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I'll happily bet £20k at even money against any of these jokers in HMRC that this whole thing goes tiits up if they press the button on it going live any time in the next 2 years.
There is no way on earth that the MTD project will work. It is a completely flawed idea, that massively overestimates the ability of ordinary people to use software to navigate through our preposterously overly complex tax rules, massively underestimates the huge value of the work done by thousands of agents in turning often incomplete records into "proper" figures and massively underestimates the additional costs that will result.
Tax revenues will fall, the informal economy will grow and enterprise will be discouraged. In its own way, this will prove to be as misguided a policy as the poll tax, the Iraq war and HS2. We truly are governed by morons, aided and abetted by a grotesquely incompetent Civil service.
This from an organisation who had a basic VAT function switched off for 3 days, failed to make Class 2 collect properly via the self assessment tax return which ought to have been trivial in comparison, and seems incapable of processing amendments to corporation tax returns automatically.
It will all work WE PROMISE.
On the good news front, with no penalties for the first 12 months, the effective date of starting this is April 2019, not April 2018, so 2 years and not 12 months away.
This from an organisation who had a basic VAT function switched off for 3 days....
It was repaired on Friday but is broken again today.
Great article.
I am now even more convinced that the MTD team have been utilising a few unusual techniques in the way they have approached the MTD project -
http://www.wikihow.com/Wish-on-a-Star
-with a few group hugs thrown in for good measure.
Wonderful! Well worth a read. I particularly liked:
"Don’t wish to change another person. It’s impossible to control or change someone else . . . "
Interesting chat with a tax inspector today when dealing with an enquiry for a taxpayer that did their own tax return....
This guy was a struggling businessman and basically tweaked his numbers to get his taxes down. The client even volunteered to me that HMRC should make it compulsory that businesses have to submit their return via an accountant to take temptation away.
When I mentioned this to the Inspector and said "just wait for MTD" her reaction was very much that she agreed with the client view.
All in all enquiry wrapped up, underpaid tax of circa £15k, successfully argued to mitigate penalties down to probably around 35%. His next stop is probably an IVA or bankrupty.
What a mess and all because a plumber (not called John) decided to do his own thing using "free software" called the HMRC website.
I know for a fact that requiring some clients to report to HMRC more than once a year presents huge challenges. I have clients who have difficulty in getting information to me to expedite an annual tax return. Often I have to fill in the gaps for them of "incomplete records".
The north east where I live already has a large informal economy, and I suspect it is set to get even larger.
Why has seasonal businesses worries been ignored? For decades small B&Bs etc have worked flat out without respite during the holiday season and then correctly completed their accounts in November in the "Off Season". To complete a quarterly return in say July at the height of the season will require a major change to their business most likely requiring book keeping services (if you can find one in Cornwall) and costly technical equipment many of whom are not skilled to use. Some of my clients will close down because of the expense and technical challenges of MTD. They just don't have the mental capacity to cope with this major change. Please ask HMRC senior staff if they regard this as acceptable calatoral damage. No one in HMRC seems to believe this will happen. It will be too late once we see the evidence in 2019. Then there will be recriminations but of course those at fault will be able to hide behind Brexit as the reason these businesses collapsed. I have to raise my hat to them - they are a clever bunch with Teflon coated sloping shoulders. They have certainly done a number on my MP who is clueless and therefore takes the HM Treasury line. Why do I get the feeling my concerns and fears are not being addressed? Why can't we be told how all this is going to work and how easy it will be for the businesses I have mentioned above? How can I prepare for 2019 when I am totally clueless as to how any of this is actually going to work? Will I have to wait until June 2019 when my first return is due to finally find out what I need to do? Every answer to your questions talks about the future. Not one piece of concrete detail is yet in place. It would be laughable if it weren't so serious. People are worrying themselves to death and HMRC tell us absolutely nothing worthwhile. It is deplorable.
I agree. I listened to the Select Committee hearings where the National Famers' Union particularly mentioned the seasonal issues. Also what is the point in HMRC knowing what my expenses are 4 times a year when it is only what the final end of tax year position that decides my tax anyway and my expenses are not uniform throughout the year.
