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End of tax returns: Expert view

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23rd Mar 2015
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Chancellor Osborne opened a large can of worms with his ‘surprise’ announcement that the annual tax return would be phased out by 2020. 

The sparsely detailed announcement sparked a huge debate on the site last week and over the weekend. 

Given this level of interest, AccountingWEB sought the views of tax and accounting software experts on what the changes, in their present undetailed form, may mean for practitioners.

This is the first in a two-part article series - the second article will focus more on the software vendor perspective. 

At this stage it is difficult for anyone to make an entirely informed opinion, as there is no defined information on how this will work aside from the short Budget paper Making Tax Easier. However, some tax experts and commentators have an idea of what we can expect, and shared their concerns on the timing, level of detail and history of large scale government IT projects. 

Accountants are not going to lose out 

While some AccountingWEB members are concerned about the potential loss of work, experts say this may not be the case. 

TaxCalc’s Steve Checkley - who is scheduled to discuss the topic in more detail in a Budget technical panel at 2pm on Monday - told AccountingWEB there was very little the software developers could do until they knew more detail of what HMRC plans to do.

Whatever happens, he said, “There’s still going a need to report things to HMRC. Information that HMRC do not possess will still need to be reported by the taxpayer to the new system.”

His advice was for practitioners to contact clients and reassure them that there will still be a need for the accountant’s services. For example, if HMRC’s systems take over the calculations it may be useful for a professional to check that they’re correct.

At IRIS, product director at IRIS Steve Cox has noted the “mixed reaction” from accountants to the Chancellor’s announcement.  “We’ve had a number of people phone to find out what this means, not only for themselves, but for the software we provide for them.

“Some accountants I’ve spoken to personally, feel this is quite a good transitional change, and could see it coming because of RTI and AE. It was an inevitable next step for the government,” he said. 

For some clients, tax and business writer Jennifer Adams said, such as businesses which already do VAT returns it won’t be such a problem as they will have already had the mindset. But smaller non VATable clients will “find it hell”.

FreeAgent’s chief executive Ed Molyneux said that the more vocal accountants are being sceptical about this. But he also pointed to a more positive minority.

“In reality many of our customers work through an accountant and our customers who don’t are at the very low end of the scale and file with the HMRC themselves anyway. The ones who’ve been working with accountants haven’t decided to go it alone and ditch their accountant and just use FreeAgent,” he said.

“We aren’t seeing a trend toward DIY accounting. Clients still want an accountant to give them a professional seal of approval, to give them a sense that they haven’t made a mistake. It’s something that people worry about a lot.”

Tax writer Rebecca Cave commented, “A set of accounts has to be prepared for any business, sole trader or company and those can’t automatically be hoovered up by revenue on other than on a tax return. Accountants are going to have to do that, that can’t be taken away.” 

Xero managing director Gary Turner said accountants shouldn’t feel compromised by the announcement, which may help them transition even further into an advisory rather than compliance role. 

In short - there are opportunities here for forward-thinking practitioners.

But Gabelle tax director Martin Mann took a more sceptical stance, warning that giving the taxman control over taxpayers’ information could put clients on the back foot.

“Although they’ve headlined this the ‘death of the annual tax return’, I think it’s an erosion of the self assessment process; taking everything out of taxpayers control all of a sudden.”

Mann questioned whether there would be an audit trail in inputting information from the accounting software into the digital tax account - and how the Revenue would handle disputes with taxpayers and third parties over information.

It needs the right tools

According to Rebecca Cave, before this happens other processes such as, for example the duplication of national insurance numbers, needs to be rectified. 

In addition, the issue of so many taxpayers not being online either through education, finance, choice, religion, disability or lack of equipment and adequate broadband needs to be addressed.

“Superfast broadband doesn’t extend to the entire country - or even, the rest of the world. There are those outside the UK who need to file UK tax returns, too,” she said.

“I think the accountancy profession would say, hang on, let’s get RTI working first. If they are thinking of feeding information through from RTI, we know how much the muddle is created with PAYE accounts and all sorts of a mess, get it working first before expanding it.”

“In addition the education of the ordinary taxpayer needs to be much better, trying to access - you need that basis to ask people to judge whether they are taxed in a correct fashion. People ought to have access to up to date legislation for free as only then would people be able to verify that they are paying the correct tax.” 

While the software companies appear comfortable with the the five-year timeframe for the new tax account project, Rebecca Cave was less certain. 

“The record of large computer projects by the government is not flawless to say the least,” she said.

Unanswered questions: Monthly submissions?

There are a number of unanswered questions around the project. For example, Jennifer Adams asked whether monthly submissions will be necessary. She is bringing her worries to a Working Together group this week but said she didn’t expect many answers just yet. 

