Editor at large AccountingWEB
Columnist
Share this content
thumbs up and thumbs down
istock_PrettyVectors

HMRC opens up about Making Tax Digital

by
16th Aug 2016
Editor at large AccountingWEB
Columnist
Share this content

On the day HMRC released its Making Tax Digital consultation documents, AccountingWEB talked to Revenue director general for business tax Jim Harra. Here’s what he had to say about the project.

Making Tax Digital is the name HMRC has given to its four-year plan to transform tax collection. The government has committed £1.3bn to the project, which will be spent on creating online tax accounts for individual and business taxpayers, and overhauling the department’s back office systems so that they can display all the relevant tax liabilities in the taxpayer’s online portal.

“We’re constantly adding functionality to that, enabling them to self-serve online rather than have to ring or write,” Harra told AccountingWEB.

The quarterly reporting proposals are the most radical change facing taxpayers and their advisers. But rather than seeing this as a new administrative burden, Harra said: “We want to integrate tax compliance with how people run their businesses. Rather than having to do a separate exercise to do tax compliance, we want the updates to be produced from their business activity. People will keep records on apps and software and that will talk to HMRC. Once a quarter that app or software will pull together information for HMRC. The taxpayer will have an opportunity to review it’s correct, press a button and send it to HMRC.

“For small businesses, that’s all we want them to do - once a quarter.”

The consultation documents point out that taxpayers will still have a statutory obligation to ensure the information is correct and report any income not been included in the calculation on an annual basis. A facility will be provided in the digital tax account to do this.

The first digital wave will sweep unincorporated businesses into the digital regime from April 2018, with more of them able to use cash basis accounting to simplify tax reporting requirements. Bigger and more sophisticated businesses will be more likely to need to make adjustments to allow for reliefs, allowances and timing issues and the fourth quarterly update will give them an opportunity to do this, Harra said.

“The first businesses we intend to on-board to Making Tax Digital are unincorporated, so the consultation documents concentrate on what’s needed for them,” he continued. “We’ll have more time to work through limited company requirements.”

Picking proposed reforms to capital allowances rules as an example, Harra said the objective was to minimise as far as possible situations where businesses had to do anything other than update their records.

“It will be cash in, cash out for as many businesses as possible. That, with the 100% annual investment allowance should make it simple for a vast amount of businesses,” he said.

Corporation tax is not scheduled to come into the quarterly reporting regime until 2020. Limited companies will continue to use UK GAAP and a further consultation document setting out corporate tax simplification proposals is expected in the next 3-6 months.

In a theme that recurs throughout the conversation, Harra is keen for readers to get involved in HRMC’s consultation processes: “This is a golden opportunity for businesses to say what simplification they would like to see.”

Answering the concerns

Making Tax Digital has not been universally welcomed by small business groups and accountants. AccountingWEB members have raised concerns about the practicality of the new regime and their role within the digital processes. There is also a simmering suspicion voiced by SteLacca that MTD will be an opportunity for HMRC to inflict yet another penalty regime on unsuspecting taxpayers.

Harra answered that MTD will require a fresh look at penalties. But, he continued, “There is no need for any more penalties. If anything, I want fewer people penalised. I expect the proposals in the consultation documents will achieve that, particularly for people who file late. Only those who persistently fail to comply will get penalised. I would expect hundreds of thousands fewer penalties.”

SteLacca was concerned that if someone didn’t file on time, HMRC would make an estimate of the tax due on the understanding that it could be amended when the query is resolved.

“No mention of an appeals process, or even of the option to standover disputed tax,” the AccountingWEB member wrote. “This means that if a third party provides inaccurate information, even if disputed, the taxpayer could finish up paying until such time as the dispute is resolved. Seems like APN [advanced payment notice] for everything.”

The taxpayer can override the HMRC estimate when they make their filing, Harra said. “If the business is not VAT-registered, there will be no obligation for quarterly payments, so the estimate would only happen for them on the final quarterly report of the year.” 

Can HMRC really deliver by April 2018?

MTD is up against an extremely tight timetable, with public testing of HMRC’s systems and submissions from third party software due to start in April - just five months after the current 12-week consultation process ends. The regulatory and legislative complications thrown up by the Brexit vote have already delayed the MTD consultation process. But as Harra sees it, HMRC’s digital initiative is in “a good state” to push ahead without being affected by EU issues.

“It’s well underway and builds on transformations we made in the past that are tried tested,” he said. “We’ve got the government money and are on track to deliver this on time.”

The MTD plans were worked up last year, and that effort has continued throughout the referendum process. There will be legislative changes to implement and some of those may well relate to leaving the EU. But that’s going to happen after MTD goes live. “It will have to be dealt with no matter what tax regime has to be complied with,” he said.

