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Chancellor calls time on annual tax return

18th Mar 2015
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Chancellor Osborne announced in today's Budget 2015 speech that the annual tax return is set to be phased out within five years.

The revelation was leaked this morning but fleshed out in detail during the hour-long speech. It's outlined in the government document 'Making Tax Easier'.

HMRC will instead collate the tax affairs of taxpayers from employers, banks, investment firms and other third parties into a single, digital tax account.

For businesses, HMRC and Companies House will be streamlining the process to register a new company and sign up for taxes by May 2017. 

In addition, during the summer the government will consult on a new payment process to enable tax and NICs to be collected through digital accounts instead of self-assessment.

By early 2016, all of the UK’s 5m small businesses and the first 10m individuals will have access to their own digital tax account.

The Chancellor said the move will reduce the time it takes to deal with HMRC from an average 40 minutes a year to 10 minutes. The changes will mean receipts and documents won't have to be collected by taxpayers throughout the year.

According to David Gauke, financial secretary to the Treasury, this is one of the "biggest ever changes to the way that people manage and pay their taxes".

Some AccountingWEB members are split in opinion about this change. Some are worried that it will drive business away from accountants, and others say that it will create more work. 

Commenting on an Any Answers post this morning, Shogun said: “Hopefully, small business owners will still need us to save tax. I doubt that they can scrap tax returns for traders because of the expenses. If they do try to do that, it will create unprecendented chaos and more work for them which they don’t want.

"Without accountants the tax system will collapse."

ACCA's head of tax Chas Roy-Chowdhury said giving taxpayers a "holistic view" of the tax they pay is welcome news. 

But, it must be done properly. 

He said the announcement "is part of the government’s push to get the tax payer to do more as HMRC’s resources continue to be squeezed by 5% cuts year on year. A change of this magnitude must be properly planned to ensure there are no problems with the roll out.

"It is imperative the public are able to embrace the move to a digital tax future if the government aer to be successful in this scheme."

In particular, those still filing paper returns must be given the right tools, support and guidance to transition to digital to ensure they are not left behind.

AccountingWEB tax policy editor Rebecca Cave took a sceptical stance: “We know with RTI that when information it gets to HMRC it goes through a series of Chinese whispers and ends up different to what you submitted.

“If that can go wrong with PAYE data, imagine what else could happen. They’ll put that in an electronic account and tax you on it without you signing anything. They do seem to be trying to run before they can walk, because we know it doesn’t work at the moment.”

There are many questions still unanswered, such as one posed by Jennifer Adams: "How will this tie in with the new penalty system?" Rebecca Benneyworth commented that this policy will require a "big" consultation.

AccountingWEB will be keeping a close eye on this for further developments.

Replies (102)

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By Vaughan Blake1
18th Mar 2015 14:05

Whilst in a parallel universe....

Self-employed claimants of Universal Credit will be doing monthly accounts!

I expect that it will work in the same way that enables subcontractors tax returns to be pre-populated with their CIS earnings, so no worries.

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By EasyTaxWMid
18th Mar 2015 14:11

Thanks technology & cloud storage.
Chipping away year-on-year for the need for small practice accountants. I said that there would be a tie-in to HMRC's system at some point - well it's happening & all compliance work is under threat. As long as some accountants think it's great, it will continue. Assisting with the downsizing of practice? Yes, certainly sir.

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By GW
18th Mar 2015 14:36

Extra work

EasyTaxWMid wrote:
Chipping away year-on-year for the need for small practice accountants. I said that there would be a tie-in to HMRC's system at some point - well it's happening & all compliance work is under threat. As long as some accountants think it's great, it will continue. Assisting with the downsizing of practice? Yes, certainly sir.

 

I see this generating more work sorting out the mess rather than reducing our workload, how many clients do you have with accounting records complete and accurate enough to feed data straight into a tax return?