“You have to look at the different types of clients who will be affected. I think they will want monthly submissions but they’ve not actually said so. If so that will bring more work for accountants not less,” she said.

Positive news for the software industry 

For IRIS, Steven Cox said, the personal tax account will be just another compliance change. 

“It’s a little broader than the annual tax changes we would normally expect – but in some respects, we actually welcome it.

“Certainly it’s a refreshing change to a tax system which, over the years, has become quite complicated. This gives us a chance to get it back to quite a simple tax system, help businesses with their complicated tax requirements and ultimately giving accountants another way to service their clients.”

Rob Ellis, chief technology officer at BTC Software said the introduction of a digital tax account is a “real opportunity” to improve things for tax agents, “provided HMRC can deliver the right tools for us software providers to use”.

Ellis said BTC has already been in touch with the HMRC Software Developer Support Team. They said they would be early adopters of the new technology and are happy to help with the change.

Xero’s Gary Turner added: “It’s inevitable that government is going down this route. It is costly to capture people’s information the way it is happening at the moment and it makes logical sense for it to be automated.

“For that to work well there needs to be more integration between the other systems that these people who are filing their tax returns are using, whether that’s their accounting software or their bank or other investment systems they’re using” 

While surprised at the announcement FreeAgent commented that it is ambitious - in a good way. 

“We’ve got all the real time data, and to tie this into a cycle of annual reporting seems to be an artificiality that’s not necessary anymore because you don’t need to spend days and weeks gathering your bits of paper and sending them to your accountant to write them all down into a spreadsheet,” Molyneux said.

“It’s just not necessary anymore, because you’ve got the numbers to create it. We would rather run on a more real time basis, anyway. Even though we’ve implemented this solution to streamline self assessment, we would rather build the equivalent thing for our customers to submit in more real time. It’s just much more related to how the data is available nowadays.

We think it’s a great idea and I think that professionals will come around eventually. It may take a year or two but there’s plenty of time,” he added.

Assumption everyone is the same

Gabelle's Martin Mann commented that the abolition of annual tax returns shouldn’t be too much of a headache for those who have simple, straightforward tax affairs. 

His main concern was for people who are in business on their own account. “There are people with much more complex affairs, various sources of income from various people. It sounds to me, in a system whereby everything is pre-populated, there is one question that comes from that: What happens if there’s a dispute, human error being what it is, over third party information? Will HMRC accept taxpayer override or will that end up in a massive enquiry?”

Indeed Turner added that the areas of significance for those in practice are the business owners and directors who are more likely to have more complex tax affairs. “There’s no question in my mind that the role of the accountant will still be important even if the capture or collation of the data will be automated.

“But I think the interesting thing outside of however many millions supply an annual tax return today is that if the government succeeds in getting this platform in place – and I have no doubt that they will – is that it isn’t just people who are filing tax returns that will be on this digital tax basis.”

Other commentators have wondered what will happen to those who still pay via cheque, for example, or have separate business bank accounts. And what about seasonal businesses? 

The unanswered questions will hopefully be answered by the government and HMRC over the coming weeks and months - however these views represent the thoughts on the matter at present. What do you think?

Replies (49)

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Francois
By Francois Badenhorst
23rd Mar 2015 10:14

Full Gary Turner interview

To see the full Gary Turner interview with AccountingWEB and to hear more of his thoughts, check out:

 

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By AndrewV12
23rd Mar 2015 11:43

Unanswered questions: Monthly submissions?

Oh my God, monthly submissions, good news for some, software business, bad news for Accountants.

 

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By AndrewV12
23rd Mar 2015 11:47

G Turner

A Software engineer is not only giving advice on Accounts, he is advising Accountants how to do their job.

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By johnjenkins
23rd Mar 2015 11:48

Anything can

be done instantly, electronically. That is not the problem. Any banking receipt or payment can be coded in such a way that HMRC have a copy. I expect that to happen in the not too distant future.

What the majority of those involved seem to be missing is the way business compute its taxable profits (or losses) and unless you change the legal structure of how business operates then nothing will change. The need to notify HMRC of those figures will still be there or self assessment will become a non entity. Monthly reporting is a non starter, mainly because of overlaps.

Why don't HMRC concentrate on getting things, that they have got now, right,then go on to see how improvements to their cash flow can be made.

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By jiatbanus
23rd Mar 2015 11:58

Bad News

The Gordon Brown dream is coming true.

 

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By johnjenkins
23rd Mar 2015 12:03

We could

see him back in his old job soon!!!!!!!!!!!!!!!!!!!!!!!

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By AndrewV12
23rd Mar 2015 12:05

All Back to cash

I have a feeling some people may wish to go back to working in cash.

