Sadly SteLacca - it is the tip of a very large iceberg. There are now too many Revenue processes which are not fit for purpose. The farcical part in the main is that HMRC want to introduce online procedures but then revert themselves to writing letters in response. Typical example is that we now file Let Property Scheme disclosures online. We then wait weeks for a letter of acknowledgement & deal with that & payment by normal post. Then we receive a closure notice followed weeks later by a promise to look at it within 90 days and then a further letter asking for example " why did the rentals stop?" - Well I guess they could look at the SA Return showing a CGT computation on sale ! HMRC have literally no idea on integration of IT systems for any of their procedures.
Without considering the pro's & con's of the proposed changes, I find it somewhat strange that the Trade Body for builders is saying that many builders are not aware of these proposals. If the FMB has 8000 members then surely they must already know and perhaps the quoted numbers who "may not be aware" include many sub contractors who will be aware of it via the main contractor or paying agency . How many of the 2/3 are actually VAT registered? It is so easy for Trade Associations to blame HMRC but what exactly is the purpose of the FMB if not to keep members informed?
It never ceases to surprise me just how often letters come out from HMRC which when looked at carefully, seem to reflect the personal views & thoughts of the writer rather than reflecting the correct tax law & procedures. A case like this is, on the most simple cost benefit basis, complete madness. Frankfx makes a very valid point regarding cost and also who is the (in)competent person pursuing the case. Were HMRC seeking to consolidate their own thinking rather than the law on penalties and thereafter seeking use as a precedent? The protagonist within HMRC, you would think, would verify the actual legal standing before wasting time & money on things like this?
I wonder how mobility of staff would be monitored within the big 4 - Self Regulation for ethics & honesty? One week a big 4 accountant was a lead consultant for A Ltd at an audit client of a second big 4 firm. He then joins that second big 4 firm a few months later and is back at A Ltd as a senior part of an audit team. I appreciate that their should be conflicts of interest checks undertaken but all too often the word "should" seems to suggest "were not because ...."
We purged our database of old clients some 2 months ago & have written to existing clients 3 times to obtain positive consent as well as including opportunities to respond within our monthly newsletter. Our risk assessments are now completed & procedures are set down as a " Work in progress " which we expect to amend over the course of time. Our Engagement letters have been revised to incorporate GDPR. I suspect that in reality, smaller firms will fall into 2 distinct categories however. There will be those who accept the necessary burden and put in place the necessary compliance measures. There will also be those who are let's say less diligent and couldn't care less. The outcome I suspect will be like lots of compliance issues in that those in the first group - my firm included - will be the easy targets for any form of compliance check whereas those in the second group will prove to be elusive to checking and will have no hesitation in "disappearing" when the ICO comes knocking at their door.
With respect to the smaller practices which deal with mainly smaller businesses ( and I know that everyone has to start somewhere) it is quite ludicrous to imagine that (a) computer software firms actually know or understand what is required if the accounting process & tax is to be simplified (b) flashy dashboards impress accountants as much as they seem to impress the clients (c) clients using the software are actually capable of doing so properly and understand the consequences of getting it wrong. Having been in practice for over 40 years I have developed a realistic attitude to the client who walks into my office & says " I use eg;Xero, I do everything as I go along so everything is always up to date, my current accountant understands what I do but they are just too expensive". I apply the pinch of salt test which says that quoting fees on the basis of what the client tells you is a disaster in the making. You look quickly at the trial balance and see that the bank is not reconciled, there is no share capital or the profit & loss reserve is a million miles from reality. It does not tie up to the last years accounts because the user doesn't understand double entry so never writes off bad debts etc. But the user says he loves the coloured graphs and pie charts etc. The quoted fee if one was stupid enough to do this would be absorbed by sorting out the inherited mess and leave you with a big fat minus figure on your costings sheet when you finally write out your invoice. Some would argue that you might just extract the primary figures and submit them whether they are right or wrong and insist that all clients subscribe to your fees protection plan for the HMRC enquiries which should follow? This is a business model I have seen quite a lot sadly but it diminishes the concept of being professional in my view. I cannot see my position changing on this as feedback from our client database shows over 96% very good or excellent in terms of service and price value. At the end of the day cheap gets what cheap should expect.