Harra added that he would have liked to have released the consultation documents much earlier. “I want to reassure everyone that we’ve had extensive engagement and consultation already, which is reflected in a lot of the movement and thinking in these documents.”

With the current consultation documents, HMRC made its first public stab at an impact assessment and Harra is really keen to get more input on any burdens MTD will place on taxpayers as well as on specific measures.

“The thing we want is responses and AccountingWEB members can help. If there are rabbit holes, we are keen to intervene to give people the best information.”

Consultation summary

Making Tax Digital overview - introductory web page that presents a succinct outline of the MTD plans, highlighting some of the key questions that HMRC wants to ask.

Digital record keeping in the digital age - The vast majority of businesses will have to keep digital records digitally by 2020 - to show invoices, receipts and cash received. With simplified cash basis accounting (see below), HMRC suggests that much of this information could be collected using smartphone camera apps to automate accounting entries, with the software summarising and submitting the totals to the tax department every quarter. HMRC said it will look again at whether a spreadsheet is an adequate digital record to comply with MTD.

Tax administration - To make MTD actually happen, HMRC will have to seek a number of changes to its administration powers. These issues are set out in this document, which also covers a new, points-driven penalty model and alignment of interest rules across different taxes. Some of the penalty proposals bring together ideas set out in last year’s consultation on the same issue.

Simplification options for unincorporated businesses - The main mechanism being suggested is to lift the £83,000 threshold on the current cash basis mechanism up to £100,000 or £166,000. The cash basis allows businesses with trading income to calculate their tax liabilities based on amounts actually paid and received within a period. Changes are also being suggested to align accounting periods with quarterly filing and to create a new definition of expenditure to simplify capital allowance calculations. A separate consultation document provides more detail on using the cash basis to report property income.

Payments regime: voluntary pay as you go - Part of the MTD formula is to offer business people an opportunity to settle their tax liabilities as they report them - as currently happens with VAT. This paper sets out how those payments will be made and managed, and how they will be allocated across different taxes. Other complications such as repayments are also dealt with.

Using third party information - HMRC has been plugging into different information sources such as credit card service providers for a while now. These processes will be extended. This paper is a good one for a nuts and bolts perspective, with example scenarios, on how HMRC will use the information to populate digital tax accounts. The online portals will also have new mechanisms to report additional income and query items in their accounts.

Over the next three months AccountingWEB will be collecting feedback to HMRC's package of MTD consultations. Feel free to raise any points about the different issues by commenting here, on the individual consultation summaries or our MTD frequently asked questions article

If you'd like to find out more about Making Tax Digital, register for our online MTD sessions at Practice Excellence LIVE! on 24 October.

AccountingWEB is working with Thomson Reuters Digita to collate the profession's feedback to the MTD consultation documents. You can participate in our quick survey here to share your thoughts. The survey responses will feed directly in to the official AccountingWEB response to the consultation documents.

Replies (75)

Please login or register to join the discussion.

avatar
By cstwragby
17th Aug 2016 11:36

They certainly do need to look again at allowing spreadsheets, because getting a smartphone to focus on a receipt then scan it, then analyse it will take FAR longer than picking up a receipt and entering it in Excel. And not everybody has a smartphone.

Thanks (11)
Replying to cstwragby:
avatar
By eleymonster
17th Aug 2016 12:10

Couldn't agree more. As a small business owner I'm a little disappointed to see this. I'm very savvy with record keeping and ensure all docs are filed away appropriately so that they can be produced when necessary; but I hate the thought of having to scan in receipts and invoices etc... I feel that technology is simply not at a stage where this is would work well. It will just add unneccessary burden to the already big workload for many. Frankly, Big Brother comes to mind with this.

Thanks (10)
avatar
By johnjenkins
17th Aug 2016 11:58

If there is no obligation for unregistered tax payers to pay quarterly then what is the point of quarterly figures?
We all know that eventually RTI will be applied to the self-employed and we all know that HMRC are determined to destroy the small entity. They can disguise as much as they like it will make no difference. Watch the unemployment and bankruptcy figures rise.
Don't you have to have a smart phone to have apps?

Thanks (3)
avatar
By gracegariff
17th Aug 2016 11:59

We seem to be encouraged to move towards cloud accounting, which is great of course, but I do have some concerns about data security, as it seems that cloud package vendors seem to be denying liability for data loss/corruption in their T&C's. If there were to be a cyber attack or some other data failure of a cloud accounting system and client data was lost, who will be responsible for the cost of recreating it? I assume HMRC would accept this as a reasonable excuse for late returns, since they are the ones encouraging the move towards the cloud?