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Replying to jcace:
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By razertoo
23rd Mar 2015 12:57

Unlikely

AndrewV12 wrote:

I have a feeling some people may wish to go back to working in cash.

 

I have a feeling this is the very first tentative step towards a cashless society. No cash, no terrorists, no more black economy and lots more taxes to collect.

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By Katy D
23rd Mar 2015 12:18

non compliant clients

I am yet to see a client with a set of information suitable for inputting directly into a Tax Return

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By Silver Birch Accts
23rd Mar 2015 12:33

Tax Returns

What the recent announcements have shown is the utter contempt the Government and in particular HMRC hold  Accountants, in particlat practisng accountants.

Without the hard work, honesty and committment of Accountants Self Assessment would not have worked, RTI would not have worked or any other reporting system that has been created over the last 18 years.

Yet any minor change, never mind major ones now proposed, is simply never communicted to

Accountants. The withdrawal of Tax Return reminders last December is a case in point. All the Working Together Groups, Working Together pdfs or blogs failed to report this.

Here we are again, would it not to have more effecient and respectful to have advised Accountants of these changes pre-budet without having to read it on the front page of the Daily Mail on Budget Day.

No, we are told at the same time as clients and as a result made to feel worthless and totally betrayed after all the work that we have put it make theit lousy systems work.

If a client asks you how these changes impact on them, what do you say, well nothing becaused nobody has a clue.

I signed up for a recent HMRC Webinar about the changes to dealing with Agents. It was an amateur affair and in reality embarrassing.

What is confirmed by recent events is that we viewed by HMRC has being in the way as they try to deal with taxpayers/clients direct online from their Mountain Retreats. No'' face to face'' as they described it in the webinar.

I think the profession has major problems and the Institutes are failing us.

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By geoffwolf
23rd Mar 2015 12:49

Big Brother

Nobody has cited Trusts and Estates in these comments. This is big brother and therefore dangerous from a political point of view.

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By raybackler
23rd Mar 2015 12:59

Stock and Work in Progress

Not to mention accruals and prepayments on a monthly basis?  Valuing stock and work in progress is a major headache in many professions, construction for instance.  How can accounts possibly be prepared accurately without paying attention to these items.  It is not merely a question of inputting a few figures on a monthly basis that HMRC do not have.

As an example of the monthly nonsense in the Construction Industry scheme.  A client has deductions that exceed his PAYE bill every month.  One month early in the tax year, a major customer paid on the 6th, and it created a situation where PAYE was due for the previous month.  My client then had to pay this and the following month went back to the situation of the CIS deductions exceeding the PAYE on a year to date basis.  So now he has to suffer the cash flow disadvantage of having paid some PAYE on top of the 20% CIS deductions.  This is madness.

I have given this example, because I can see this anomaly arising in seasonal businesses as far as Corporation Tax is concerned and I am sure there will be many other anomalies.  I will be interested to see what is exactly being proposed for monthly data.  Business isn't smooth across a tax year for most businesses.

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By Alonicus
23rd Mar 2015 13:29

RTI on steroids for small businesses

To me, this looks like RTI for the self employed, sole traders and partnerships, with the added twist that HMRC can dip their fingers into people's bank accounts and take what they like.

If (as seems to be implied) it works so that when you hit the month end button, it automatically posts the figures to HMRC, does this mean that they'll be getting their tax receipts 18 months or so earlier than at present ?  

More to the point, in the scenarios raybacker lists, where a business has inventory or other items which can throw in timing differences that distort a month's figures, I can see a situation where a business will show artificially large profits in (say) months 1 and 3, and a loss in month 2, but by the end of the year it'll have all come out correctly apart from a few pre-payments and/or accruals.  

Will HMRC return rebates as rapidly as they take tax over-payments caused by this system ?

Perhaps next, HMRC will want all revenues directly paid to themselves, keep what they want and give employees and the self employed a bit of pocket money from what is left over....

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By Spriggy
23rd Mar 2015 13:30

penalties

As an agent I deal with a lot of people who are not computer literate, even in this day and age.  Many of them will simply ignore the need to go online and enter their expenses, for example, thus ultimately paying more tax than necessary.  Will they be penalised for not "checking" the entries on their record by logging in?  Will there be penalties for those who are unable to work the system?  A system which purports to make the tax system easier could end up with many people having Bailiffs knocking at their door to collect on penalties.

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By Michael C Feltham
23rd Mar 2015 13:30

I loved this comment!

"For example, Jennifer Adams asked whether monthly submissions will be necessary. She is bringing her worries to a Working Together group this week but said she didn’t expect many answers just yet."