The problem with joining the mediation process can be a conflict of interest surely. Common sense tells me that with most SME's an accountancy firm will act for the company as accountants , tax advisors or even auditors but will generally act on behalf of the Directors / Shareholders as well. Introducing the concept of mediation to clients is fine but being part of the process which can steer the process to a particular outcome does not sit comfortably. My 40 years in the profession has demonstrated that firms will favour or take sides with one party and that party is the one from where the favoured outcome will produce future fees for the accountant going forward. " Getting a slice of the action" is perfectly ok if the accountant is completely independent of the parties involved. To that extent it is a matter of educating the lawyers & marketing the value of using accountants within the process. I doubt the legal profession will take kindly to accountants taking bread from the mouths of them and their friends after all they have been trained to be adversarial.
It would be fair to say that the big picture of MTD is necessary and that whilst Government probably wanted it pushed towards the front of a Treasury agenda, common sense has brought a delay which from most practical standpoints is absolutely necessary. HMRC are now to be seen as a Service Provider & taxpayers as their customers but it is simply not possible for HMRC to provide a service for which they themselves do not have the tools and resources. I still waste far too much of my own & therefore HMRC time dealing with incorrectly issued P800's for clients who are in the SA system. We currently wait up to 8 weeks to receive a response to queries which is not because correspondence is in the post room but because HMRC's in-trays are not being reduced. In over 40 years in practice I am now starting to have sympathy with HMRC because they lack the resources to properly implement what is being asked of them. MTD will not make them type twice as fast and without decrying the work they do, there is little incentive it seems to implement & operate what they see as something which will only cause them more frustration than they already have.
In conclusion & with deference to the author, I love the idea that people have "poured" over the technical stuff rather than "pored" !!
Whilst not a regular user of this "service" I have recently had occasion to contact HMRC in response to an aspect enquiry on a particular client's tax return. The Tax Executive who had written to me in the first instance had raised a question relating to PAYE income & tax deduction as declared. I had the client's P60 in front of me on my desk which presumably for some reason did not tie up with information HMRC had from the employer but when I phoned, I was told that they would not discuss it with me as it was taxpayer information. I laughably said " In which case please don't write to an agent to ask questions if you are unwilling to discuss the response" The numpty on the phone then said " In which case do you want to cancel the 64-8?" A few respondents seem to concur with the view that HMRC prefer to deal with customers directly because they can challenge them without fear of contradiction.
My answers
I don't believe 2015/16 (as stated in the article) is relevant?
Are not the 3 relevant tax return periods 2016/17,2017/18 & 2018/19 ?
Sadly SteLacca - it is the tip of a very large iceberg. There are now too many Revenue processes which are not fit for purpose. The farcical part in the main is that HMRC want to introduce online procedures but then revert themselves to writing letters in response. Typical example is that we now file Let Property Scheme disclosures online. We then wait weeks for a letter of acknowledgement & deal with that & payment by normal post. Then we receive a closure notice followed weeks later by a promise to look at it within 90 days and then a further letter asking for example " why did the rentals stop?" - Well I guess they could look at the SA Return showing a CGT computation on sale ! HMRC have literally no idea on integration of IT systems for any of their procedures.
Without considering the pro's & con's of the proposed changes, I find it somewhat strange that the Trade Body for builders is saying that many builders are not aware of these proposals. If the FMB has 8000 members then surely they must already know and perhaps the quoted numbers who "may not be aware" include many sub contractors who will be aware of it via the main contractor or paying agency . How many of the 2/3 are actually VAT registered? It is so easy for Trade Associations to blame HMRC but what exactly is the purpose of the FMB if not to keep members informed?
It never ceases to surprise me just how often letters come out from HMRC which when looked at carefully, seem to reflect the personal views & thoughts of the writer rather than reflecting the correct tax law & procedures. A case like this is, on the most simple cost benefit basis, complete madness. Frankfx makes a very valid point regarding cost and also who is the (in)competent person pursuing the case. Were HMRC seeking to consolidate their own thinking rather than the law on penalties and thereafter seeking use as a precedent? The protagonist within HMRC, you would think, would verify the actual legal standing before wasting time & money on things like this?
I wonder how mobility of staff would be monitored within the big 4 - Self Regulation for ethics & honesty? One week a big 4 accountant was a lead consultant for A Ltd at an audit client of a second big 4 firm. He then joins that second big 4 firm a few months later and is back at A Ltd as a senior part of an audit team. I appreciate that their should be conflicts of interest checks undertaken but all too often the word "should" seems to suggest "were not because ...."
