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“A dream you dream alone is only a dream. A dream you dream together is reality.”
― John Lennon
This hasn't a hope in hell of working. Since April I have had numerous Self Assessment Tax Returns incorrectly "corrected" removing Class 2 NIC and also had numerous P800 Tax Repayments issued when a client is in Self Assessment and has other income on top of the PAYE!
Quite! I have just had my third annual telephone call to HMR&C to pointing out they have refunded, yet again, my client because they have not taken into account her s/e income. Reason - because, yet again, they have TWO UTR's for her, only one of which is linked to her PAYE, and that one they deleted after last year's telephone call.
This is a good summary of the information we already have and, as pointed out, much of this seems based on fantasy expectation than realistic results. A much more pragmatic view needs to be taken by the Government and an acceptance that much of the proposal is fantasy ... an unrealisable dream.
I still struggle to see why 1300 million pounds needs to be spent on this when the current Self Assessment system does, or can be adapted to do much of what is proposed.
Good article.
This does only relate to the way that unincorporated businesses and landlords are expected to operate MTD and raises just a few of the potential problems arising from the proposals.
We have yet to explore the wider implications of MTD such as -
a) The apparent disregard for Accounting Standards
b) The obsession of trying to deal only with taxpayers and/or trusted family members or friends. The attempt to make it difficult for Accountants and other Agents to prepare and submit records for our clients is not normal and looks to me like some juvenile backlash from one of the Architects of MTD who perhaps once had a bad incident with an Accountant. It is clear to any normal observer that Accountants and other Agents have already taken on much of the work that the Civil Service used to do and without us the system would not work at all. The same applies to MTD where the proposed sidelining of Accountants and other Agents is an absurd idea and the system will soon descend into chaos as taxpayers try to struggle with matters they neither understand nor want to understand.
c) I think there may also be Human Rights issues here. It is not reasonable to force/bully taxpayers into doing something that they cannot do and then fine them for not doing it. I would expect some representations about this before too long.
d) What will happen with formal companies of all kinds and partnerships of all kinds? Will they be forced to use a specific type of software? This will be very bad news for those hundreds of thousands of small companies that currently use a wide variety of accounting systems that produce the correct results but can in no way send information to HMRC 'at the touch of a button'. As any Accountant knows, it is a major operation to transfer records to a completely different accounting system which could involve many hours of professional help and internal staff time at a considerable cost. This is particularly galling when this will not improve the profitability of the company but will certainly cost it much and in the worst case, could disrupt trading activities to the extend that it has to cease to trade.
e) I think the Government are not coming clean about the need to use specific software. Whilst initially just summary information may be uploaded at quarterly intervals, I believe that the software will have the capability to upload every single piece of data, every transaction and every penny that passes through the business will be fed into the HMRC computer. There is absolutely NO NEED to use specific software if just summaries are required as summary information could be taken from almost any existing method of accounting and entered into an online summary template.
This insistence on using specific software is probably the biggest stumbling block to MTD as far as I am concerned and I cannot see why this is necessary in order to achieve quarterly submissions. This is an unreasonable requirement of MTD and my only conclusion is that it is the vested interests that are pushing this requirement. (MTD Consultants to HMRC, Software Houses, Data Transfer Consultants, Civil Servants and many others likely to make wads of money from this project).
As Jennifer points out, the official proposals seem to be aimed at the vested interests whilst cynically telling us that this is for our (taxpayers) benefit. No one should be fooled by that.
So Jennifer has prepared an excellent summary of the way that MTD is likely to affect those initially in the firing line but that is just the tip of the iceberg.
"submissions will be total figures only"
So HMRC have backed away from wanting to see every single transaction?
And, therefore once a quarter total figures can be gleaned from your spreadsheets and entered into whatever digital format HMRC provide?
"So HMRC have backed away from wanting to see every single transaction?"
I think you can only assume this when the unreasonable requirement to use specific software has been dropped. Until then, I believe that all specific software will (or eventually will) have the capability of uploading all data and transactions to HMRC.
I can just imagine the fun that would lead to, having dealt with HMRC enquiries for a number of years where they will pick up on something, assume something, then stick to their guns despite all evidence to the contrary..