Thanks (7)
Replying to gracegariff:
avatar
By Peter Cane
17th Aug 2016 12:21

gracegariff wrote:

We seem to be encouraged to move towards cloud accounting, which is great of course, but I do have some concerns about data security, as it seems that cloud package vendors seem to be denying liability for data loss/corruption in their T&C's. If there were to be a cyber attack or some other data failure of a cloud accounting system and client data was lost, who will be responsible for the cost of recreating it? I assume HMRC would accept this as a reasonable excuse for late returns, since they are the ones encouraging the move towards the cloud?


I agree with this.
In addition, what happens if the taxpayer changes from one software package to another one. Will the previous provider say sorry you haven't renewed your licence, so you can't access the information etc any more? How will that help taxpayers who are supposed to retain their books and records for so many years in the event of an enquiry?
Will the software providers be compelled to maintain access indefinitely?
I can see all manner of issues with this.
Thanks (7)
Replying to Peter Cane:
avatar
By sparish
22nd Aug 2016 23:07

.

Thanks (0)
avatar
By Dave Oakley
17th Aug 2016 12:02

It will be interesting to see how well this works with the people who normally turn up in January using the TCB book keeping system (Tesco carrier bag).

Thanks (4)
Replying to Dave Oakley:
avatar
By wblewis
17th Aug 2016 12:21

Dave Oakley wrote:

It will be interesting to see how well this works with the people who normally turn up in January using the TCB book keeping system (Tesco carrier bag).

It just shows that HMRC have finally lost touch with reality. In my personal experience the average owner of an unincorporated business has little knowledge of accounting and tax and doesn't want to learn as they are willing to pay an accountant to do it for them. This is another disaster like RTI in the making and the costs and headaches will fall on the taxpayer.

Thanks (3)
Replying to Dave Oakley:
avatar
By gemmalambshead
17th Aug 2016 14:08

This January I have seen less of the TCB book keeping system since the introduction of the carrier bag tax. They now come in January carrying an unsteady pile of receipts etc. (not in a carrier bag)

Thanks (5)
avatar
By North East Accountant
17th Aug 2016 12:02

With all due respect to Jim Harra, you do not have a clue about the real life of a small business owner.

Quote" rather than seeing this as a new administrative burden, Harra said: “We want to integrate tax compliance with how people run their businesses. Rather than having to do a separate exercise to do tax compliance, we want the updates to be produced from their business activity".

So you take a task that you do once per year (prepare accounts and a tax return), when you have time to consider all issues, ensure that all is correct in a calm and considered manner to a minute by minute task as you keep your records in real time. Or to get to a number 260 working days of the year.

HMRC in their fantasy land expect admin, book-keepers etc as they go about their day to day work to make key decisions that they have neither the time nor the skill set to make. Most don't have book-keepers of course so the one man band racing from job to job, quoting, chasing money etc will have no chance.

I don't know who Jim has consulted extensively with but I can't believe he has spoken to many accountants or small business owner's with real life experience.

This isn't self interest, as there is loads of additional work for accountants, it's common sense.

Imagine Jim you asked your wife to wash and iron every single item separately rather than in batches. This is the same.

This consultation seems a PR exercise but if you are genuinely prepared to listen and act Jim I will take a day off and come and see you where I will try to give you an insight into the real world of a small business owner. 26 years as an accountant, running my own business as well.

Once per year to a min of 260 times a year. Some reduced admin burden.

Thanks (23)
Replying to North East Accountant:
avatar
By leon0001
17th Aug 2016 15:10

Can I come too?

Thanks (2)
Replying to North East Accountant:
avatar
By leon0001
17th Aug 2016 15:10

Can I come too?

Thanks (0)
avatar
By 0098087
17th Aug 2016 12:04

If I could i'd be gone from this profession. Totally insane idea. RTI isn't working right with codes coming for employees who have left.

Thanks (3)
avatar
By Nigel Hughes
17th Aug 2016 12:10

This is beginning to sound a bit like joined-up thinking which is a bit of a shock - not necessarily in a bad way.
The major question mark seems to be over the ability of small unincorporated businesses to be able to comply. The emphasis on combining cash accounting and 100% capital allowances, might work, provided the input mechanisms are robust. It might even result in a rush of highly mechanised compliance work for smaller practices ....... but then again .........

Thanks (0)
avatar
By pauljohnston
17th Aug 2016 12:11

HMRC say this is nothing to do with tax collection but having better figures to plan with for the chancellor. I am not against MTD but this seems to be a great rush andHMRC are not commiting sufficient resources. It is supposed to start March 2018. In 18 months. Based on HMRC's record with RTi is should now all be in place for testing.