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By EasyTaxWMid
18th Mar 2015 15:23

Most of them
I do hope you are right, the majority of my clients are under 30 (I am 34). Most of them could bring a shuttle down with their smart phones! I get pdf's fired to me left, right & centre. With only EOYA to do & filing, I know under an ever forced cash accounting/fixed allowances environment, the linked bank feeds & data migration could remove that. Many of them don't realise how close they are to being able to do it now (obviously not all could be bothered). I have seen off site storage & cloud usage develop ( I have I.T. background also ), it is evolving in a terrifying manner. I do have a friend who's clients are all completely disorganised, but most of them are of a certain age. I mentioned this years ago & people said that it would be impossible for HMRC to link a live bank feed into their system. I informed them that in a few years it would be fairly easy to implement - there she blows! The writing is on the wall. Organisation is easier to kids who carry their filing around digitally in pocket. App's a plenty for records - that will no doubt tie in.

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By Donald6000
18th Mar 2015 14:29

We are all dispensable

Sooner or later they will find a way to do away with all of us just as they have found a way to do away with the HMRC itself. For so long as they get a drip feed of receipts from PAYE they will not be interested in who has to punch in numbers and create profit and loss accounts and tax computations.

I find it so amazing that the amount of tax which has been lost from all these gizmos of ideas is utterly incalculable. They have an acceptance of the fact that their tax collection methodologies will now only raise so much and are really letting any compliance work go to hell. At the present moment, I don't believe that anyone higher than a clerical assistant inputs tax returns and now even that small amount of effort will be denied whilst we are expecting a lot of unqualified (accountancy wise) trades people will input their own accounts.

It's not self assessment, it's self assisted tax suicide and a self collecting tax regime run by machines. No wonder the fiscal regime in this country is going down the pan. A half baked idea if ever there was one and it throws the whole idea of compliance down the toilet, where HMRC already resides.

 

 

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By rib
18th Mar 2015 15:27

re We are all dispensable

While in truth HMRC should pre-input details where they already have them (much as they already do with state pension information) and increase efforts to take simple cases out of self-assessment I don't follow the logic of abolishing the annual tax return outright. It adds to the climate of laissez-faire which as Donald points out with his trades people example might already albeit in relatively small part be responsible for disappointing tax takes. An annual focus is no bad thing for some of our less motivated clients. 

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By EasyTaxWMid
18th Mar 2015 15:48

Client realities.
The only clients to really be picked up are the ones who want nothing to do with the process or the remaining few who want to do things by 'the book'. In reality, many people just make up figures & process them by themselves. HMRC are trying to combat people who don't do their returns - these are often the people who just couldn't care less & how many investigations does it result in?? So HMRC resorts to trying to trip them up with other processes which require current SA figures. There will ALWAYS be people who want to outsource this element, but everything possible is being done to strangle this client stream. HMRC are just working on averages & to hell with the details.

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By mcarey25
18th Mar 2015 14:41

This will take away most of accountants work, but yet on the other hand i suspect a lot of errors and mistake to be done and also to top it up clients may end up loosing by not knowing if they have claimed all what they are entitled to claim. Only time will tell......

 

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By vince8
18th Mar 2015 14:42

Accounting software

So its proposed that the self employed with feed in their taxable income from their accounting software, direct to their HMRC digital account. They will also have the option to pay tax regularly to ease the burden. Still plenty of work here then eh??

The main headline that tax returns will cease is really aimed at the employee population, since presumably there will a direct link from RTI and employer returns to the digital account,which is what lots of people are expecting anyway.

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By AJ05
18th Mar 2015 14:47

Is it a waste of time and resources?

@Donald600 @ EsayTaxWMid- In your opinions will it be a waste of time and resources to embark on a career in tax? i.e with a view to setting up a small practice focusing predominantly on OMBs and the self employed?

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By EasyTaxWMid
18th Mar 2015 16:37

And breath!
While we are venting on this site, over something that is quite serious - it would be foolish to say there is no career in tax! Death & Taxes my friend. Governments change, policies change, markets emerge & markets disappear. A bigger threat to my client base was the forced payroll element of many agencies (no longer offering CIS payments to 'subbies'), driving them into the arms of umbrella companies & PAYE. But as one door closes..... I found most of the former self employed 'subbies' wishing to go LTD - thus actually increasing my overall fees. Take payroll for example - RTI & it's many wonders , have created income streams from clients who formerly dealt with their own payroll. Things change all the time. Please don't be put off too much, but be aware that knowledge is a flow - not just a stock, things are never static for long.

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By Ian Anderson
18th Mar 2015 14:48

What's the panic?