From the current experience of our local accountant's group and the reports given each meeting by our Working Together delegate (A hugely experienced part-retired FCA), the initiative should be renamed "The Pretending To Work Together Group!".

Software vendors suffer one huge flaw: they tend to create systems, divorced from reality and on the "nice idea" and blue sky concepts.............

Let's return to the core realities:

1.  The vast majority of SMEs are small:

2.  The proprietors haven't a wee clue, concerning "Proper Records":

3.  They tend normally to be ICT-Illiterate: 

4.  They would throw their toys out of the pram if faced with increasing fees for monthly services:

5.  They would prefer to buy a top-end Merc or BMW than invest in decent IT.

About the only cogent comment is this:

"Tax writer Rebecca Cave commented, “A set of accounts has to be prepared for any business, sole trader or company and those can’t automatically be hoovered up by revenue on other than on a tax return. Accountants are going to have to do that, that can’t be taken away.”.

Of course: asset financiers, bankers, mortgage providers demand sets of certified accounts: not computer records.

 

% of Total Enterprises

% of Total Employment

% of Total Turnover

Size of Enterprise in Employees

0.1%

34%

45%

Large: >250

0.9%

14%

19%

Medium< 250

6%

19%

18%

Small: 10 - 49

41%

23%

14%

Very Small 1 - 9

52%

10%

4%

No Employees*

*Sole Traders/Proprietors only.

In Europe 55% of total turnover of 17, 586 Billion ECU, (i.e. 9,672 Billion ECU) is created by SMEs'

SMEs' create more jobs in Europe than the large companies.

 

Above is a fully segmented analysis of Euro SMEs, including UK.

(Copyright: PDD (R) Ltd/Michael C Feltham 2015)

I just bloody wish Gideon his coterie of clowns would and could comprehend Britain's real economy on Main Street!

 

 

 

 

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Stephen Youngs
By Stephen Youngs
23rd Mar 2015 14:03

Straightforward for some, but....

I can see that for an employed higher rate tax payer who also has some investment income HMRC can get all they need from RTI and banks etc. That would indeed probably wipe out quite a large number of SA tax returns, and I suspect a lot of these people don't presently use an accountant anyway. For those receiving dividends from public companies I guess that data can be easily harvested by HMRC too. If HMRC introduce a system for online real-time reporting of dividends from private companies to supplement payroll RTI (not a bad idea?), then I suppose many working through small corporates could also very easily be catered for with a simple tax account, working in real time. The £10k salary plus £30k dividends people. If you add that lot up, it must be a heap of tax returns.

Life is more complicated for the self employed though isn't it. Perhaps HMRC see many more self-employed moving to some sort of simplified cash-based accounting where the bank account is the prime record? Fine for a window cleaner or home-based hairdresser. But that makes no sense, as others have mentioned, where the business involves inventory or WIP. And what about fixed assets, will they simplify capital allowances by recognising that the present AIA in effect means many (most?) small businesses get immediate 100% tax relief, and just abolish them for some?

As the tax account approach is for individual self-assessment not CT, it may well be that this move will add a new incentive to incorporation. Like many though, I have a challenge with those who I have to advise to incorporate for financial reasons but who are completely unable to cope with the additional responsibility and admin, and don't want or can't afford to pay anyone else to do it for them. 

As a concept it is hard to say it doesn't have merit, but with so many unknowns it is hard to see where this is going to go. I just hope HMRC consult widely enough, and listen to the responses they get.

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By User deleted
23rd Mar 2015 13:33

I would say ....

... only around 25% of my client base uses formal bookkeeping software, and @ 25% use no software whatsoever, preferring manual books.

I am sure many on here have similar client profiles!

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By DMGbus
23rd Mar 2015 13:38

Monthly reporting...oppression + penalties

Were monthly reporting to become mandatory, then this really could be a money-spinner for HMRC in terms of creating 12 opportunities a year for taxpayers to miss deadlines and thus incur penalties instead on one as at present.

As it happens, as a policy of what some would describe as apparant oppression monthly reporting has already been implemented for some "customers" on low incomes.

Part of the Univeral Credit rules (UC = possibly a hidden agenda to reduce credits payable to low profit traders) is that Universal Credit claimants have an obligation to report their income monthly.  I can well imagine some Universal Credit claimants giving up on claiming their lawful entitlement as the compliance costs (ie. their own time and professional advisors time) will outweigh their true and fair entitlement.

 

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By ringi
23rd Mar 2015 13:53

Most people have simpler tax then what your clients do!!

Firstly this will be optional, so stop panicking.

Then think about someone that works var 2 or 3 employment agents, or a nurse that does some bank work for a different hospital.   Clearly in these cases it can be made to work.