One problem not covered is that in the 18/9 tax year accounts and others are going to have to produce accounts for April 18 year end and then quaterly reports starting in JUly - not sure where are the extra manpower is comming from to deal with a double workload. As a HMRC MTD presentaion I asked why not start with VAT registed businesses since they are already in the quarterly mode. Another point not cover if your VAT quarter ends in August you will have to do 8 presentaions of data to HMRC. Or change the VAT quarter end. If the later can HMRC systems cope with quandruple load

Thanks (2)
avatar
By debrahuzzard
17th Aug 2016 12:23

have not seen any mention in discussion re the extension of using cash basis about loss relief. to me the loss of the option to set off losses against other income is a major reason not to put new clients onto the cash basis. or have I missed something?

Thanks (1)
avatar
By Peter-S
17th Aug 2016 12:39

The Revenue's view is just too simplistic. Many small businesses barely find the time to chuck a receipt in to a carrier let alone scan it or enter it in some cloud package. Seasonal trades can be rushed off their feet but they will need to find extra time in the day to simply use an app. Even in our office we segregate parts of the accounts process as we allow staff access to, say, petty cash, but not payroll. We put it together once a year but I don't relish having to do four reports, scan all receipts or whatever proves necessary as its obviously extra work and we understand what we are doing.
As has been said by others, HMRC really need to think about what they are asking small businesses to do and the ability of the individuals to actually do it. I'm sure most of us have many clients that can't find the marked box to sign on a tax return and generally don't read the letters that we send to them. All of a sudden they are expected to be proficient in basic book keeping. Its not going to work.

Thanks (4)
7om
By Tom 7000
17th Aug 2016 13:00

There are 2 parts to this:

1. The macroeconomic view ie HMRC want quarterly reporting so they can collect tax quarterly and in effect collect in a whole years revenue as you go along rather than through POA etc. Then the government will have more money and the deficit will be lower. This is coming just accept it.

2. At the higher level dont really care about the microecomnomic view. However here's a couple of things to think about:

a. Accountants act as the first line of defence to the treasury. If as it implies all the self employed people will simply scan in their receipts you will find the following scanned in
i) 20 Benson and Hedges as part of a petrol reciept
ii) A new boat, because I have meetings on it
iii) The bill for my wedding, because I invited some clients
iv) A holiday in America because I was looking for new clients for my window cleaning business
v) The list goes on and on

and there will be millions of transactions like this and there aren't enough tax inspectors to pull the rubbish out which is what we do. The result is money will be collected quicker but the overall amount will fall 10%. But thats the Governments worry.

From our point of view I have been thinking about this. We complete about 500 tax returns a year that will get caught in this. 480 of them turn up with a box full of bits which we painstakingly check each item enter into a spreadsheet, total and pop in the tax return. So thats about 10 a week, or 8 a week and a big December/ January rush.

Of these 500 people 20 of them will scan stuff into an app and we lose 20 clients. The others are carrying hods and up ladders. which means, Instead of doing a steady 8 a week and having all hands on deck in January, we will now have to scan/ record 480 sets of data quarterly. So for January February and March, we will scan this in during April for submission by 30th. So I now have 480 tax returns to do in 30 days. ( we can do all the ltd co work in the other 2 months, dont fret). But I hear you say the clients will drop their records in weekly/monthly so we can do it as they go along. Well thats not going to happen is it, they are all going to turn up on 28th March and say sorry I forgot.....

The result of this is two fold
1) Its going to cost them a fortune, instead of £300 a year its going to be £200 a quarter...as theres slightly less input work. So accountants fees up £500. There will be a lot of complaints so expect to lose another 10% of clients.

2)I am going to need some staff. Assuming theres 20 days in a month and I have 440 to do thats 22 a day. Lets say you can scan in 3 a day. I need 7 people working on this solidly. I can drag the ''sledgehammers'' in off the complicated stuff ( at a cost of staff morale - but c'est la vie) . But on average I reckon I need 3.46 extra members of staff.

Increase in revenue 440x500 = 220,000
Increase in staff cost 3.76x 25,000= 94,000

Now where am I going to get room for 4 more desks. Perhaps they can have my office and I can sit in the cupboard under the stairs. Or I could run an evening shift. Scan it all in 5pm to 11pm. That would work. Better put salaries up 15% for unsociable hours, make that £94k x1.15 = 108k

Unless I put the records in a big container and fly it all to India/Pakistan/ Bangladesh once a quarter and drop them into the data upload centre for a £25k set fee per annum. I wonder if theres one near Goa where I can set on the beach and watch them process it with my binoculars.

Its not very busy today, hence the musings.
It will be interetsing to see what develops

Thanks (16)
Replying to Tom 7000:
avatar
By Spriggy
17th Aug 2016 17:30

Tom 7000 is assuming he will still be able to do the work. As I understood it there will be penalties levied on traders who give their personal HMRC login details to a third party. The whole point is that HMRC want everyone to do their own, effectively sidelining the smaller agents such as myself. My business will not exist. Or else I will have to become peripatetic moving from one trader to another advising and looking over their shoulders whilst they make their submissions.