Although the numbers are going to be collected from other sources - RTI, banks, pension providers - the self employed will still need accountants to prepare the figures and submit them. As most of us will have found out, if some tax payers try to carry this out themselves they end up in a mess and we have to bale them out. Additionally, if the information providers or even HMRC process the figures incorrectly it will be ourselves who will have to sort that out - extra fees?

 

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By johnjenkins
18th Mar 2015 14:50

Great News

but nothing really surprising. I have always said that eventually Accountants  and HMRC roll will be reversed. The quicker the better. Does anyone honestly think that we will lose business if HMRC start producing profit figures based on digital downloads?

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By petersaxton
18th Mar 2015 15:20

Sensible

There will be less hassle in future.

There's no need to report small amounts of interest received and even employment income.

This will mean mainly self employed and people with buy to lets will need to complete tax returns, Also capital gains, overseas income and dividend income. I dont deal with trusts so its not a problem for me.

The new plan will encourage people to use online bookkeeping which will make things easier for clients and accountants.

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By jonathan Freeman
18th Mar 2015 15:22

NOT great news!

This is not great news in my opinion.  More and more self employed people try and become 'tax experts' as each year passes and HMRC do not have the time, inclination or resources to check returns.  These people assume just because they never get picked up on errors or mistakes then everything is correct, so why employ an accountant!  This is like allowing people to drive around in cars with no TAX or MOT, just because they think the police won't stop them!

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Stepurhan
By stepurhan
18th Mar 2015 15:52

Driving us crazy

jonathan Freeman wrote:
This is like allowing people to drive around in cars with no TAX or MOT, just because they think the police won't stop them!
I'd say it's worse than that. It's like abolishing the driving test.

Some people will take the time to learn how to drive properly anyway. Some will seek an instructor (accountant) to assist them in making sure they drive safely. Others will just zoom around like maniacs and claim they are good drivers because they are lucky enough to not get in an accident. In fact, having dispensed with their instructor (accountant) post-test, that is what we have now. 

At least you can't crash you tax return into a load of other tax returns causing a massive tax return pile-up (this analogy may have gotten away from me a bit ;-) )

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By Jekyll and Hyde
18th Mar 2015 16:40

Best quote of the day so far!

stepurhan wrote:

jonathan Freeman wrote:
This is like allowing people to drive around in cars with no TAX or MOT, just because they think the police won't stop them!
I'd say it's worse than that. It's like abolishing the driving test.

Some people will take the time to learn how to drive properly anyway. Some will seek an instructor (accountant) to assist them in making sure they drive safely. Others will just zoom around like maniacs and claim they are good drivers because they are lucky enough to not get in an accident. In fact, having dispensed with their instructor (accountant) post-test, that is what we have now. 

At least you can't crash you tax return into a load of other tax returns causing a massive tax return pile-up (this analogy may have gotten away from me a bit ;-) )

Stepurhan, what a excellent summary of where we currently are today. changing the filing make up doesn't change this one bit. Perhaps it is time I considered a career change and become a self employed tax inspector! How, a bit like the USA's bounty hunter concept but to tax evaders!  

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By malcolmhUK
18th Mar 2015 15:23

Making all tax returns digital by the back door

Ever since the original Lord Carter proposals failed because of HMRC poor online service/experience, there has been a need to rush things through to save money.  I suggest this is being sold to the taxpayer as a miracle cure to the ill of completing an annual tax return.

We know the great accuracy shown by HMRC is just adjusting simple tax codes under PAYE so this should be just a simple walk in the park.

Anyone see how there could be an in-built requirement to submit current records on a regular basis by the self-employed ?  e.g. at the same time as completing the quarterly VAT return.

I am sure there will be plenty of work for accountants who are willing to adapt to the changing requirements of the hard-pressed taxpayer. 

 

 

 

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By SimonLever
18th Mar 2015 15:25

9m tax returns....

9 million tax returns (ish) a year.

How many of these include: sole trader accounts, partnership accounts, rental income, capital gains over £11,000, gift aid (higher rate taxpayers), pension contributions (higher rate tax payers), trust income, foreign income (Santander etc), residence and remittance details...and the list goes on.

The abolition of returns is for higher rate taxpayers who have to submit returns without these complications.

Of particular interest is how HMRC will pick up on small family company dividends unless something like CT61 is re-introduced.

Based on the number of incorrect P800's I have received over the past few years there is a whole career to be made in just putting right the Revenue errors that are likely to occur.

