HMRC’s Giles McCallum on the purpose of MTD
Giles McCallum, the director of Making Tax Digital, sets out HMRC’s vision for MTD and the benefits it will bring to the tax system.
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The trouble with the politicians is that they just don't have a notion. They don't understand what is being fed to them . . . . . so they just swallow it whole. So few of them, nowadays, have any experience of the real world and a vanishingly small number (on the relevant committees) have any experience or understanding of self-employment and/or the game we are in. We need somebody to ask pertinent questions on those committees but, let's face it, that's not going to happen.
The House of Lords Economics Select Committee that looked into the then proposed MTD for VAT in October 2018 clearly knew their stuff and had done their homework. As one of the (small firm) accountants invited to attend I was impressed. I was also surprised that not one of them had a good word to say for MTD. Their end report was heavily critical. BUT:
HMRC and HMG ignored every recommendation in it.
I watched the video of this and as you say, there was nothing good to say about MTD.
This will come back to Haunt HMRC and the Government as the problems discovered by the Select Committee (and many, many more) turn in reality.
Sit back and watch the panic evolve, this should be highly amusing.
Sit back and watch the panic evolve, this should be highly amusing.
Yes. I was looking forward to this and was gutted when the MTD shebang was postponed.
As I see it, the problem HMRC have got is that for them, if MTD goes down the pan, they're up the swanny without a paddle. So I presume they will protect MTD till the cows come home and then some, which puts us in a very bad position and the reason why they won't admit they've cocked up.
I actually think they have no option other than to back-off as this has been the default situation with many of the grand ideas that have been proposed in the past, such as RTI and MTD for VAT which is just a mere shadow of the original plans.
30 day reporting for CGT apparently still does not work properly which is pretty disgraceful as the software should have worked perfectly before it was brought into service. This is a relatively small procedure compared with MTD for ITSA so multiply the problem a thousand times and imagine the chaos that will ensue.
MTD for ITSA must go the same way although HMRC have hung on for so long with this that the fall will be quite spectacular when it comes.
You know, I know, so do 99% of us know, HMRC know (they can't be that short sighted). It's like IR35. Everybody knows it's ridiculous but it's still there.
We have received letters for several PAYE clients stating that they are overpaid - whereas we KNOW that they are not. What's a body supposed to do in that situation? Use up the overpayment? Write to them (phooey!)? Or do what we have done . . . . just ignore them and carry on up the Khyber?
I gave up on any sense coming out of PAYE quite some time ago.
Carry on up the Khyber with Kenneth Williams and Charles Hawtrey sounds a much better option. At least you can have a good chuckle at all the double entendres about Tiffin.
One of my clients received an over payment letter. Trouble is she also has SE income and has an overall tax liability. Tax return filed in May/June, over payment letter sent out in September. I telephoned HMRC to tell them about the error more than 2 weeks ago. The person on the other end said that the repyament cheque would be stopped.
Today she received a cheque. I advised her that the easiest course would be to bank the cheque and not spend it. Any other action would cause trouble down the line.
I had this too. I also reported it on HMRC's Agent Forum who said the problem was not widespread because not enough agents had reported it.
The postings on this matter have all been amazing and thought provoking. However, until such time as bigger guns are brought to bear nothing will change.
I challenge all of the professional bodies to make stringet representations to government to put a stop to this madness of MTD. They will not of course. They are all only filled with self-interest and have no mindset to lobby on behalf of their smaller members.
If we were living in France, for example, we would all have taken to the streets in protest.
That's why I avoid professional bodies. This country is riddled with time-serving, snouts in the trough elitism.
Oh for a good bit of Gallic bloody-minded revolt and direct action. What happened to all their fishing boats and blockading British ports or is that a timebomb still ticking?
I have read all the above comments and agree with pretty much all of them in criticising this MTD IT nonsense for the reasons given.
HMRC have of course pulled the wool over the politicians' eyes, as they did with the loan charge. There was only a volt face (or volt farce in that case) there when the politicians felt pressure from independent pressure groups and all the suicides etc.
As per Jon Griffey's original and now famous MTD IT post, all these sensible complaints are pretty much in vain without similar action here, which is unlikely let's face it.
