HMRC lights blue touch paper on MTD letters
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Rebecca Cave is now retired from 35 years in the tax world, including eight years as AccountingWEB's consulting tax editor.
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But I am thinking of my clients. I'm thinking of how much time and effort cloud accounting can save my clients. I'm thinking of the more accurate data my clients are producing, and I'm thinking of how I can advise them much better with real time information.
Tornado posted:
"What happens if the XERO shareholders sell out to Chinese or Russian entities?"
This is a good point, but much more likely is that Xero simply goes bust. See my earlier posts on this subject. the balance sheet is a mess, they are still making losses and bleeding cash and the Finance Director is a wally.
They still have not listed their shares anywhere other than New Zealand, so not exactly a vote of confidence from the Xero board that they want to just stay on a second rate market.
So, what happens if Xero busts? The last 8 or 9 years has been very benign for the world economy for companies like Xero who aren't making any money and need to borrow shedloads of it.
If this was 2008 and not 2018 then Xero would be toast. And the subscribers would be praying that whichever bank moved in on Xero kept the servers switched on, or all their lovely graphs, charts and source data would be toast too.
For me HMRC has been utterly negligent in forcing through MTD at gunpoint without giving any consideration to this sort of issue.
The idea behind MTD is fine. The reality, having moved over 3 dozen clients over onto four various cloud systems is that the vast majority are ill equipped to use this technology, no matter how 'simple' the cloud producers make it (apps on phones don't do much beyond the extreme basics btw).
The correction facilities on one are appalling (maintaining the old desktop problems, rather than starting with a fresh database). The reporting on two others leaves more than a bit to desire. Another has purchase/sales ledgers where you are unable to see a true activity log without running a report out of the browser. I could go on for hours!
None of the cloud systems have been designed to be used by volume transaction operatives (i.e. accountants and their bookkeepers), yet this is who will be forced to use them most.
Of course, the real issue here is that the old crusties at the institutes made no effort to engage with the Fintech Cos to push for a sensible working solution for MTD. The Fintechs were left to make up their own ideas and are now fleecing everyone with those sub-requirement products. Oh, and where they don't do something, "there's always a bolt on from XYZ" neglecting to mention it might be £150 per month!
It's a bit like the railway - no one is over-seeing and no one taking control
I don't understand your comment "None of the cloud systems have been designed to be used by volume transaction operatives (i.e. accountants and their bookkeepers), yet this is who will be forced to use them most." I have clients who put through dozens of transactions into Xero each day and it works perfectly fine. Can you explain your comment?
77% of my clients are partnerships so can't participate in the pilot but will be mandated from 1 April. 51% of my clients are either partially exempt or use a margin or retail scheme - none of the mainstream software can handle them. 81% of my clients are farmers - none of the mainstream software can handle farmers' averaging, herd basis etc, and most of my farmers are in locations where there is poor or zero internet. I'm no luddite - I've been filing digital tax returns since 1998, but I'm a realist and know the limitations of the software and my clients. I am QuickBooks accredited and have attempted to get a few of my more tech-savy clients to use QuickBooks but few have made progress. I would love it if all my clients had the time/ability to do their own bookkeeping but I know from 35 years' experience that they cannot.
This is where the third-party apps come into play! I have several clients who are used car dealers and so are on the VAT margin scheme . As you say, none of the mainstream software can handle the margin scheme per se, but they can when you add on a third-party app. I found third-party apps that could handle the VAT margin scheme for clients using either Sage or Zero. There are farming third-party apps for Xero, so you might want to have a look at some of them.
Clients doing there own bookkeeping is a bit of a mixed bag for me: some clients seem to think they can learn bookkeeping in a few hours, others grab hold of the nearest barge pole and ask me to do the work. Irrespective, all of them can see the advantages of cloud accounting.
Thanks Patrick, I was unaware of these additional apps. Is there a list of them on HMRC? These might solve some of the problems, though I guess this is yet another app clients will have to learn and there will be extra cost?
At last, HMRC wakes up to start its communications to tell unsuspecting VAT registered businesses about MTD coming next April.
About time, we started communicating with our clients on 31st March 2016 and have done so periodically since.
It is such a shame that all the problems that will unfold in 2019 and beyond could have been properly resolved if only HMRC had actually listened to people who know what they are talking about.
We told them forcefully in September 2016 consultation trying to get millions through the starting gate all at once was a recipe for disaster but listen they did not.
We suggested they stage it like they did for AE but listen they did not.
HMRC you are about to reap what you sowed and you have no-one to blame but yourself.
Its now Thursday - nothing in my post from HMRC. I'm gutted! ...but don't we all know that if HMRC 'issue' something on any given day then it won't arrive until at least a fortnight later!
I'm very pleased HMRC are moving towards the digital age, I welcome change.
However, I'm not impressed with the lack on information and I would have welcomed some webinars and support in preparation for April 2019.
Unfortunately, I'll be one of the many in a VAT group that will be forced to go live on MTD in May 2019 without time to plan and train.
I would be interested to see the contents of a letter anyone has received.
The letter will probably go something like.