Not going to be an easy project to get right.

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By Mister E
18th Mar 2015 15:25

Interest without tax at source

The Abolishing tax on savings factsheet confirms from April 2016 interest from banks will NOT have tax deducted at source.

Someone with £20k pension and more than £1k interest is now dragged into this digital account malarkey.

 No wonder  they 'scrapped' Tax Returns, everyone will have a digital account and have to check it each year. 

 

  

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By johnjenkins
18th Mar 2015 15:33

The only people that drive around with

no tax, no mot and no insurance are crooks.

The only self-employed that do their own tax returns are either very accomplished or idiots. I wouldn't want either as clients.

Interest of £1k or less won't be taxed now anyway.

 

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By David Heaton
18th Mar 2015 15:34

Making tax simpler?

The idea of pre-populating returns with information already held is great, provided the data are correct, and they parallel run annual returns with the tax accounts for two or three years until everyone knows how it works and that it works properly, rather than a brief pilot like RTI, where filings are misposted or ignored or duplicated, and debt collectors chase phantom debts, two full years into full operation.

My favourite bit of the vision is on page 5 of the document:

"By 2020, businesses will be able to manage their taxes together as part of their day-to-day running, rather than something to be done separately. Their accounting software will be able to feed data straight into their digital tax account, so most businesses will simply log-in to check their details with no need to send an annual return."

Touching faith in (a) HMRC IT (anyone for RTI Mk2?), (b) client IT (how many packages don't offer EPS and EYU support under RTI, for example?), and (c) clients' knowledge of how to put the right numbers in the right boxes, especially if there is anything unusual in what they do (eg, VAT partial exemption, capital goods scheme, NIC aggregation, or that simplest of things, allowable expenses).

I don't think we'll be out of a job for a while.  The rep bodies will help HMRC to get it right, if they are closely involved in the process and their concerns are not ignored.

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By mr. mischief
18th Mar 2015 16:42

It's a good idea

It's a great vision statement and a major about turn from the "make 'em fill a return and fine them if they are late or muck it up" approach we've had over the past 10 years.

With the mess that is RTI and the likely car crash in progress that is Auto Enrolment, this looks like being a more ambitious project than either of these.  Given that currently some clients have to give exactly the same information to the following three bodies:

HMRC SA

HMRC tax credits

The Student Loan Company

I would need to see a vastly improved setup within HMRC in terms of data processing to be in any way confident that it will be a successful project.  In my view HMRC needs more staff not less unless there is a major and radical change in the approach of management of that organisation.  The budget implies double the rate of cuts within HMRC in the next 5 years compared to those we've seen in the last 5.

So a great vision but from where we stand now it would be a great muck-up.

 

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By Dowland
18th Mar 2015 15:42

And what about the poor software suppliers?

Will this mean that the likes of IRIS/PTP/Forbes et al will suddenly go out of business?  Or does it mean that as there still be a need to submit a tax return for some clients these companies will charge us extra as the number of users of their software will have declined?

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By daveforbes
19th Mar 2015 14:22

RTI for the self-employed

Dowland wrote:

Will this mean that the likes of IRIS/PTP/Forbes et al will suddenly go out of business? 

I hope not !

Essentially we are talking RTI for the self-employed (and RTI has gone so smoothly !).

The original push for RTI was to enable calculation of tax credits on a monthly "live" basis. For that to work its scope (even if not admitted at the time) had to encompass the self-employed in due course.

I suspect there will be more opportunity for we software suppliers rather than less.

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By levelheaded1903
18th Mar 2015 15:44

I don't think it will make a massive amount of difference long term. Many SA clients are savvy enough already to complete their own tax returns, but they still choose for someone else to do it. I cant imagine that mind set changing that much. For those that are self employed, as already mentioned, many want help to know what they can claim for etc, so that wont change either. I suspect that with the mix of work in many practices covering all aspects of accounts / tax, that if a small amount of SA clients left, that many may not feel it is such a blow.  

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By johnjenkins
18th Mar 2015 15:48

All in all

the advert was better than the real thing.

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By youngloch
18th Mar 2015 16:10

Calm down everyone!

I have read the HMRC publication "Making tax easier"

To my mind this is no different than when self assessment came in in 1997. Remember "tax doesn't have to be taxing" with friendly Hector!?!