Well - now it is official HMRC are lying through their teeth, they are incompetent and take absolutely no notice of their 'customers'.
MTD for VAT has not closed a tax gap. I should be surprised if it has not opened it as HMRC believe everything they are told.
If it comes from a computer it is right. Someone ought to tell them that the errors come on entry of data to the computer and once entered HMRC thinks they are miraculously correct. ABSOLUTELY NOT TRUE! I have just spend hours trying to sort out errors on a well known bookkeeping system caused by its inability to deal with payments on account in a comprehensible manner.
This client on its old software (not MTD compliant) was no trouble whatsoever.
And this expert is backed by an HMRC that cannot even run its own systems properly RTI, VAT etc and is so incompetent that it cannot answer letters in a reasonable time.
It cannot even process paper returns correctly. It is totally incompetent. To be honest more words fail me. Thank goodness I shall be retired by April 2024.
"Someone ought to tell them that the errors come on entry of data to the computer and once entered HMRC thinks they are miraculously correct!"
Unfortunately it's far worse than that. Garbage in, garbage out is still true of course ... but even valid data gets corrupted within HMRC systems (the results of which are hidden from the taxpayer - making it hard to get corrected even whilst the taxpayer is being chased for corrective actions not of their making, or penalties are applied).
Now, I wonder whether Mr McCullum has actually read these comments?
Personally, I very much doubt it: the same level of doubt I suffer about politicians and ministers actually reading letters sent in by electors; let alone understanding anything much about the topic they are supposed to be in charge of!
Monkeys in charge of the rocket seems to fit the bill??
We have heard many pious comments in the past week about "our democracy". But when you put "monkeys in charge of the rocket", you know the system has serious flaws and problems.
As Mark Twain I believe said "if voting changed anything it would not be allowed".
Giles, I have been filing 100% digital ITSA since 1998. I adopted it way back then because (1) HMRC were taking too long to process paper returns and (2) a huge number contained HMRC input errors. Switching to digital meant I eliminated both problems. It was expensive: we only had one PC in the office at the time and had to invest in a network, server and additional PCs as well as the software and the staff cost of inputting loads of data. But we decided the benefit outweighed the cost. We also adopted digital CT way before it became compulsory, and online VAT, digital PAYE etc. Though we are IT-literate, many of our clients are not. Some are digitally-excluded and others are IT-challenged. There's a world of difference between being able to buy something from Amazon and maintaining your business records digitally. I have put all of my larger clients onto software because there are good commercial reasons for using software. But the vast majority of my clients have no good commercial reason to switch to software. We did buy hundreds of cloud software licences when MTD was first announced and started transferring clients over, but we were on a hiding to nothing and even those clients who wanted to maintain their own records found the task too demanding. Let's face it Joe the Plumber is a plumber, not a bookkeeper. HMRC would not expect their own staff to be able to fix the office boiler, so why does HMRC expect Joe the Plumber to be able to become an instant bookkeeper? It takes training and experience to be able to reliably use any software and most small business owners (and landlords) haven't got the time.
HMRC originally said MTD was required to (a) close the tax gap and (b) because it would be cheaper for businesses than their existing record keeping. We agents said MTD would (a) increase the tax gap and (b) cost more to administer. The tax gap would increase because software makes so many mistakes (eg Sage defaults to T1 thus reclaiming VAT on items with no VAT such as insurance, rates, drawings etc). HMRC now admits that MTD will cost businesses more and recently https://www.gov.uk/government/statistics/measuring-tax-gaps/measuring-ta... has confirmed the VAT gap has increased under MTD VAT from 7.0% in 2018-19 to 8.4% in 2019-20. So we agents were right all along and HMRC wrong. Will HMRC now listen to us? It is not that we're Luddites, far from it. It's because unlike HMRC, we know our 'customers' and know what is reasonable to expect of them and what is not. MTD is not reasonable. If HMRC continue to steam roller through MTD it will fail.
I have now recovered from my loss of words so can relate another bit of HMRC incompetence.
They want people to report residential property disposals within 30 days.
But you must have a special account to do it - your accountant cannot do it for you.