Then think of someone that lets out one property using a letting agent and has a job…

Or a brick layer that does some work that comes under CIS, and takes on a few small jobs that he completes in 1 or 2 weeks.   So no stock or work in progress.

Or someone with 3 pensions and a few investments along with a little seasonal part time work.

Provided this is taken slowly and only the simple cases are pushed to use it, then it could work very well. 

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Replying to mbee1:
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By ringi
23rd Mar 2015 15:55

Just aim for the 50% of easy cases

Stephen Youngs wrote:

Loss relief is an issue to think about though isn't it, as is roll-over relief. The timing of the calculation of tax liabilities and resulting payments would be important, so that tax related events in different months can be considered together, without causing cash flow issues due to frequent payments and refunds. I think you would still need an annual calculation of liability, based on the data collected in the tax account during the year. So you would still have payments on account, and adjusting payments.

 

Agreed,

For me, the annual calculation and return will still be needed, as I get loss relief, spend lots doing up a property etc, don’t use agents for all of my properties etc..  But a lot of landlords just have one property that is their former home, so simple cases should be simple.

An annual calculation will still be needed for everyone, but for 95% of people, it should just be a case of printing out the information that HMRC already have, and confirming it is correct and complete.

“Payment on account” should be able to be improved for most people, as the payment can depend on  the information already know, rather than just taking half of last year’s tax.

If HMRC tries to get this to work for everyone it will be far too complex, but if they just aim at the easy 50% of the people that do tax returns at present, then it would be of great benefit.    Even for complex people like me, 75% of the boxes in my tax return could be completed by HMRC using information they already have.

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By DexterDog
23rd Mar 2015 13:59

Tax returns

I think many are overreacting to this.  The main part of our work is preparing annual accounts and this will not change - it can't be done by automated bank feeds or whatever; what about stock, debtors, creditors, cash transactions depreciation etc, the idea is clearly ridiculous.  On the other hand at the moment collecting P60 information and keying it in is also rather pointless as HMRC already have this information so why submit it twice?  The same could conceivably apply to bank interest but it would require banks to maintain accurate records of NI numbers or UTRs which could be a problem.  

If it means that self-employed accounts are submitted like company tax returns i.e. within twelve months of the year end, rather than all on a fixed date,that could be very helpful, spreading the work over the year rather than have the 31st January rush as at present.

However at present there is nothing to stop you submitting your tax return during the year - many don't though and it seems to me that there will always have to be a deadline for completing submissions - so whether this proposal will make any great difference, if it is ever enacted at all, is doubtful.

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By Montrose
23rd Mar 2015 14:26

Income tax is an annual tax.

Even the creaking PAYE system with code numbers recognises that, so that all calculations are automatically annualised- hence the wonders of a system where barely 25% of taxpayers submit a tax return.

Leaving aside the practicalities of CGT being calculable only an annual basis, if the taxpayer is to be responsible for paying the correct amount of tax, he or she has to be in control-which means signing [in some way] his or her approval of the figures..

Denmark for example splits its taxpayers between :-

1]those where the Revenue compute the tax, and it is up to the taxpayer to object[a bit like our coding notices if you think about it]

and

2] Those who have to complete a full  return , which includes the self-employed and those with investment property.

 

All we have been told appears to be to allow those who don't complete a tax return[ that 75% ?]to see their tax details on line. Not very interesting !

Beyond that, we are removing responsibility from the taxpayer- what price negligence in the future?

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By johnjenkins
23rd Mar 2015 14:37

I suppose we

have to ask the question. Do we want a Government that is going to go down this route?

UKIP with all it's problems seem like a good bet. Maybe that's what the Tories want. Saves them having to pull us out of the EU.

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By johnjenkins
23rd Mar 2015 14:41

So we go

on monthly reports. We have from 6th of the month to 19th of the month to get every bodies figures in. Yer right.

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By Tim Vane
23rd Mar 2015 14:49

What a bunch of whiners.

Honestly it's like being back at school and having the headmaster announce that grades will be assessed monthly and no longer given at the end of the year, then hearing all the boys and girls bleat about how it is unfair and impossible and will never work and doesn't he understand and what is he thinking and things are going to be so awful and hey yes it's currently a mess but it's a mess we are used to and this is just going to be sooo much worse.

So I get that people are averse to change, that we want things to stay the same and that the whole process is rife with uncertainty. I understand that these are our jobs and this is our livelihood and that we need to know where we stand. And I agree that things are going to be different and without knowing how different it is difficult to plan and all of that looks uncomfortable from where we are sitting.