Thanks (0)
avatar
By anthonystorey
17th Aug 2016 13:10

It's blatantly obvious that none of the people who are driving this nonsense forward have ever seen, spoken to, dealt with or can even visualise a small business. Just like RTI Making Tax Difficult might be ok for big corporations with their huge in house accountancy teams but it will be a massive bureaucratic nightmare for the small business.
And what makes HMRC think that they can make it work anyway. How well are they doing on bringing a few benefits together for Universal Credits? I think it's more cloud cuckoo land than cloud accounting.

Thanks (2)
avatar
By katemetcalfe
17th Aug 2016 13:10

I am really unhappy about this. Most of my clients are low earning, have absolutely no understanding of accounts and tax . They have no computer skills and happily give me all their receipts and bills and bank statements annually to prepare accounts and returns for them. I would not be able to do this four times a year for them and they could not afford to pay me.
Smart phone apps? A foreign language. In their days of education computers did not exist. I have about 80 clients and this would relate to about 70% of them. There must be hundreds of thousands of such people in this country which we be in a similar position. The government's policies of "one cap fits all" is just so unfair to expect a low earning handyman to be able to do this. If he understood this stuff he would probably be employed with a good salary.

Thanks (3)
Replying to katemetcalfe:
7om
By Tom 7000
17th Aug 2016 13:21

@Kate... I know... I know... but its the same for all of us. Remember its not the strongest lion in the jungle that survives but the one most adaptable to change. Lots of accountants wont be able to cope so you can pick up all the clients they shed....see always look for the silver lining :)

Thanks (0)
blue sheep
By Nigel Henshaw
17th Aug 2016 13:15

“For small businesses, that’s all we want them to do - once a quarter.”
As soon as I got to that part I knew Jim didnt have a clue, sorry Jim I am sure you have good intentions, god knows I wouldnt have your job for anything, but you clearly do not understand the complexity of getting these small businesses to do this, I and others on here deal with these people every day of our working life and have done so for many years. Please listen.
As for all these consultations that have been going on, I thought that process started a couple of days ago?

Thanks (2)
avatar
By frankdavid
17th Aug 2016 13:20

I spent 5 years training to become an accountant + have gained 40 years experience, bit like the time plumber I use gaining his skills.

I dont do plumbing, how is it that he's expected now to learn book keeping skills adequate to sell himself as a "book keeper" ? he's not going to do it, he's just going to set up a computerised accounting system with some help & do his best, which I fear will not be very good.
Garbage in, garbage out. The question really is WHY ?

19 months away and HMRC wont tell me what CIS deductions have been made until Return filed and payments missed. Shambles in the making

Thanks (4)
avatar
By david wilks
17th Aug 2016 13:20

I am horrified at the ramblings of Harra. I find it difficult to believe that he (or anyone else responsible for this nonsense) has any idea of reality. Must be nice to be paid for burdening everyone with more red tape. Am I wrong or wasn't it Cameron who said red tape for small business would be reduced? Oh yes, then there was auto-enrolment!
My smart phone threw a wobbly the other day and it took 3 days for it to be repaired. Will that be regarded as either not being careless or a reasonable excuse for not filing if the filing date had been missed?
Are they saying that by 2018 everyone will have reliable access to decent broadband?

Thanks (2)
Glenn Martin
By Glenn Martin
17th Aug 2016 13:32

I started reading the consultation documents but lost the will to live after first half dozen pages.

What I want to know is what will happen in the compression year.

For a year end March you currently 9 months to do accounts before any files are about but when this is introduced your July submission will be due before most people have turned around and got their March books into you.

I can barely remember the introduction of Self Assesment and we had to 2 or 3 years accounts for a lot of clients as they were so far behind and wanted to avoid penalties.

The logistics behind the first 18 months are going to be a nightmare .

Thanks (2)
avatar
By mgunn
17th Aug 2016 13:38

There are hundreds of thousands of people out there, possibly millions, for whom these digital proposals are a complete impossibility. Many are simply not up to the task of quarterly anything, especially to deadlines, or they are not computer literate, not sufficiently organised by nature, or too busy running businesses and families to be thinking constantly about tax. Plenty of smaller firms still have clients who provide plastic bags full of bits of paper.

Thanks (4)
avatar
By KenKLM
17th Aug 2016 14:21

The simplistic view that HMRC expect all such taxpayers to be able to understand software or APPS is fundamentally flawed along with a proportion of self employed ( high percentage ??) that cannot / do no want to use such packages or do not have access to smart phones or computers - an extra cost being forced onto some people . Good luck with all of the incorrect quarterly returns you will be getting as agents will stick 2 fingers up to HMRC when they come back to us to sort out this inevitable mess . Retirement seems a good option .