So I have 4 clients in a partnership who sold a property. All have Ni numbers and UTRs. All have been unable to open the accounts because they cannot, for one reason or another, complete the security checks. So they have had to apply for paper forms. PAPER FORMS! In our digital world HMRC cannot even get a simple registration right when the taxpayer has a NIC number and a UTR.
And these are the monkeys who want to waste everyone's time with MTD for ITSA.
They also don't respond to 64-8s any longer so presumably it doesn't matter if people are unrepresented - who cares - it's digital - it must be right!
Do you reckon Rishi knows what sort of people he is employing at very high salaries paid by us to spew out such a load of *******s? He might as well sack them for all the good they are doing.
Actually the client has to set up a Government Gateway ID but you can now take over within the Agent Services Account and do the reporting. An example of an improvement that I doubt any on here will credit HMRC for !
That is helpful David but it was the personal account that was the problem. Still - one positive is better than none.
That is helpful David but it was the personal account that was the problem. Still - one positive is better than none.
That is helpful David but it was the personal account that was the problem. Still - one positive is better than none.
Because it's not much of an improvement.Actually the client has to set up a Government Gateway ID but you can now take over within the Agent Services Account and do the reporting. An example of an improvement that I doubt any on here will credit HMRC for !
A real improvement would be not forcing a client to set up a Gateway Account for this one transaction at all. The whole point of engaging an agent is that they deal with these things on your behalf. A system that forces individuals to do some of the work they have an agent for is a rubbish system.
Not seen you respond to my query about increasing the exemption limit for MTD by the way. It's back on the first page of this thread, so it should be easy to find. That is if you really want to engage in debate and not just take pot-shots at those you call "refuseniks".
Raising the exemption to £85k the same as VAT would help enormously with smaller businesses with which I deal. And then, having done the quarterly VAT, most of the info HMRC seems to require will have been compiled anyway.
I personally have found MTD for VAT not as bad as I feared, and I use and approved third party Excel Macro to file. Again, if there is something similar to MTD for ITSA, then that will make transition a lot easier.
However, I am still sceptical of the proposal in the round. The danger that small businesses in particular will have still more tax admin to undertake seems ridiculous if it takes them away from the day job.
VAT registered business are already doing quarterly updates. Some will be doing actual accounting figures, some just the vat content. So really it's not too much of a transition. You could say what was the point?
MTD for ITSA is a totally different kettle of fish and I have to agree too much admin (which the smaller business will find MTD to be) will distract from earning money.
That’s been the case since day 1. It’s setting up the individual gateway account with ID checks that causes issues. But you already knew that.
It would be simpler if hmrc had just added a reporting option to the SA account when we log in.
I have only a couple of partnership returns now, and one of them is to do with a small business I am involved it. I make do with paper returns.
Mind you, paper returns have their drawbacks. HMRC lost one a few years ago and we had all on to convince them we'd sent it. They are priceless.
One of my clients worked for Customs before merger. He will tell you all the experienced staff like him went at merger, and they employed low grade staff who knew nothing. No doubt the same happened at Revenue.
As for Sunak, he's a former an investment banker, the parasites of the financial world. All he sees is profit and loss. My nephew is a tax accountant and worked in a firm in London where some of the senior executives were investment bankers. he left in disgust and works for a normal firm in Sussex now.
I had one of my Usual Suspects in this morning, to collect his record book (last made up to 5 April 2020 so that he can now make it up to 2021). Knowing that he has to pay tax on his SEISS he commented that he 'had better make sure his income was not too high for the year'.
I told him that he was the exact target Giles has been looking at, and digital would be closing the Tax Gap, in his case at least.
We got his phone out, signed him up for Mettle and downloaded FreeAgent at the same time - which will be free with Mettle. When he gives me his sort code and account number I will set up his FreeAgent then download the data from his present Bank.
I observed that once we had control of his data we would not need to trouble him with emails in October (like the one I just sent) to the effect that if he could not be bothered about his own affairs, I would be resigning.
From now on I will be able to reliably delegate the task of marshalling this chap's figures and be ready to file in April. So I get an easier life, so does the client, HMRC gets a proper Return and he has to learn to play the game.