Our clients have been able to prepare their own returns since then - how many have?

Any decent client knows they are not an accountant. I can build my own extension at home if I want but, guess what, its going to be a proper mess!

Tax rules will not simplify so the preparation of self employed accounts (for all but the most basic) will not change or disappear.

Out of 300 clients no more than 20 of ours do their own thing. They come to us because we give them ADVICE, we are not a collection of nodding dogs just listing out receipts. They want to know they are paying as little as legally they can.

It is good advice that makes a successful accountant and nothing will change.

Maybe in another generation or two things may change in terms of account prep (I foresee a society where cash has gone!) but the need to advise will always be there. The need to give business advice. More top end work less basic work.

Example: A new client came in yesterday and we advised him to register for VAT under FRS. He had never even thought of it as his turnover is no more than £50k. In year one he will "make" £2200, in year two it will be £1400 and so on. He's happy - instantly he feels we are effectively working for free!

Nothing dodgy, just good advice because Joe Public the Self Employed Businessman does not have the time and definitely not the desire to do everything himself. Get an accountant and often (not always) we can save them enough to cover our fees and take a burden away from them.

The bad news from this though - we lose the need to prepare returns for the retired with investment and pension income. This is a shame but when you look at the time it takes to write to them, get all the info together, often meet to discuss over a cuppa etc for circa £80 plus VAT a year it actually just frees us up a bit.

The biggest fear I have (and this would worry me) is that the 31 January deadline would shift forwards at some point........ clearly HMRC want the money sooner!!!!

I'll end up with the words of David Gauke MP Financial Secretary to the Treasury from the HMRC guide issued today "Millions of people will no longer have to complete a tax return at all - whilst those with more complex tax affairs will be able to use their account to declare income and pay tax in year"

Complex = more than just P60 and interest income

"able to use their account to declare income and pay tax in year" - I can't see many of our clients rushing to do that! It's tough enough dragging them in before November as it is and too many aim for 31 January e.g. the last possible point.

Anyone taking bets that we'll all be on holiday in January 2021? Hopefully my wife hasn't got her hopes up too soon or else I will not be popular when I go home tonight!

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By Melody
18th Mar 2015 16:27

Cashflow advantage to HMRC at the expense of the self-employed.

Is this partly a disguised attempt by HMRC to get their payment sooner?

Once they have the digital tax accounts set up will they then be trying to get traders to keep these up to date and pay HMRC as they go rather than 9 months after year end? (I suppose it might be useful for those who've spent the money by then,)

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By James Reeves
18th Mar 2015 16:35

Good.

Melody wrote:

Is this partly a disguised attempt by HMRC to get their payment sooner?

Once they have the digital tax accounts set up will they then be trying to get traders to keep these up to date and pay HMRC as they go rather than 9 months after year end? (I suppose it might be useful for those who've spent the money by then,)

Employees have always had to pay tax as they earned it. It's no bad thing that traders should have to do so as well. A lot simpler than payments on account.

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By David Heaton
18th Mar 2015 17:05

A lot simpler than what?

"Employees have always had to pay tax as they earned it. It's no bad thing that traders should have to do so as well. A lot simpler than payments on account."

There's a reason why the system for the self-employed is as it is.  You know how much an employee has earned because it's paid to him through payroll (mostly).  You can't seriously be suggesting that the Universal Credit approach of guesstimating profits (and disallowing losses) monthly is simpler than an annual tax return for a whole accounting period, when you know how much you've made for the tax year?  In many businesses, you don't know how much profit you've made month-by-month, other than on a very broad-brush basis.  How would you propose to deal with losses caused by PI claims in an accountancy or legal practice, for example? Or huge bad debts in any business?  Either could wipe out the year's profit.

There's perhaps a logic in requiring monthly POAs from the self-employed instead of collecting it six-monthly, but you do need to know what you're taxing before you can tax it, so unless you bring the reporting forward you can't work out the POAs any more accurately than the six-monthly version we have now.

Not simpler after all, I think.

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By James Reeves
18th Mar 2015 17:54

Argumentum ad antiquitatem

David Heaton wrote:

There's a reason why the system for the self-employed is as it is.  You know how much an employee has earned because it's paid to him through payroll (mostly).