Thanks (4)
By ireallyshouldknowthisbut
17th Aug 2016 14:38

Calm down chaps and chapesses.

Whilst I would agree having read the consultation document (hint - dont do whilst eating or drinking or you will end up with a lot of it on your keyboard) that these people are in la la land and simply dont understand the difference between:

1. Bookkeeping for the purposes or collecting cash and paying people
2. Accounting for the purpose of performance review
3. Tax work for the purpose of paying HMRC

That is immediately apparent.

However this matters not a jot, we can leave them to their ignorance and fantasies about magic phone apps. The crux of the matter is HMRC want:
#
1. Turnover (one line)
2. Expenses (one or several lines)
4 times a years

And crucially they are not doing a single thing with that data. [id underline that but I cant with this poxy formum]

Then once a year - and the deadline is going to be December - d0h - we can provide proper data

Which in practice means its like PAYE for directors, where we put in a string of zeros for 11 months and put the data in for March only. end of year is correct, no possibility of penalty. It is the filing that carries the penalty not the quality of the data, and if the data isnt being used, it can be any old garbage.

So we just slap in a budget, and "job done"

There is zero chance of getting us off spreadsheets, some bright chap will invent an upload to populate the minimum field levels.

jobs for the beancounters as far as I can see.

Thanks (5)
avatar
By Nigel Hughes
17th Aug 2016 14:42

John
The comments in this string are serious arguments, well made. Are you going to summarise them and pass them on to Mr Harra?
I knew that we were going to get the "you can cope with VAT once a quarter, so you can cope with this" argument sooner or later and am only surprised that it has taken until now to raise its head.
Jim Harra's pitch only works if the whole basis of taxation is changed - if it somehow doesn't matter that the cost of the wedding or holiday in America is included in business expenses. To me this points to some kind of revenue based tax with flat rate deductions and an end to the detailed tax comp for small business.
Whether this has been thought through yet ...... I guess I'm finally going to have to read the full consultation docs to find out.

Thanks (1)
Replying to Nigel Hughes:
By ireallyshouldknowthisbut
17th Aug 2016 14:58

@Nigel, the answer to all questions of that type are that the computer software will deal with it.

and, by the way, I have seen this great app where you take a picture of an invocie and it knows what it is. Brilliant! Its the future!

Thanks (1)
Replying to ireallyshouldknowthisbut:
avatar
By Nigel Hughes
17th Aug 2016 16:32

:-)

Thanks (0)
7om
By Tom 7000
17th Aug 2016 15:25

I would suggeat entering "budgeted" figures and popping the correct ones in at the end of the year is bordering on negligence.

I would also not be too hasty telling HMRC you throw in a string if Zeros and pop in a big no in month 12. Rti is reported on on before date of payment. If they take payment before this then as HMRC I would argue a string of fines are due on all your clients. Do it once do it properly. Get the clients to pay the 675/858 a month and report it. Then you can sleep at nights.

Also when they start collecting tax monthly you will have to reengineer your " budget " clients to actuals and it wull be a pain in the window....

Thanks (0)
Replying to Tom 7000:
By ireallyshouldknowthisbut
17th Aug 2016 17:19

@Tom, i would imagine a budget would be a lot more accurate than sucking in unfiltered transnational data and deposit it like a large [***] in HMRC's databanks.

On RTI, yes there is the risk they could argue we are late filing an FPS, but so long as you have an EPS its surely an "error", and even deliberate ones are tax geared, and as the tax is right, no penalty.

anyway the RTI computer says we are compliant, and computers are bloody brilliant, and this software demonstration showed an invoice being scanned in by a phone, and it read the data. Amazing! We should base a £1200 million IT programme on this one demonstration with no further thought or understanding.

Thanks (2)
By SteveHa
17th Aug 2016 15:31

They more of the con docs I read, the more it sounds like a sales pitch rather than a consultation, and it sounds like they are trying to convince themselves.

Having said that, there is a group of people that should be more worried than most, and that is the contractor accountants (Such as Brooksons, where I used to work. Thankfully, not any more). Their model is to give their clients an online portal, where invoices and receipts are uploaded, the computer does the math, and estimates the tax liability. At year end, and final adjustments are made and the final liability is determined.

Oddly, exactly the same description could be used for MTD. Are these firms about to find their business model is redundant?

Thanks (0)
avatar
By RobertD
17th Aug 2016 15:52

I had a letter back from the Ministerial Correspondence Unit. Amongst all of the blurb extracted from previous press releases it states, "the Government has made it clear that the annual nature of profits, taxes and STATUTORY PAYMENTS will not change. MMMMM We'll see. Time to pay off the mortgage and quit.