Of course there will be problems, but it is swings and roundabouts. What I stand to gain I expect to more than compensate for what I stand to lose. It was the same when Self Assessment came in, when we had the same whinge-fest from the accountancy profession (and shame on those of you who did not change accounting dates back then, may your clients sue you for Overlap Relief)
"Of course there will be problems, but it is swings and roundabouts. What I stand to gain I expect to more than compensate for what I stand to lose. It was the same when Self Assessment came in, when we had the same whinge-fest from the accountancy profession"
I don't remember any whinge-fest with Self Assessment. Bearing in mind there was no widely used internet or social media in those days, all I remember was a well planned introduction of Self Assessment by The Inland Revenue and plenty of opportunity to get involved with the process. The key point was that Self-Assessment was a very attractive, logical and above all, doable proposition and was well received by most people. MTD has none of these attributes.
I don't remember any whinge-fest with Self Assessment.
I did kick up a fuss about SA because I realised how much work it would create. And work it did indeed create. But I also recognised the pre-SA tax procedures were not fit for purpose eg the 30 day deadline to submit tax returns that everyone ignored, commissioners hearings listing 3 or 4 years of accounts etc. The transition from PYB to CYB was massive as was everything else about SA. But it wasn't as painful as it might have been because back in those days, HMRC was different. We still had local HMRC offices and a member of staff in our local HMRC office was appointed our SA liaison officer. We could go to her with any SA issue and she took ownership and came back with an answer. Also, she arranged workshops and meetings which were 50:50 HMRC staff and agents. HMRC was much more an enabling organisation and because they had local offices with staff who actually did compliance checks, HMRC knew their 'customers' and what could be expected of them. Today HMRC have all but ceased any contact with taxpayers (we haven't had a compliance check or enquiry for years) so HMRC no longer know their 'customers'. HMRC's movers and shakers are no doubt IT literate and because they don't have any dealings with the great unwashed, HMRC don't realise that most small business owners do not have the IT skills or bookkeeper knowhow to maintain their own digital records. And that's the crux of the problem: the digitisation of transactions. If software was clever enough to handle everything then I'd be happy, but I've seen far too many errors because there's no intelligence in the software.
Thank you Kevin.
You have expanded my own thoughts and experience in a very eloquent manner
What Tornado calls " a whinge fest" is in fact a series of very valid criticisms that need answered. The proposals in their present form are flawed.
For me, a threshold of £85k to coincide with the VAT threshold makes perfect sense. And doing quarterly returns at the same time as VAT makes much more sense because most of the figures required will be to hand.
I often give clients an update on the performance after I have done the VAT return. But my background is management accounts so it's in my DNA.
As regards accounting software, it tends to be designed as a one size fits all package. Adapting it to individual circumstances is problematical. I use MS Excel and use an Excel Macro package to file MTD for VAT and that seems to work well.
The only software packages I use are Sage payroll, and I have just strated setting up Quickbooks for a client which seems be oversold as regards with what it can do for small business.
All I am asking for - and I think that would cover a majority in this thread, is for HMRC to listen some of our criticisms and resolve them well ahead of the 2024 prospective launch date.
However, those with larger businesses probably could not things that way so easily. But then I did a great deal with Lotus 3 back in the day when working out group accounts.
The only software packages I use are Sage Payroll which does what I need it to do, and I have started to set up Quickbooks for a client. I suggest the TV ads on Quickbooks oversell its virtues to small business. You need considerable accounting nous and IT skills to make it workable.
I did not refer to the introduction of MTD as a Whinge-Fest. The term was used by davidross to describe the introduction of Self Assessment, which I did dispute
MTD is a different matter but whilst I do not describe the criticisms as whinging, there are definitely many valid points that need addressing.
David, your post is full of holes.
You always have site of clients bank statements. If you've done the return without them..........................
What he is actually saying to you is "I will have to look at how much cash to declare".
So David, having all singing all dancing software will not make an iota difference to your clients tax bill or his attitude.
"I had one of my Usual Suspects in this morning, to collect his record book (last made up to 5 April 2020 so that he can now make it up to 2021). Knowing that he has to pay tax on his SEISS he commented that he 'had better make sure his income was not too high for the year'
How is signing him up for Digital Accounts going to change the situation. All he has to do is receive cash or pay monies into another account which it seems from what you say, could already be happening. Have you checked this?