 

Sorry, but I just don't see it. Are you seriously telling me that the average self-employed person takes nothing from his business until the end of the year when they know how much profit they have made, what losses to offset and what the final after tax position is? That's nonsense. They will dip into their profits every month to live on. The sensible ones keep money aside to pay the tax man, and many others will just spend it all and then run into difficulty in lean times. All I'm saying is that they may as well balance the tax books sooner rather than later. Yes there needs to be some sort of calcuation as they go along, but so what, it just makes them keep their bookkeeping up to date and properly categorise their expenses. Not a bad thing at all.

I would argue that a year between sets of accounts is just is too long for most businesses, and perhaps too short in others - hence the planned 5 year averaging periods for farming. Yes, annual books take into account seasonal fluctuations, but a simple monthly rolling average calculation could resolve that.

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By David Heaton
19th Mar 2015 18:34

You misunderstand (and propose something equally unintended)

James Reeves wrote:

Are you seriously telling me that the average self-employed person takes nothing from his business until the end of the year when they know how much profit they have made, what losses to offset and what the final after tax position is? That's nonsense.

Er ... no. It is indeed nonsense and not at all what I was telling you.  Are you seriously telling me that the average self-employed person should pay tax on his drawings rather than his profits?

No, of course not, because that would be equally stupid and not what you meant. 

My point, perhaps not made clearly enough, was that profits are measured over a tax year (or for a tax year), because you need to know the parameters for working out the tax, and they apply for a year at a time.  Until the end of that year, you do not have an accurate figure to tax for that year.  Employee wages are known when they are paid, and PAYE typically builds up the tax deductions towards the correct(ish) full year liability, in most cases, with a cumulative and usually fairly steady income profile.  You can't do that with the self-employed, because you don't know the annual figure until you get to the year-end.  What's the income profile of a farmer?  Or a builder? Or an author?  Or a lawyer?  Think how they will report their business transactions to HMRC and pay the 'right' tax on account month by month.

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By David Heaton
19th Mar 2015 09:57

A lot simpler than what?

"Employees have always had to pay tax as they earned it. It's no bad thing that traders should have to do so as well. A lot simpler than payments on account."

There's a reason why the system for the self-employed is as it is.  You know how much an employee has earned because it's paid to him through payroll (mostly).  You can't seriously be suggesting that the Universal Credit approach of guesstimating profits (and disallowing losses) monthly is simpler than an annual tax return for a whole accounting period, when you know how much you've made for the tax year?  In many businesses, you don't know how much profit you've made month-by-month, other than on a very broad-brush basis.  How would you propose to deal with losses caused by PI claims in an accountancy or legal practice, for example? Or huge bad debts in any business?  Either could wipe out the year's profit.

There's perhaps a logic in requiring monthly POAs from the self-employed instead of collecting it six-monthly, but you do need to know what you're taxing before you can tax it, so unless you bring the reporting forward you can't work out the POAs any more accurately than the six-monthly version we have now.

Not simpler after all, I think.

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By johnjenkins
18th Mar 2015 16:38

HMRC

have never understood small traders and they never will. That's what makes their attempts (CIS, trying to re-classify the self-employed or IR35 ) to change the way they operate so farcical.

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By jon_griffey
18th Mar 2015 16:54

We're not out of business yet!

When self-assessment was introduced the HMRC mantra was that under SA you would not need an accountant.  It's so simple - just enter the information on the return and they will calculate the tax for you.  Nearly 20 years later we are still completing tax returns for clients.  Now it is announced that the self-employed can simply link their accounting software to HMRC and job done - no need for an accountant or a tax return.  I foresee that we will still be here in 20 years doing accounts and tax returns. 

HMRC are being disingenous suggesting that this is the end of the tax return.  The self-employed will still need to convey their tax adjusted income details to HMRC, check that it is correct and then make a declaration and approve the submission. Presumably there will be filing dates by which time this information needs to be provided. Is that not a tax return?

It is laughable to say that the accounting info can just be fed in by accounting software.  How many clients can actually produce an accurate tax adjusted P&L from their software?  Many for example don't understand the wages control account and post their wages payments to balance sheet accounts.

The only real change I see is that online returns will be pre-populated with P60 details, bank interest, pensions, CIS etc. This is long overdue.  Any loss in clients I expect will be compensated by the fact that we save a stack of time in chasing around for this information. I also foresee that there will need to be a return of the CT61 to report to HMRC what dividends have been paid to what individuals, which means more work for accountants, not less.