Thanks (0)
avatar
By kdbr
17th Aug 2016 15:58

Ah well, I'm sure the professional bodies will fight the corner of the micro businesses on our behalf all the way through the consultation process...

Thanks (0)
avatar
By Briar
17th Aug 2016 15:59

Jim, come up here to Cumbria. But don't bother to phone me on my mobile because I don't get a signal (Voda or O2). I might not get your email either because I am lucky if I can get more than 0.8mps and it is very unreliable.

Many of my clients still use carrier bags to keep their records. Locally, there are no supermarkets but lots of small shops who don't have to charge for carrier bags (<250 employees).

Many of my clients are too busy working and making money (and paying taxes!). They are not book-keepers and don't want to be (and are not capable either). They pay themselves a "wage" every week (which I treat as drawings). They are good at their jobs though and sometimes work for cash (and record it (?) in a receipt book) because it is easier than trying to get to a bank (3 closed in the last year) with cheques.

The Government goes on about how important small businesses are to the economy. Yes they are and are profitable and pay taxes. These proposals will close down many small businesses or reduce their taxes (due to less work being able to be done due to having to "wash your shirt every day").

So the message is (as someone has said already) .. one cap doesn't fit all and won't. Get real!

Thanks (8)
avatar
By Michael C Feltham
17th Aug 2016 16:26

When I reached this bit: "we intend to on-board.........." I realised the interviewee was a muppet, trying to play in the real world of tech.

I have said it before on these boards and will say it again.

Clearly, as so often in the past, Government holistically and in this instance, HMRC have been sold the vision of the utopian dream of a dedicated system which not only does everything in a flash, it makes the tea, cleans the office and your shoes and is all knowing and all powerful.

Staff answering boring questions from taxpayers and advisers and agents will be a thing of the past....

Don't know what this man has been smoking but he clearly, is a clueless clown.

We know, HMRC's far vision concept is to have each and every transaction (Purchases, Sales, Payments et al) fed into their Big Brother lookalike IT systems.

Nice dream: since in the real World on Main Street I live in and my clients live in, wholesalers and retailers use a raft of disparate systems to take and process payments.

Again in the real World, even where a client uses a software-driven approach for bookkeeping, then most of us demand a Trial Balance print out or copy and even a Transactional Trial Balance: are HMRC expecting advisers to process and check the TB every quarter?

http://www.computerweekly.com/news/450297102/Implementation-problems-ine...

Thanks (3)
avatar
By chancewind
17th Aug 2016 16:29

accounting business for sale as from 5th April 2018!

Thanks (2)
7om
By Tom 7000
17th Aug 2016 16:55

@chancewind, Ill give you £500 and a tube of smarties
No vat TOGC ( maybe...)

Thanks (1)
avatar
By Spriggy
17th Aug 2016 17:19

I know the Self-Employed will not have to comply with this new regime for a while yet but when they do what happens with the 20% of the population who cannot adequately read and write, let alone operate a computer.

I am also concerned that some traders will simply submit their sales and simple purchases in order to comply but will lose out on claiming many expenses because they are unaware of the rules. The accountants and agents currently help with this but they will be sidelined by the new regime. Apparently agents will not be allowed to submit on behalf of clients.

Thanks (1)
avatar
By vowlesj
17th Aug 2016 17:41

Smartphone, tablet, laptop or pc, taking photos or scanned in receipts ... whatever! It is immaterial and pretty trivial to whinge about using a recognised software platform. Surely a part of the point is to ensure that the taxpayer has a 'proper' system of record keeping...and that the system collates and provides information in a simple and easy manner.
So what is a proper system? From experience I know the number of errors found in both manual record keeping and spreadsheet record keeping is far higher than in bookkeeping software. So three cheers for HMRC insisting that if you run a business you take it seriously and have proper software. And the £10k turnover limit means 'hobby' businesses don't need to comply.
Of course the issue with accounting software is that it is just as easy to enter rubbish as it is to enter good solid data after all garbage in=garbage out. Which leads me to a point- HMRC are clearly assuming the data is entered correctly! Which is of course the issue when the client does their own record keeping and it is not checked by an accountant before submission.
I am heartened by one comment that there would be an opportunity to add in other details on an annual basis - but so far it seems like HMRC have rose tinted spectacles about the quality of the record keeping of the average micro (ie less than 10 employees!) business...you know the 4m odd of sole traders and very small businesses. Whilst some will be excellent, others will be atrocious. How will that be reflected in the ability to file updated information?
Personally I can forsee tears, arguments and toys being thrown out of the pram before it is all sorted. One of those is clearly data security. I am happy with the encryption and security of the various cloud softwares, but the client's data is only as secure as the password they choose - storms ahead and icebergs lie in the path of the unwary here!