"As from 1st April 2019 all business with a turnover of £85k or more who are registered for VAT will have to go onto MTD. To find out more please go on to our website and all the relevant details of how to apply and the software companies selling the equipment you will need will be available just as soon as we sort out a few slight problems.
There are 2 versions of the letter. I have no idea why there are 2 or who will receive which version. Here are both versions:
Encouragement letters – version 1
The way you send us VAT information is changing – find out what it means for you
We are changing how businesses need to keep their VAT records and submit their VAT returns. This new service is known as Making Tax Digital. If you are a VAT registered business with annual taxable turnover above the VAT threshold (currently £85,000) you will need to use this service to report your VAT. This will be mandatory for periods starting on or after 1 April 2019, but you can make the switch now by following the guidance below.
To use this service you will need to keep digital records. This may mean using software designed for record-keeping or a combination of software packages or spreadsheets. You will then need to submit your return using software that works with Making Tax Digital.
By joining early you will know that your business is ready, but there are other benefits too. Going digital makes managing business finances easier. It can do this by making tax part of your day-to-day record-keeping in a way that will give you the confidence you’ve got things right. Once your software is set up and your VAT return is ready, it just takes the click of a button to send it to us.
What you need to do
To join the new service you can either:
talk to your accountant about Making Tax Digital and joining, if you have one
go to www.gov.uk and search for ‘MTD ready’ then click on the first link - this will tell you about the steps you need to take and give you the option to join
If you already use software to keep your VAT records, you need to make sure it has been updated to work with Making Tax Digital before you join.
If you need help, the link above includes short YouTube videos and help to find the best software for your needs. The pages also have links to the ways you can contact us to talk about Making Tax Digital.
This Encouragement letters - Version 2
We are modernising the VAT system - get your business ready now
For accounting periods starting on or after 1 April 2019, VAT registered businesses with an annual taxable turnover above the VAT threshold of £85,000 must:
keep digital records for all VAT transactions
use software to submit VAT returns to us digitally
We call this Making Tax Digital. If your business is VAT registered and has an annual taxable turnover above the VAT threshold, you should act now to get ready for this change.
What you need to do
To get your business ready, you must:
talk to your accountant, if you have one, about signing up to Making Tax Digital
go to www.gov.uk, search for ‘MTD Now’ and click on the first link to sign up
either
start using software to keep VAT records, if you don’t already
ask your software supplier if the software you already use is ready for
Making Tax Digital
Sign up now to be certain that your business meets the new requirements. Once your software is set up, you can send your VAT returns to us with just the click of a button.
Support is available on the link above. This includes short YouTube videos and help choosing the best software for your needs. The guidance pages also have links to the ways you can contact us.
Thanks. Mine will probably come soon. I don't find either particularly helpful and I won't be watching any videos. So that really just brings me back to square one - learning how to use excel and finding the cheapest or free bridging software off the cloud which exists yet.
I am hoping whether paid or not it just takes a few minutes to download and install and that I will keep my paper/Word records in tandem in case it does not let me save all the detail and explanation I choose to write into my existing records.
Kevin - thanks (how did you get your hands on these?) - neither I nor any of my clients have yet to receive the letter.
Isn't it jolly super that it all works by 'just the click of a button' - there was I thinking that more was involved.....
How many of us will be encouraging clients to register for MTDfVAT early I wonder....
I like 'By joining early you will know that your business is ready' as if that's all you have to do.
Both letters tell the business owners to contact their accountant. I'm glad HMRC are telling businesses this rather than doing it themselves. But by telling clients to contact us it implies we will have a quick solution for MTD. It'll be us who will have to give the client the bad news. With 39% of my clients still using paper records I'm going to be giving out a lot of bad news.
Welsh Rates of Income Tax (WRIT) start 06/04/19. Tax rates won't be a change for 2019-20 because the Welsh Government is maintaining the 2018-19 rates. HMRC is in the process of writing to all Welsh taxpayers telling them about the change. Taxpayers receive a letter in English and Welsh, and a flyer in English and Welsh. WRIT is far less disruptive than MTD yet HMRC is sending more information to Welsh taxpayers than it is sending to businesses affected by MTD. It is almost as if HMRC is trying to ignore MTD in the hope it will go away.
..as per my still held view that the Lord's committee's report, once issued, will have a significant impact on what happens next year.
I think you will very much disappointed if you think the HMRC is going to delay mandatory introduction of HMRC for VAT from April 2019 because of what the House of Lords committee says.
As someone who watched the HMRC being grilled by the committee I expect the report to be scathing but the committee can't even get Mel Stride to talk to them. Their concerns will be noted but nothing will happen.
House of Lords Committee or not, there is no way that MTD for VAT will be mandatory from 1st April 2019.
We already have exceptions creeping in plus the new revelations that many Government Departments which account for VAT may be unable to comply with the regulations, along with thousands of larger businesses who have bespoke complex accounting systems that will also be unable to comply with the regulations.
The clear evidence is there for all of us to see that making MTD for VAT mandatory from April 2019 will be impossible to achieve.