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By busacrun
18th Mar 2015 17:09

reducing the burden on small business?

cant see how having to provide this information throughout the year is going to help reduce the burden on small businesses when so many struggle to meet one deadline as it is. I don't think this will affect accountants in a bad way

would be interested to see what information HMRC will pull out of clients software if connected - just the figures for the period end or full detail of transactions behind it??

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By Branski
18th Mar 2015 17:10

Presumably with all the "small" newly self employed and

those filing due to HICBC not to mention £100k + earners, the system is close to breaking point.  If these measures take care of that, I can see the sense there but I am sceptical that the implementation would work given the P800 debacle, the number of codings which are continually issued incorrectly resulting in large underpayments and an adviser to check and sort out, plus the RTI rollout which was far from perfect.  In some ways I am thinking more work in sorting out so perhaps a positive for advisers but it does seem to be the tax payers with the more straightforward affairs who this happens to which surely the system should be, by now, able to deal with thereby dragging more into the "net" which this is supposed to get people out of.  

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By mrme89
18th Mar 2015 17:23

It is interesting (but not suprising) to think that HMRC believe that everything that is fed into bookkeeping software is data that is ready for tax purposes. Do they not realise that it is usually accountants that sort out all the crap entered in bookkeeping software, and making all the necessary adjustments before it hits HMRC's doorstep?

Before they came up with this whack brain idea, did anyone stop and think to ask an accountant their thoughts?

 

 

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By Jekyll and Hyde
18th Mar 2015 18:08

although I am in favour of in year reporting

mrme89 wrote:

It is interesting (but not suprising) to think that HMRC believe that everything that is fed into bookkeeping software is data that is ready for tax purposes. Do they not realise that it is usually accountants that sort out all the crap entered in bookkeeping software, and making all the necessary adjustments before it hits HMRC's doorstep?

Before they came up with this whack brain idea, did anyone stop and think to ask an accountant their thoughts?

Cloud book keeping marketing seems to make people see how easy book keeping (actually data entry is). The truth is what is a Sainsbury payment for £20.25? Especially when Saintsbury supplier bank payment has already been auto tagged to fuel. So fuel plus sweets = fuel (no change from the good old system)

The reason I am in favour of mid year reporting as well as promoting accountants, not tax specialists at the end of the year and let the wife be the book keeper type promotion is that as accountant practice's we really can now start to offer and promote real positive change to the carrier bag jobs annually and create a division of bookkeepers that we can manage and control and then enable us to provide real in year tax advice and business advice.

We can even blame HMRC in the process as well by saying that unfortunately the processes have changed. What I have seen in the last 15 years is the decline of the accounting profession and I sense that there has never been a better time for us accountants to take charge of the book keeping of clients.

Did they consider accountants in the process, probably not as most are currently explaining why a system won't work rather than looking for opportunities to enable it to work for them.

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By petersaxton
18th Mar 2015 18:25

Attachments

Jekyll and Hyde wrote:

mrme89 wrote:

It is interesting (but not suprising) to think that HMRC believe that everything that is fed into bookkeeping software is data that is ready for tax purposes. Do they not realise that it is usually accountants that sort out all the crap entered in bookkeeping software, and making all the necessary adjustments before it hits HMRC's doorstep?

Before they came up with this whack brain idea, did anyone stop and think to ask an accountant their thoughts?

Cloud book keeping marketing seems to make people see how easy book keeping (actually data entry is). The truth is what is a Sainsbury payment for £20.25? Especially when Saintsbury supplier bank payment has already been auto tagged to fuel. So fuel plus sweets = fuel (no change from the good old system)

At least the attachments should enable the accountant to check the postings.

I have a client who is unable to do his company accounts other than once a year. He doesn't do VAT returns. He disappears for 8 months at a time and comes to me when bailiff's chase him for tax. I'm going to advise him to get out of business.

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By SteveOH
19th Mar 2015 13:06

Well said, mrme89. I have just spent about 5 hours going through a client's Wave Account (other bookkeeping software packages are available) and have had to adjust almost every P&L and Balance Sheet account; including reconciling the bank. The client is an IT specialist so has no problem using the software but he doesn't know certsin aspects of bookkeeping and accounts. And why should he?