But for goodness sake, we've been here before. We've had the introduction of SA, XBRL, RTI and so on, and we've moaned about how life is going to be impossible and the world is coming to an end, and how the only possible people to benefit are the software providers and the exchequer, what with all the new programs we'll need and the new penalties and fines etc.

What rot! There is more choice of cheaper, better software than ever before, and those of us who use the software properly are not racking up huge fines and penalties for our clients, and in fact there are more of us out there doing our own thing than there has ever been before.

Hurrah for progress, I say. Those of us who get our heads down and get on with it will prevail as usual, and the rest that won't accept it will fall by the wayside and be trodden into the ground.

Plus ça change, plus c'est la même chose.

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By johnjenkins
23rd Mar 2015 14:58

@Tim

change to make things better or quicker (SA XBRL) yes great, I'm all for it. I've even got to grips with RTI.

Change for the sake of destroying SME's so that most taxpayers are on PAYE, working for big companies and the tax take goes up quickly is not on and cannot work in this country. Why not you ask? That's because the people of this country are not sheep. We are generators. we make things happen through our SME's. Take that away and you've got nothing.

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By KIKISROSSIDES
23rd Mar 2015 15:49

This is one of the most crazy ideas ever from a government I thought had more sense than all the others! We used to deal with a few sub contractors and all of them were paying their fair share of tax until they got together and decided to do their own tax returns! They are now claiming everything and anything and are getting tax refunds they had never dreamt of! So Mr Osborne continue with this idea of abolishing tax returns and watch this country's tax income reducing slowly but surely!!

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By johnjenkins
23rd Mar 2015 16:48

@ringi

So all the Government need say is "we are doing away with tax returns for those that we feel aren't needed". That isn't what was said though. They intend getting rid of all tax returns and the concept of SA (the two go hand in hand) and replacing it with digital doodah.

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By RJandCo
23rd Mar 2015 19:07

Monthly returns?

Compulsory monthly submissions are the fear for the profession.  One January a year is bad enough  -  12 would be unthinkable.  

However, as far as I can see, (please let me know if I have missed something,)  no-one is actually talking about monthly submissions.   I think that it will probably still amount to submissions annually for self employed accounts and CGT events,  i.e anything that can't get squirted to a digital tax account (DTA) automatically.   I also see nothing about tax being paid monthly, apart from PAYE , either, but that could change I admit. 

What might happen is that in a variation of the payment on account system,  (this year's tax payments are based on the previous year's figures until overwritten with the actual,) that a metered monthly dose of previous years figures for s/e accounts will be added to the DTA with the option, as we have now with poa's,  to adjust that down either by appeal, (sec 303 equivalent,) or by,  heavens above, actually submitting the real numbers, produced fairly soon after the year end,  instead of in the final hours of January following. 

So I can foresee a sort of monthly reckoning taking place, (not sure about actual payment intervals,)  but not necessarily a monthly submission.   

As for getting clients to get stuff to you quicker for accounts preparation,  I think we might find it quite interesting to see the reaction of clients to being more efficient if there will be a real cash incentive for them to be so,  which there isn't under the current regime. 

Richard Joseph

 

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By WongR
24th Mar 2015 01:59

Government stupidity

I shake my head with disbelief at some of the nonsense I'm seeing here.  It is obvious the government believe in drowning everyone in paperwork simply to make their lives easier.

First RTI, then AE, and now monthly submissions for the self employed ?

So who pays for all of this ? - it certainly isn't the government although they reap most of the benefits... With the lack of small business funding also, this almost seems to be an active step to kill off all small businesses - I'm surprised the FSB has not made more noise.

I also feel our institutes are failing our members here if they do not make more noise to steer HMRC away from some of their blue sky thinking...  

 

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By The Innkeeper
24th Mar 2015 08:53

& what about a

sole trader who is on cash accounting for VAT but accounts are prepared on an accruals basis

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By johnjenkins
24th Mar 2015 08:57

@WongR

Since the days of Gordon Brown, HMRC have been trying to kill off small business. Why don't our Institutions say something? Simple, they only want big business also.

What the government really haven't taken on board is that if you kill off small business then there is nothing left. A far cry from Maggie actually breaking stranglehold of big business so that small could flourish. It was quite funny listening to TM (a future PM?) trying to emulate Maggie.

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Replying to Tax Dragon:
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By Michael C Feltham
24th Mar 2015 14:47

It is far worse than that!

johnjenkins wrote:

Since the days of Gordon Brown, HMRC have been trying to kill off small business. Why don't our Institutions say something? Simple, they only want big business also.

What the government really haven't taken on board is that if you kill off small business then there is nothing left. A far cry from Maggie actually breaking stranglehold of big business so that small could flourish. It was quite funny listening to TM (a future PM?) trying to emulate Maggie.

