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Awesome, just watched the MTD video.
Looks like the prefect system, with just a minor flaw.
So they just take a photo of receipts, click upload once a quarter, and HMRC systems will do the rest accurately and efficiently.
Now, I've seen a lot of receipts in my time. Even petrol receipts have a lot of numbers of them, of which only one is the actual purchase price, and the layout isn't consistent even across the same group. Many receipts (especially in poor old John's line of work) are hand scrawled and the numbers can be anywhere.
So even assuming a perfect OCR system, it would also have to be intelligent to work out which number is the actual receipt, and what that hand written scrawl actually means.
Unless, every quarter, poor old John will have to go through all those receipts, extract the right figure, and manually enter it. Surely not, that would be as big of a burden as the tax return, only quarterly, which goes against the whole ethos of making it simpler and less burdensome.
I don't know whether to laugh or cry at the MTD video
Is everyone is expected to have a smartphone now?
So John downloads a 'free' app. What free app is this? Will the likes of Sage, Xero, Iris develop a comprehensive app which they will then give away? Thought not. There will of course be some basic free offering from HMRC that is barely fit-for-purpose.
Let's picture it. John sets off to work in the morning. He stops at the petrol station. He buys petrol, sandwiches and cigarettes and it all goes on the same receipt - if he remembers to get a receipt that is. He needs to stand at the counter with a steady hand and carefully scan in his receipt, being careful not to contravene Article 115 of the General Traffic Regulations by using a mobile phone at a petrol station . Is the OCR really going to correctly identify the elements that relate to petrol, cigarettes and the sandwiches which may or may not be subsistence depending on the nature of his journey? Is it correctly going to know that there is VAT to reclaim on the petrol, but not the sandwiches? But John also uses his van for private purposes and the app will not know in advance what proportion of the petrol he can claim. He will need to log his business mileage later on somehow for the app to make a retrospective apportionment.
He needs to get on the road and also there are other people waiting for the pump. He will throw the receipt into the passenger footwell with the intention of dealing with it later on but in reality it will end up in a shoebox presented to his accountant at the end of the digital tax filing quarter.
And finally it DOES mean 4 tax returns a year. Once a quarter the app sends him a prompt reminding him to update his digital tax account. He makes sure that everything is entered and up to date (and presumably tax adjusted for private proportions etc) and then presses a button (presumably making a declaration).There will be a deadline for doing this with penalties for getting it wrong or late. THAT IS A TAX RETURN!
Separating fact from fiction
Thank you Jon-griffey for that wonderful discription of a typical accounting transaction. We will need many more similar fact-reports, to stand up to the imposed MTD craziness which is coming. Ministers at HM Treasury are going to take a lot of persauding that the fictional future pushed by HMRC is just that - fiction, not fact.
State sponsored marketing
I can't see why this is any different to what people have been able to do for a long while (apart from the uploading to HMRC bit - which I can't see is of any real benefit)
I just think it's lovely that HMRC are now giving free advertising to help support the online accounts packages (sorry apps).
@ taxwriter - rather pushed by Ministers/Treasury on to HMRC
As a former civil servant in a delivery strand of the Service, ie Inland Revenue, I can see a Treasury based policy wonk/political initiative when I see one. This has deffo been dreamed up by the connivance of the Treasury with impetus from the government of the day and pretty sure foisted onto the bulk HMRC as the necessary deliverer of its New Dawn. I actually feel sorry for majority of my former colleagues having to swallow and then promote this tripe, there being no effective opposition to impractical measures in the upper echelons of HMRC these days, having been supplanted by the "true believers" or placemen/ women.
How the hell do you get these people to see sense and row back from the barmy end of a possible good direction of travel, reign in the looniness and look to reasoned, tested, incremental, & manageable changes for everyone's benefit, over a reasonable timescale? Despite the hacking down and demoralisation of the Service, I bet the majority of HMRC would still be agreement with that and it might offer the best hope of the profession changing the speed and direction of the oil tanker if we can get most of the on board crew's assistance.
Making tax digital
And even little businesses can have work-in-progress, prepayments, and all sorts of exotic adjustments (exotic for HMRC). How on earth can you deal with these on a quarterly basis when it needs considerable adjustment at the present year end. Small businesses are not always simple businesses.
If the system is to be made digital, how do you confirm that the information HMRC has collected gives a 'true and fair view' of the clients trading position?