The more I read about MTD the madder it gets. All this will do is persuade more people to join the black economy!
The more I read about MTD the madder it gets. All this will do is persuade more people to join the black economy!
I told a client yesterday about the joys awaiting down the line and he said exactly that!
Surely Government has learnt the hard way already with other failed IT projects not to try and implement this mammoth change all in one go. Small iterative steps are required to evolve the current way of working more towards this utopian automated dream. The only winners in this will be the large software consultancies hired by HMRC to try and implement this. Change request heaven!
Surely Government has learnt the hard way already with other failed IT projects not to try and implement this mammoth change all in one go. Small iterative steps are required to evolve the current way of working more towards this utopian automated dream. The only winners in this will be the large software consultancies hired by HMRC to try and implement this. Change request heaven!
As I have pointed out elsewhere, I believe that the MTD proposals are not really designed to help improve the tax system but more to line the pockets of the vested interests. What we see as miserable failures in the past have been tremendous successes to those that have benefited from those failures. This will continue to be the case until such time as the Government start to seek advice FIRST from those of us who are better qualified to understand how tax administration works and can better advise how it should work.
Remember from your statistics courses that when recording data, a negative answer to a question may be exactly what you are looking for and can thus be regarded as a successful answer. A negative situation to us is probably a successful situation to others.
Also remember that as a general rule, where vast sums of money are being manipulated, there is bound to be corruption somewhere. If something does not look right, then often it is not right.
The best bit of this dream is the 'agent free' bit for quarterly submissions....as someone who does VAT quarterly for a number of very intelligent clients, dreaming that clients can get it right without their own accounts department is just fanciful.
The vast majority of my clients have little to no interest in scanning anything for accounts purposes and don't want to spend any time doing these things- which is why they employ us in the first instance.
No doubt the Treasury will produce another report like the landlords interest restrictions one which will say the costs will be minor and everyone will be happy with the new, easier system...
Super article, Thankyou.
I would reaffirm that is is essential for as many accountants as possible to make response to the consultation. I am planning on taking this one step further by providing a template for my clients to forward to HMRC, setting out details of why this is likely to be unworkable. If every accountant can get just 10 clients to submit such a consultation, the numbers of responses will soon get to a level which should make HMRC take notice.
Super article, Thankyou.
I would reaffirm that is is essential for as many accountants as possible to make response to the consultation. I am planning on taking this one step further by providing a template for my clients to forward to HMRC, setting out details of why this is likely to be unworkable. If every accountant can get just 10 clients to submit such a consultation, the numbers of responses will soon get to a level which should make HMRC take notice.
It is clear that the requirement to use specific software will eventually result in every transaction, and possibly every scanned receipt being uploaded to HMRC, which will enable them to scan for anomalies and cross check one taxpayers deductions with another taxpayers income. That will be phase 2 once MTD has bedded in and is not being announced now because of likely political fallout.
What we do know is at present nobody has MTD compatible software so the expense to be imposed on taxpayers will be enormous. I do wonder how this is going to work for corporation tax. Anyone who has a limited company client that is part of a sizeable group - especially a foreign group will be familiar with the fact that they more often than not have to use strange intra-group bespoke accounting software. I really can't see that such companies will be forced to use Xero, Freeagent etc and so will have to adapt their bespoke systems to be MTD compliant. It is another ball-ache and a reason to ditch UK operations, which with Brexit looming is the last thing the country needs.
I was going to comment but Tornado has said all I was thinking of. Apart from "juvenile backlash" which is something I wish I had thought of but sums up the whole thing pretty perfectly for me.
It certainly is a "dream".
Can someone explain to me and perhaps to most taxpayers how we are "customers"?
If so, will there be an end of year sale?
I approve of the level of sarcasm in the article, well done.
Making Tax Difficult, Making Tax Diabolical or whatever is a daft idea that in the main won't achieve what its expected to achieve (collecting more tax).
The one other issue not mentioned anywhere is the real reason for quarterly updates, which is that HMRC want to tax everyone on quarterly profits in "real" time. nothing can be more sure of doubling the black economy, making thousands of older workers retire early and devastating the small business sector. its insane, unworkable and the biggest waste of government money since..... Hinckley Point!