There will always be plenty of work for accountants. It is essential that we market ourselves differently, though. Looking to the future, we can't just offer compliance services as our clients will simply say "Well I can push a few buttons". We have to offer advice, training, hand holding etc etc.

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By A mum and an accountant
18th Mar 2015 18:14

In theory, it should sound like a good idea. 

No annual tax returns, so hopefully no deadlines but the alternative sounds really confusing at the moment.  Surely you can't get rid of annual tax returns for everyone?  How would that even work?  But I guess everything will become online eventually, so it is something that will have to embraced one day.

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By petersaxton
18th Mar 2015 18:28

Changes

Lilac1 wrote:

In theory, it should sound like a good idea. 

No annual tax returns, so hopefully no deadlines but the alternative sounds really confusing at the moment.  Surely you can't get rid of annual tax returns for everyone?  How would that even work?  But I guess everything will become online eventually, so it is something that will have to embraced one day.

The annual deadlines will be replaced by monthly deadlines.

How will property rental income and capital gains be reported. Will dividends be reported by companies?

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By Fraser White
18th Mar 2015 18:19

Companies

The guidance note "Making tax easier: The end of the tax return" would seem to indicate that this relates to companies as well!

See page 5 Para 3 "Those which pay more than one tax (such as CORPORATION TAX, VAT and PAYE) will be able to take a single view of their total liabilities across all taxes.

I think this is far worse than it first appears!!

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By EasyTaxWMid
18th Mar 2015 19:19

Know what you mean
I wonder whether the lack of consulting & so on is a hidden warning. Much of what is said, if put to accountants, would be rejected. All this 'streamlining' don't sound good. I don't like the sound of tax accounts, since when has HMRC set accounting standards. I can't imagine accruals accounting slotting into the average Joe's record keeping - which I'm sure they know - this obsession with cash accounting for ease is not true & fair. Cash accounting & fixed (often low) allowances make clients think what the hell I'll go with that. There are many questions, but think about this, what if they have ACTUALLY thought about them? It would be easy to pass it off saying about HMRC's record - but wow this could be a mega change. It's not only us who stand to loose, clients will too. They, however, may think it's a fair price for the easy life. They must be planning to annihilate tax investigations, or near ad damn it.

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Image is of a pin up style woman in a red dress with some of her skirt caught in the filing cabinet. She looks surprised.
By Monsoon
18th Mar 2015 19:05

Oh my god.

That's all I've got so far.

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By dropoutguy
18th Mar 2015 19:07

Panic

If this makes some contributors to AW panic, it will make lots of taxpayers out there panic - and that creates opportunities for us.

Small firms who find it difficult to recruit staff could do worse than approach one man bands.  There will be many who will wish to avoid wholesale change, but who do not wish to retire yet. 

 

 

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By geoffwolf
19th Mar 2015 06:09

please see my comment on any answers

THE IDEA IS UNWORKABLE

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By EasyTaxWMid
19th Mar 2015 08:39

Only if you think of things under current practices.
Live bank feeds give purchase and sales ledger (& obviously the cash account) withdrawals, etc. Knock out unpaid invoices & so on - so it's a cash accounting style operation (something HMRC seem to push) as could be VAT ( something already pushed or FRS). Look at Xero software & how that works, simplify it & boom - invoicing registers immediately into the system as a sale blah blah blah. It's all actually very easy to do, and I think we should realise that. I have listened for years to accountants (accountants!), who think that simplifying things is a wonderful idea. Errr - no, the only thing stopping anyone with fingers doing it is the complexity. Turkeys? Christmas??. Well what does this all leave? Data entry to those who don't want to do it I suppose & a bit of management accounting for those who don't understand system reports. Whenever you think, oh well how would you do that? You have to think will that process still be required. I read earlier, that this is planned to roll out to most SME's in the next 5 years! It is easy to think how much knowledge you need to know about tax to work with others tax issues in practice - but a client only needs to know THEIR tax process - which often doesn't vary much from year to year ( plus it will all be written on a screen in front of them in real time). Financial Accounting? Hmmmm. Taxation compliance? Hmmmm. Company accountants ( which make up the vast majority of accountants in the country ) will just process everthing themselves, I can't imagine how this could affect the qualifications training structures!

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