We purged our database of old clients some 2 months ago & have written to existing clients 3 times to obtain positive consent as well as including opportunities to respond within our monthly newsletter. Our risk assessments are now completed & procedures are set down as a " Work in progress " which we expect to amend over the course of time. Our Engagement letters have been revised to incorporate GDPR. I suspect that in reality, smaller firms will fall into 2 distinct categories however. There will be those who accept the necessary burden and put in place the necessary compliance measures. There will also be those who are let's say less diligent and couldn't care less. The outcome I suspect will be like lots of compliance issues in that those in the first group - my firm included - will be the easy targets for any form of compliance check whereas those in the second group will prove to be elusive to checking and will have no hesitation in "disappearing" when the ICO comes knocking at their door.
With respect to the smaller practices which deal with mainly smaller businesses ( and I know that everyone has to start somewhere) it is quite ludicrous to imagine that (a) computer software firms actually know or understand what is required if the accounting process & tax is to be simplified (b) flashy dashboards impress accountants as much as they seem to impress the clients (c) clients using the software are actually capable of doing so properly and understand the consequences of getting it wrong. Having been in practice for over 40 years I have developed a realistic attitude to the client who walks into my office & says " I use eg;Xero, I do everything as I go along so everything is always up to date, my current accountant understands what I do but they are just too expensive". I apply the pinch of salt test which says that quoting fees on the basis of what the client tells you is a disaster in the making. You look quickly at the trial balance and see that the bank is not reconciled, there is no share capital or the profit & loss reserve is a million miles from reality. It does not tie up to the last years accounts because the user doesn't understand double entry so never writes off bad debts etc. But the user says he loves the coloured graphs and pie charts etc. The quoted fee if one was stupid enough to do this would be absorbed by sorting out the inherited mess and leave you with a big fat minus figure on your costings sheet when you finally write out your invoice. Some would argue that you might just extract the primary figures and submit them whether they are right or wrong and insist that all clients subscribe to your fees protection plan for the HMRC enquiries which should follow? This is a business model I have seen quite a lot sadly but it diminishes the concept of being professional in my view. I cannot see my position changing on this as feedback from our client database shows over 96% very good or excellent in terms of service and price value. At the end of the day cheap gets what cheap should expect.
The problem with joining the mediation process can be a conflict of interest surely. Common sense tells me that with most SME's an accountancy firm will act for the company as accountants , tax advisors or even auditors but will generally act on behalf of the Directors / Shareholders as well. Introducing the concept of mediation to clients is fine but being part of the process which can steer the process to a particular outcome does not sit comfortably. My 40 years in the profession has demonstrated that firms will favour or take sides with one party and that party is the one from where the favoured outcome will produce future fees for the accountant going forward. " Getting a slice of the action" is perfectly ok if the accountant is completely independent of the parties involved. To that extent it is a matter of educating the lawyers & marketing the value of using accountants within the process. I doubt the legal profession will take kindly to accountants taking bread from the mouths of them and their friends after all they have been trained to be adversarial.
It would be fair to say that the big picture of MTD is necessary and that whilst Government probably wanted it pushed towards the front of a Treasury agenda, common sense has brought a delay which from most practical standpoints is absolutely necessary. HMRC are now to be seen as a Service Provider & taxpayers as their customers but it is simply not possible for HMRC to provide a service for which they themselves do not have the tools and resources. I still waste far too much of my own & therefore HMRC time dealing with incorrectly issued P800's for clients who are in the SA system. We currently wait up to 8 weeks to receive a response to queries which is not because correspondence is in the post room but because HMRC's in-trays are not being reduced. In over 40 years in practice I am now starting to have sympathy with HMRC because they lack the resources to properly implement what is being asked of them. MTD will not make them type twice as fast and without decrying the work they do, there is little incentive it seems to implement & operate what they see as something which will only cause them more frustration than they already have.
In conclusion & with deference to the author, I love the idea that people have "poured" over the technical stuff rather than "pored" !!
Whilst not a regular user of this "service" I have recently had occasion to contact HMRC in response to an aspect enquiry on a particular client's tax return. The Tax Executive who had written to me in the first instance had raised a question relating to PAYE income & tax deduction as declared. I had the client's P60 in front of me on my desk which presumably for some reason did not tie up with information HMRC had from the employer but when I phoned, I was told that they would not discuss it with me as it was taxpayer information. I laughably said " In which case please don't write to an agent to ask questions if you are unwilling to discuss the response" The numpty on the phone then said " In which case do you want to cancel the 64-8?" A few respondents seem to concur with the view that HMRC prefer to deal with customers directly because they can challenge them without fear of contradiction.