I don't think your argument for more accuracy when using accounting software is very convincing, you can only see in such software the information that has been entered into it. In my view this is a golden opportunity for fraud if you are not making extended checks to ensure that the data is correct rather than 'HMRC like' assuming that just because it is in accounting software it must be right.
It was the same when Self Assessment came in, when we had the same whinge-fest from the accountancy profession (and shame on those of you who did not change accounting dates back then, may your clients sue you for Overlap Relief)
Sue for a relief ? Seems unlikely.
As others have said, there was no "whinge-fest". Problems were pointed out to HMRC and they accepted them. In truth, as I was relatively new to practising on my own account, I didn't have a huge amount of extra work to bring clients up to date, though anecdotal evidence suggests that many other firms did. The difference with MTD is that problems are pointed out and HMRC don't even bother to respond to them.
I was there at the beginning of SA. There was no whining because the concept was right and HMRC had seminars with local Accountants (not just the big boys) and asked us how it could work. The concept of quarterly updates is wrong so it will never work. As you quite rightly say HMRC are not responding, they just stick to the original format, which has been proven to be incorrect.
That's exactly when I set up. Another accountant told me SA was a golden opportunity to set up my own business. In those days I had dial-up compuserve and filed on paper for a while but then moved to filing online and haven't looked back. MTD will be a step too far.
I have just discovered that you can send Giles McCallum a personal message via Accounting Web. Click his name next to his happy face!
I already have sent him a message but as of today no reply. I sent it 3 days ago. Perhaps he might be looking into it. Then again it's his job on the line so he won't give up that easy.
I hope that Giles reads these comments in which case he will be left in no doubt how we feel. We need to ensure we are professional in our arguments and reasoning and not get personal otherwise Giles and others at HMRC may decide not to engage with us again on AWeb. I welcome Giles' publishing this article on AWeb and hope that this is a sign of increased engagement with agents.
Problem is Giles article is exactly the same as when MTD was first mooted. It would appear HMRC want the most digital tax system in the world (even though the content needs overhauling) and this is how they propose to do it. Nothing has changed in 6 years except timing. The mindset has to change before HMRC will even listen. Giles has got the easy bit, installing a digital system. We have the difficult bit in making it work.
I agree John that nothing has changed other than the timing. In recent times I've not heard HMRC mention their aspiration to be the most digitally advanced tax authority in the world. That could be because MTD has nothing to do with making HMRC the most digitally advanced tax authority in the world. As we all know, HMRC is clogged with manual processes and poorly planned/implemented digital systems that will not be improved by MTD. I dare say most of us already submit digital Tax Returns. The main changes with MTD are (1) digitise transactions (2) maintain a digital link between the transactions and the submission to HMRC and (3) several tax returns a year instead of one. None of this will make HMRC any more digital. To make HMRC the most digital tax authority in the world HMRC needs to improve its existing internal processes.
HMRC have to come from antiquated to state of the art, all singing, all dancing systems, whereas we have had time to evolve to what we have now. This will inevitably lead to major problems which will take years to solve. The really stupid thing about this is that over the years (retirement of old business and new taking its place) MTD would happen naturally. Why the necessity for speed. What's the saying "Speed kills".
Thanks for the note about the ability to write to Giles.
I really couldn't miss the opportunity.
We shall see if I get a reply
if you want to understand why we are in such a mess with this MTD you should read Giles McCullam's CV, its on the web.
It is outstanding. It also includes a distinguished military career. I am in awe of what this man has done through his life so far.
But, there is always a "But"
According to his CV he has had F*** all experience of the nitty gritty of implementing a tax system, and working with it at the sharp end.
I wonder during his military career with the Gurkhas what he would think of sending them into a fight led by officers who had not yet been trained on which end of the kukri to hold.
Giles, according yo your CV you have had less experience of the system as it works than a first year articled clerk.
I would count it an honour to be invited to tea with you, but please do not have the presumption to advise, direct, or tell my self-employed and landlord clients regarding the tax system.
Perhaps you should spend a week on my office, or a similar office. I suggest some "Front line" experience would truly enlighten you.