold. Those that want cheap software are always going to be vulnerable to that. Look what happened to all those tax payers that decided to use free VAT bridging software: most of those free providers have already stopped offering their service, or are selling something else the user's don't want. Avalara packed it in, and I understand datadear was bought by Intuit, who is closing them down in October.
I would imagine that a client that cannot be bothered to send all his purchases and receipts, he isn't going to be diligent at tagging every bank sale with a sales invoice and every purchase with a purchase invoice either. Equally, if the client hasn't kept the paperwork (or its digital equivalent) he is not entitled to tax relief on such expenditure in any case and so the bank transaction shouldn't be allowed on his tax return. I think a client is more likely to keep paperwork if he is told to by his accountant than go through the process of setting up a new bank account, setting up a bank feed, tagging all the transactions. only using that bank account and so forth.
I have always failed to understand why accountants want to do a sole trader's tax return from a bank feed/bank account, as opposed to obtaining sales and purchases data/documentation. There are numerous issues with doing the tax return off bank transactions:
1. There is a high risk the client is not going to keep the required legal income and expense documents if you are not checking them. A bank transaction is not legal evidence from HMRCs perspective of a sale or purchase, it is rather the payment of the sales purchase, not evidence of the actual purchase/sale that might have been on a different day. However, if you the agent or client has done the bookkeeping off the invoice and purchase records, then you know the records are kept. If you do the bookkeeping off the bank, and then try to match with purchase sales invoices, that will treble the bookkeeping time - you might as well just have done it off the purchase/sales to start with. By getting the client to give you the sales/purchases info or get them to do the bookkeeping themselves off those records, you are training him/her to keep the necessary legal documentation. It ensures you have not claimed an expense without the requisite legal documentation. This makes the client safe from a £3k/year fine for not keeping proper records.
2. You are doing 25% more bookkeeping for no reason, as perhaps 25% of the bank transactions are neither income or expenses, but such things as: drawings, loans, personal items etc etc that are not required for a tax return.
3. Using bank transactions assumes you are making use of the cash-basis for the tax return. However, the cash-basis is not actually the cash-basis, but a mixture of cash and accruals accounting. HMRC doesn't want to lose money, so there are accruals adjustments that are expected to be made, even on the cash-basis. This makes it more complicated that just sticking everything on the accruals basis to start with.
4. With a bank transactions, you need to ask the client for more information: eg What has that you bought from Amazon? Can you send me the invoice for the car you purchased? All that can be avoided if you only did the tax return off the legally required documentation to start with.
5. There are times when not all the transactions are in the bank. EG: a client fills the petrol tank, go to the till and the bank card isn't working. He cannot take the petrol back out of the car, so naturally he/she has to use a different bank account to pay for it.
Now, I can understand why you need the bank transactions if the client is substantial, say a pub for example, and needs a proper P&L and Balance Sheet for commercial reasons, so that they can sell the pub one day for example, and keep track of what is owed to suppliers, but for small-fry sole traders, that is simply overkill in my opinion, and not required for a sole trader tax return. Small sole traders just want their tax returns done, not P&L and Balance sheets that neither understand nor care for. In any case, where a P&L and balance sheet is required, you would enter the sale and purchases and then the bank only after that, so you still need to do the bookkeeping firstly from the sales and purchases documentation.
All five of the above problems are avoided and the bookkeeping completed much quicker if it is done off receipts and invoices. If a trader has a lot of invoices, say 100 sales a day from a till or online sales facility, he is well within his rights according to HMRC to use a summary total of the sales for each day, either a z-reading off at till, or similar daily sales report from an online sales portal.
I think the article has the wrong title: its should be about HMRCs calculation that should be checked, not that of the software provider.
If the software providers calculation of tax does not match that of HMRC, the online filing is automatically rejected by HMRC.
This is why HMRC asked for paper filings, for affected top-slicing relief tax payers. It wasn't possible to submit the correct electronic filing tax payable, as it would be rejected by HMRC.
My answers
Ditto for ministers of religion, they don't pay Class 4 NI.
Probably a euphemism for Making Tax Digital.
If it moves, tax it. I am sure HMRC would love to tax the billions in the drugs industry as well. In fact in many cases I am sure they actually do.
Stupid All Answers: an immoral person will always want to avoid actual taxes due with nonsense, not suprised they keep trying. Laughable how they thought going back to their "contract" and amending it, would change the result when clearly the substance of the transaction hadn't changed.
I recall being groomed to purchase a practice by a retiring accountant 10 years ago (I was a manager at the firm and I did want to own my own practice). I did want to buy it, but I really had no money/home to re-finance to even purchase the necessary first third value of the block of fees which was over £100k. In the end, I just set up on my own and managed after 5 years to have 2/3 of the value of the prior firm (money worth - not pinching clients!). I did purchase a small block of fees a few years later after starting, for £30k, just to see what it was like after a local accountant presented me with the opportunity - I saw it as a good way to get experience of the process for when I one day sell out. I must say, it was highly stressful taking on even just £30k of new business, with a sudden rush of lots of extra new clients to keep happy and move over to our systems, go around and meet and so forth all within say a month, all the while lookiing after my existing client base, even though it was done out of season: February. I am so glad I never did purchase the original much larger firm I was offered. It also meant I got to take on the clients I wanted, get my own name rather than taking on someone else's name and problem clients who had been groomed, or allowed to behave in certain ways I wouldn't put up with.