I come into self assessment in April 2018. So far the Finance Act 2017 is not even out and I cannot even see or beta test free any software.
April has 30 days so April 2018 is a little bit vague.
The whole damned thing is "a bit vague"!
I'm sure I read, somewhere in the HMRC docs, that it is periods starting from 6 April for self employment.
That then means anyone, self employed, t/o below VAT threshold, t/o above to be confirmed exempt amount, with a year ended 31 March 2019 will actually join from 1 April 2020.
Case in point of something that we can just about get our heads around but try explaining that to a bricklayer client!
I had an interesting thought last week. What group of people operate predominantly in an unincorporated business structure and with turnover in excess of the VAT threshold? Barristers, of course. That should be great fun for HMRC when they are the first group of people to receive penalties after the soft landing period. I wonder if the Treasury have realised they're inadvertently targeting that market?
And me -0 solicitor but also quite a few IT consultants - they are not all operating through companies. My brother too - mostly an NHS doctor but huge self employed income (closed his company last year when dividend laws changed). There are quite a lot of us like this out there - sole traders, paying heaps of tax and working 6 or 7 days a week often with children too and very very very little time.
In a sense this change is catching the good guys from April 2018 - those of us who pay a lot of tax, are over the VAT threshold, hide no income and are not incorporated so we the least experienced and with least time become guinea pigs - you could not make it up.
Do we know if quarterly returns will require stocktakes, WIP figures etc?
A prerequisite for MTD should be simplification - so we have just seen the longest Finance Bill ever. Joined-up thinking required at the top!
How can this work when AW informed me today that HMRC have got the calculations wrong for SA for this year and that they are forcing our software providers to match their errors or tax returns wont file. So now I am paying a software provider to create incorrect returns because HMRC can't follow their own rules.
And will MTD cope with the change to VAT once we leave the EU?
I will be within MTD from April 2018 (sole trader, over VAT limit, provide professional services). I don't like Excel and keep my accounts meticulously and every day in a "Word" document. My invoices are not saved digitally but I have paper copies going back 20 years. I don't use my mobile phone much. I don't choose to use an accountant.
So it will be a massive change for me. I would like now to get ready for next April to be able to download from the HMRC website whatever computer software it will want me to use, free of charge and get a bit used to it and use it in parallel with my existing system which I trust for the 18/19 tax year. No such luck. We will have to buy it. I detest and rarely use Excel so if these software products are linked to excel spreadsheets.... perish the thought.
I am not happy to buy any product and the fact HMRC are forcing purchases of expensive software on tax payers and not even allowing 100% tax relief for the cost of those products against the tax (I believe - article on it this week) does not fill one with hope that the points HMRC have made that this system will save us time and lots of money are true.
In fact had they just been honest and said it will be awful, very expensive, take you hours and hours to deal with but will increase HMRC revenue (but don't expect tax rates to reduce) that would have been a better original message, rather than suggesting it will allow us all to know what we owe ( we already know) and give us a wonderful privilege of choosing to pay tax early.
I bet it will take a lot of time up. At present if I incur an expense eg work rail fare, that night I open a word file and type that in in about a second, same when I invoice someone, no uploads, no cloud security risks, no pass words, no issue if I am not on line (UK has awful wifi - we had to raise here in our bit of outer Londion £12k from neighbours (I organised it) to pay to Openreach just to get broadband speed over 1MB), simple easy quick recording of expenses and then in January in about an hour I complete the tax return on line (and my VAT return quarterly).
I wonder if I can invoice HMRC at my hourly rate for every second of extra time this new system will cost me..... no chance.
So I have 9 months before I have to start using new software products I do not yet even own and yet we do not even have the Finance Act 2017.
As it is Accountants that mainly use on this site, it is good to see the views of a non-Accountant on MTD. Such views are few and far between due to the general lack of general knowledge within the small business community about MTD.
Your analysis of the situation is so good that I suggest you email a copy of your review to as many Government officials and MP's as you can. Their email addresses can be found with a little searching on the internet.
The 2017 Finance Act (2) will need to be debated in the House before the 20th July, so I guess there will be much thought about what to include even up to the last minute. Your independent views may well have some affect on the deliberations as this Government will be keen not to create troublesome situations that could lose it more support.