 

I fear it far worse, John: the main institutes except now CIMA, run CCAB. CCAB is dominated and driven by the top ten practices. CCAB are Government's main source of input: and thus the FRC and APB-ASB are driven by Big Practice ethos.

However, few understand nor realise quite how SMEs impact the UK GDP, employment and the real economy. None comprehend the core problems facing SMEs: or their professional advisers!

Additionally, the governing councils of professional accountancy bodies fail to listen to the small practitioners: yet the sole practitioner and one/two man-woman partnerships comprise the bulk of membership!

My wife actually worked towards the end of her City career for ICAEW HQ at Moorgate: mainly on what was called the Practice Advisory Group; i.e. input from practitioners up and down the country. They were rarely listened to!

I must confess my surprise that Mark Spofforth, earlier chair of the Small Practitioner's Committee of ICAEW, now seems to have forgotten all he stood for..........

 

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By Ken of Chester le Street
24th Mar 2015 13:41

Nobody has cited Trusts and Estates in these comments.says a commenter below. Or Ministers of Religion, MP's,  LLoyds Underwriters, Charities,  and all the other taxpayers whose returns need professional software because HMRC software can't provide it Someone may have made the point, but what about the good old R40? And from my days in prcatice, I seem to recall that HMRC didn't make self-assessment repayments unless you ask for them.

And most people don't die conveniently on 5th April.  Will they get automatic balance of allowances repayments?  The one-stop nofication procedure sorts out NI benefits and probably council tax, but it stops short of making the repayments. Will R27's still be necessary?

 

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By The Innkeeper
24th Mar 2015 14:04

& Pray

how would a section 72 ITA claim be handled???????????????????

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By Spriggy
24th Mar 2015 14:40

It is a minefield and we could all drive ourselves mad chewing the cud and discussing ifs, buts and maybes. I propose to reserve further judgement until clearer details emerge and/or there is a change of government which may well change evrything anyway!

 

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By SXGuy
24th Mar 2015 15:01

Monthly submissions? No thank you.
Monthly submissions instead of yearly would be impractical and a logistical nightmare. It's fine for rti because we already have to process wageslips each pay period. But annual accounts are exactly that, annual.

A small firm like mine who has around 300 clients most of which have period ends in April, and a few throughout the year are manageable, we already have quarterly vat submissions, monthly payroll submissions, there would be no time to complete those if we also had to do monthly accounts submissions. Most clients turnovers are small, there is no requirement for VAT or PAYE, their turnover would not justify charging for monthly book keeping. And they would not want to provide receipts on a monthly basis either. If they ever decide to make this foolish mistake I pray to God it's only a requirement for turnovers above a certain threshold only.

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Replying to lionofludesch:
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By charlb
24th Mar 2015 16:27

Non-dom remittance basis

I have a non-domicile client who has mixed up all sorts of foreign income and capital, and the calculations to work out what has been remitted under the mixed fund rules usually gives me a big headache each year. To be honest with you I would love it if HMRC took on these calculations, but realistically I can't see how it would be happen in practise.

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By mydoghasfleas
25th Mar 2015 13:50

Third party data feed in ........

It will save HMRC so much effort.  Your bank feeds in the interest you earn.  HMRC thinks you owe tax when you do not, no need to search for bank details it already has them.

We recently had an enquiry based on bank data provided to HMRC.  The account was held as attorney for elderly impaired relative.  Apply this to above scenario.

Once all this data is on one government system, how long before, in the interest of -

1 national security; or

2 need for spending and collecting departments to share information; or

3 money laundering; or

4 any other excuse those in power can find to accrue further power (information is power after all)

all personal financial data is within the ownership of the executive without the need to pass it through the legislative and judicial safeguards?

It's not that returns do not need a shake up, or a plea to leave us to grind out a crust; ultimately what is optional becomes obligatory (look how many farmers can only operate with DEFRA online) and we are left wondering, "how did this happen?"

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By Montrose
25th Mar 2015 14:50

Losses various

Without some  method of taxpayer 'sign off', if  data  only income and gains are collected directly how does the taxpayer claim relief for losses, be they CGT or trading losses. And how about  the allocation EIS CGT relief, , allocation of Gift Aid to previous years etc. etc.?

I reiterate that the system looks like an extension of PAYE, not a full system to deal with the myriad circumstances with which we all have to deal

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By Alonicus
26th Mar 2015 14:02

So that explains why Margaret Hodge (in her role as chairman of the Public Accounts Committee) attacked HMRC's handling of reliefs and the reliefs themselves so vigorously yesterday.

Clearly the next strand of attack; make people claiming relief seem like tax dodgers, in the same way they have with people trying to minimise the tax they pay through avoidance schemes.  I wonder if they will create retrospective legislation to claw back previously-legal reliefs ?