It must have been earlier than that, perhaps that is when they increased to £3k a year, in 98/99, I recall feeling lucky I didn't need the larger £3k loans that came out shortly after I graduated. I had a student loan for each year: 95/96, 96/97 and 97/98. In all three years I took the maximum, which was £1k a year! Seems so funny now. I remember feeling so sorry for those who studied for 4 years and ended up with £15k student loan debts in the early 2000s, that seems on the lucky side too now!
Taxable P11d benefits reimbursed so no tax due, or s336'd so no tax due. These no longer need reporting on form P11d. However, that was about 5 years ago! I think most of their time is spent thinking about and requesting things which are refused for good reason.
Our tax system is generally complex to create fairness and reduce the opportunities for tax avoidance.
There is a reason the previous owners sold out: they were making losses year after year (see their prior sets of accounts if you don't believe me), so unless they were going to get private equity backing (which some have - but many wouldn't want the stress) selling was the only option. Fundamentally, they hadn't learnt how to price the software properly and thought the price needed to be absolute rock-bottom, far below everyone else. On the plus side, having a rock-bottom price helped them get a higher sale price, as they then had more customers, so a more appealing purchase to the likes of IRIS. So in a sense, the fact that you are buying software that is really too cheap means of course it is going to be sold, the owners are building up a business for it to be sold. Those that want cheap software are always going to be vulnerable to that. Look what happened to all those tax payers that decided to use free VAT bridging software: most of those free providers have already stopped offering their service, or are selling something else the user's don't want. Avalara packed it in, and I understand datadear was bought by Intuit, who is closing them down in October.
Thanks for your reply Glen.
I would imagine that a client that cannot be bothered to send all his purchases and receipts, he isn't going to be diligent at tagging every bank sale with a sales invoice and every purchase with a purchase invoice either. Equally, if the client hasn't kept the paperwork (or its digital equivalent) he is not entitled to tax relief on such expenditure in any case and so the bank transaction shouldn't be allowed on his tax return. I think a client is more likely to keep paperwork if he is told to by his accountant than go through the process of setting up a new bank account, setting up a bank feed, tagging all the transactions. only using that bank account and so forth.
Just my opinion, maybe I'm wrong.
Am I missing something here??
I have always failed to understand why accountants want to do a sole trader's tax return from a bank feed/bank account, as opposed to obtaining sales and purchases data/documentation. There are numerous issues with doing the tax return off bank transactions:
1. There is a high risk the client is not going to keep the required legal income and expense documents if you are not checking them. A bank transaction is not legal evidence from HMRCs perspective of a sale or purchase, it is rather the payment of the sales purchase, not evidence of the actual purchase/sale that might have been on a different day. However, if you the agent or client has done the bookkeeping off the invoice and purchase records, then you know the records are kept. If you do the bookkeeping off the bank, and then try to match with purchase sales invoices, that will treble the bookkeeping time - you might as well just have done it off the purchase/sales to start with. By getting the client to give you the sales/purchases info or get them to do the bookkeeping themselves off those records, you are training him/her to keep the necessary legal documentation. It ensures you have not claimed an expense without the requisite legal documentation. This makes the client safe from a £3k/year fine for not keeping proper records.
2. You are doing 25% more bookkeeping for no reason, as perhaps 25% of the bank transactions are neither income or expenses, but such things as: drawings, loans, personal items etc etc that are not required for a tax return.
3. Using bank transactions assumes you are making use of the cash-basis for the tax return. However, the cash-basis is not actually the cash-basis, but a mixture of cash and accruals accounting. HMRC doesn't want to lose money, so there are accruals adjustments that are expected to be made, even on the cash-basis. This makes it more complicated that just sticking everything on the accruals basis to start with.
4. With a bank transactions, you need to ask the client for more information: eg What has that you bought from Amazon? Can you send me the invoice for the car you purchased? All that can be avoided if you only did the tax return off the legally required documentation to start with.
5. There are times when not all the transactions are in the bank. EG: a client fills the petrol tank, go to the till and the bank card isn't working. He cannot take the petrol back out of the car, so naturally he/she has to use a different bank account to pay for it.
Now, I can understand why you need the bank transactions if the client is substantial, say a pub for example, and needs a proper P&L and Balance Sheet for commercial reasons, so that they can sell the pub one day for example, and keep track of what is owed to suppliers, but for small-fry sole traders, that is simply overkill in my opinion, and not required for a sole trader tax return. Small sole traders just want their tax returns done, not P&L and Balance sheets that neither understand nor care for. In any case, where a P&L and balance sheet is required, you would enter the sale and purchases and then the bank only after that, so you still need to do the bookkeeping firstly from the sales and purchases documentation.
All five of the above problems are avoided and the bookkeeping completed much quicker if it is done off receipts and invoices. If a trader has a lot of invoices, say 100 sales a day from a till or online sales facility, he is well within his rights according to HMRC to use a summary total of the sales for each day, either a z-reading off at till, or similar daily sales report from an online sales portal.
Can someone tell me what I am missing?
I think the article has the wrong title: its should be about HMRCs calculation that should be checked, not that of the software provider.
If the software providers calculation of tax does not match that of HMRC, the online filing is automatically rejected by HMRC.
This is why HMRC asked for paper filings, for affected top-slicing relief tax payers. It wasn't possible to submit the correct electronic filing tax payable, as it would be rejected by HMRC.