Plans to raise the threshold for cash accounting so that their system can actually work are afoot. What happens if the client wants to work with accruals and prepayments and do proper true and fair accounts?

Also, there will be some mechanism to review and amend the figures before they are submitted. Obviously this is needed, but what does this mean for time limits, penalties, etc. Can you mark a quarter as provisional when you report it? Will all quarterly reporting be treated as provisional and to be confirmed with an annual 'final' statement.

Then you look at accountant's workloads. Essentially the system as planned seems to require a quarterly set of accounts prepared to pretty much the same standard as annual accounts are prepared now. What are the workload implications for accountants? Is there enough resource in the UK accounting profession to deal with this? What are the cost implications for the individual businesses?

Wouldn't it be easier to have quarterly reporting that is informational, but is not used to calculate tax bills. Stick with the system of annual accounts for the final calculation of tax, but need a reconciliation back to the quarterly reporting. To have a system of quarterly (or even monthly) payments on account instead of six-monthly payments as at present.

I think HMRC might have bitten off more than the business community can chew - I am willing to go along with it but if we are doing 4 tax returns a year I can see my client base reducing when I say their bills are going up by 400% come 2018!

Thanks (2)
Replying to vowlesj:
By ireallyshouldknowthisbut
17th Aug 2016 18:12

I think you need to read the consultation docs. Its 4* data, then 9 months to correct it, ie one month less than now.

The quarterly data is not used it just sits there for purposes unknown and only top line data arrives HMRC side.

There is no mention of balance sheets, agreeing data to bank accounts or any basic accounting 'checks and balances' its just scanning in invoices on a phone and "pow" that's your tax return. Obviously!

I doubt a single one of them had completed a bookkeeping course, let alone run a small business or (heaven forbid) worked in an accounting practice. It reminds me of Gove's reforms of teaching based on zero experience of teaching.

Thanks (0)
Replying to ireallyshouldknowthisbut:
avatar
By Michael C Feltham
17th Aug 2016 18:48

Quote:
I doubt a single one of them had completed a bookkeeping course, let alone run a small business or (heaven forbid) worked in an accounting practice. It reminds me of Gove's reforms of teaching based on zero experience of teaching.

I was having an enjoyable pint with a fellow cynic (Nuclear Physicist) and we were discussing the thorny topic of damned politicians.

I had an inspiration! And said to my friend (misquoting and plagiarising G B Shaw): -

Those who do, do.

Those who can't teach.

And those who are unable to do even this, become,

\/

\/

\/

POLITICIANS!

Thanks (0)
avatar
By North East Accountant
17th Aug 2016 18:50

I still have a couple of Frank Wood book -keeping books somewhere if anyone in government would like to borrow them!

@Tom 7000 - your posts are great.

Thanks (0)
avatar
By frankdavid
17th Aug 2016 20:20

COMING TO A TAX OFFICE SOON

The latest HARRA HORROR

Making Tax Disastrous !!!!!

cast of mllions unpaid extras (hope someone tells them), no spreadsheet users allowed !!

Thanks (1)
avatar
By ralan
17th Aug 2016 22:08

Until their software people can sort out the time on Gateway responses to be the correct time which has been going on for years ( only correct in winter) and RTI to be updated in "Real Time" not every two weeks then they should leave well alone.

The software developers must be laughing all the way to the bank with the rubbish systems they have sold HMRC.
Whoever is responsible for signing them off as fit for purpose should be ashamed of themselves but instead they will have been paid a bonus and probably been nominated for a "gong"

Glad I will probably be retired by the time this shables is foisted on us.

Come back paper and quill.

Thanks (1)
avatar
By whiteways
18th Aug 2016 09:18

Surely the key issue here is not whether accountants will be ABLE to cope, but whether they will be ALLOWED to cope. All the indications I have read suggests that Taxpayers will not be allowed to give anyone else access to their Individual Tax Account. If that's true, then the Government will be forcing Taxpayers to deal with them unrepresented, and accountants will be effectively frozen out of the process. Game over.

I think this needs urgent clarification.

Thanks (0)
Replying to whiteways:
avatar
By johnjenkins
18th Aug 2016 09:52

Legally I cannot see how HMRC can stop an authorised agent accessing tax payers records (practically yes of course they can). So perhaps a court case is in order to establish tax payers rights? Will it be compulsory for everyone in business to have a device that scans? Again perhaps another court case? If our bodies had any notion of common sense they would have taken this head-on. At the very least they could have stopped any MTD for years.
Don't get me wrong I'm all for techno advancement but 1/4 figures for no purpose?????????? Yes we all know what the purpose is apart from Mr. Hfuhruhurr (The man with two brains). Maybe that's his UTR (you can put your own meaning to that).

Thanks (0)

Pages