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Replying to bosclibby:
By mydoghasfleas
26th Mar 2015 15:22

What explains Margaret Hodge is twofold ....

................ we have a moribund House of Commons full of time serving politicians with experience outside of politics living Westminster's fishbowl.  Nothing comes from the House of Commons; it's all released at 6 am to make sure it's picked up by the Today programme for the best sound bite.  Other than the PMQ's knockabout once a week, again rescheduled for TV exposure at lunchtime, no news come from the House of Commons.

................ whilst much of the PAC questioning is contrived and predictable, it provides a mouthpiece for some MPs (for good or bad) with more exposure than could be provided in the House.  The questioning is always along party lines; the PAC is, after all, a committee not an inquiry, like so many others e.g. Home Affairs Select Committee where non ministerial party apparatchiks (from all sides) manage to raise their profiles in that above mentioned aquarium.  Other than generate headlines, does the PAC do anything about what it "finds"?

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Replying to more rain:
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By ver1tate
01st Apr 2015 21:03

Mrgaret Hodge

One of her assistants replied 'Margaret Hodge can do nothing ( about your comment) as she is not sure who will be on the committee after the election.'

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By Spriggy
26th Mar 2015 14:34

Watching

I have been reading all the comments on a daily basis and really do NOT like the way this is going.  Everyone is terribly cinical but with just cause I feel. 

As a small practitioner I certainly would not be able to deal with more monthly returns than we already have under RTI and CIS. As has been said before there will still need to be a mechanism to deal with the twists and turns of individual circumstances and expenses, many of which are job specific. 

Maybe HMRC plans

to abolish the claim of expenses preferring instead a flat rate system like that used by some companies and individuals for VAT.

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By SXGuy
26th Mar 2015 22:07

Well well

So today i saw something very interesting.

I personally received a letter from HMRC, generic to everyone (no doubt others will also receive it shortly) saying that as i submit my self assessment by paper, they would like to invite me to try filing it online in the future.

It says that i will shortly be receiving an SA316. which after a quick google search tells me that its their way of encouraging people to start filing online to "reduce costs for HMRC and improve customer experience."

Perhaps this is the start of a softly softly approach to get people to file online ready for any digital changes that will soon be made.

But dont worry, at the very bottom it said i can still choose to file by paper if i wish. Phew.

Its just a shame HMRC felt the need to send me such information when i already file online...

 

The SA316 test paper results seem to suggest their letters are tailored to SME's with very basic accounting needs. It gave the impression that almost anyone can file online easily.

Quite amusingly one of the results were that although people prefer paper returns they "understood the need for HMRC to encourage them to file online instead" 

To the trained eye i would read that as, they prefer to file by paper, not online.

I think that says it all really.

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By Ian McTernan CTA
31st Mar 2015 11:30

One Example

I saw someone post post the 'simple' example of an employed person renting out their previous residence..

Let's assume he's a higher rate taxpayer, doesn't have any losses brought forward to the current tax year.To date under the monthly filing system he's paid £500 per month in taxes..as he's forgotten to deduct the mortgage payment increase that occurred when his fixed rate expired 6 months ago- and he wrongly assumed HMRC would adjust this automatically as HMRC have all this information under the new system.  How does he adjust this? He's not represented (HMRC discourages taxpayers from having agents for this 'simple, straightforward' situation).

Or losses brought forward after a revision to previous years following a claim?

How about unexpected expenses for the previous month that come to light the day after submission and direct debit of the tax for that month- how long before the taxes come back?

I have a feeling this system will be the excuse used to 'simplify' accounting for small businesses with fixed deductions and a system similar to flat rate VAT- which suits the big accounting firms that are all that are heard by our Institutes and HMRC but spells big trouble for our small clients.

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By qad999
12th Aug 2015 22:21

why are you all running around like headless chickens?

nothing is going to change , you will still need annual accounts for the self employed

 

... look....

even SE quoted plc's have trouble meeting quarterly reporting so its going to be the same as before -  ie "annual self employed accounts"

I am sure everyone has misinterpreted all this .. all hmrc want to do is auto populate a tax a/c ( ie the return) with 3rd party info - bank interest etc etc ..maybe on a monthly basis...

the rest... its business as usual

now go fishing... or do something that will chill you out

its no wonder  a lot of accountants  seem to end up with heart attacks

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By theaccountancysolutions
09th Oct 2017 09:08

Thank You

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Replying to theaccountancysolutions:
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By johnjenkins
26th Jun 2017 09:05

You're two years behind with your post. That doesn't say much about your marketing strategy. Bob should be able to help you.

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