Perhaps HMRC could take it the whole way and insist on full details and scanned documents and to be submitted in iXBRL!!
Noooooo.............................only kidding, spare me the anguish!! Good grief, I hope I haven't started something there!
That is how ludicrous some of this is becoming.
I reccommend Singapore.
It is welcoming of companies of all sizes.
Interaction with their tax authority is a dream.
The combination of their witholding tax + corporation tax is less than UK corporation tax - although expect 15 weeks for HMRC to give you the documentation needed to handle the witholding tax!!!
HMRC are stepwise removing, it seems, all and every reason why one would retain a UK plc.
As I read it the final data must be with HMRC 9 months after the year end. As I see it for the majority of property investors and unincorporates and maybe LLPs this will be 31 December and 5 January.
I hope overtime is in the budget for people to answer the phones and for computer staff when HMRC's computer has gliches. After all the discussions when self-assessment was set up about not using 31 December you would have thought HMRC would have stuck with 10 Months.
Parliament rejected the petition "out of hand" reverting to "it's going to be better for you". So they will not listen. No they aren't listening because the real reason for all this is to put the smaller business on RTI with monthly tax payments. (They already do it with subbies - CIS). The stagnation that follows will be blamed on brexit.
I think MTD is going to send a Tornado through the business community. Jennifer has written a great article and Tornado has summarised the situation very well.
I can't think of a single one of my clients who will want to do the quarterly updates.
I am writing this as someone who has 50 clients or so, that are all limited companies, and all use Liberty Accounts right now. We upload bank transactions each month and hassle the clients to enter expenses quarterly in time for their VAT returns. We do, in the main, achieve this each quarter in time for the VAT deadline, but usually only with a day or two to spare.
What MTD requires is for the information we collect personally for 80 clients in self assessment to be updated by the same VAT deadline, assuming the VAT quarters are alined with the tax year (most are but several are not). We have about 10 self assessment only clients, the rest are the directors from the 50 limited companies.
The quarterly updates can't generally be done from Liberty Accounts because it is not a self assessment system, it is for our limited companies. I guess for the self employed, the data could be uploaded from Liberty Accounts, but we don't have any self employed clients. The self assessment only clients are usually property or capital gains tax related. We use Taxfiler for self assessment, so I guess this is where the uploads will be needed.
I think there is much confusion between the self employed who will be able to upload much more data and the directors of limited companies, who will really only be uploading dividends. Some of our directors also have property income and that will be required as a quarterly update.
My take on this is that our clients will definitely want us to do the quarterly updates and there will be added cost to our clients as we do additional self assessment updates into an already crowded annual schedule.
HMRC's "Your Charter" states the following.
"We’ll respect your wish to have someone else deal with us on your behalf, such as an accountant or a relative. To protect your privacy, we’ll only deal with them if they have been authorised to represent you, and we’ll deal with them courteously and professionally."
Yet by asking for quarterly submissions within one month of the end of each quarter they are effectively making it impossible to comply.
I have 150 or so clients, all of them keep manual records. The majority will not be able to submit figures to HMRC and most of the others will not want to. How on earth am I supposed to cope logistically. If tax payers have a right for someone to act on their behalf then surely the system has to allow time for that work to be carried out.
I was googling up, for another purpose, 'the concept of helpfulness' and came across this which I assume relates to the HMRC website:
http://www.brunel.ac.uk/cbass/social-sciences-media-communications/anthr...
And then, children, they all lived happily ever after......
This fairytale makes Grimm reading.
I've started strawling through the Making Tax Dreadful consultation. Have you read the "concessions". One is not having to account for obsolete stock. What? Stock is only ever a guestimate. Another is provision for doubtful debts. How many clients have provisions for doubtful debts. There's a concession for WIP of <12 months and accruals/prepayments of <12 months - but you still have to find the sources to identify whether they are <12 months or not. Many prepayments are for more than 12 months at the time of payment eg insurance. These "concessions" actually add another tier of rules to the tax system. A simplification would replace complex rules with simple ones.
As I said in my summary, there is an apparent disregard for accounting standards. Without standards, chaos has to be the only logical result.
In the Making Tax Daft consultation documents HMRC says over 1 million business report their profits on a cash basis. Have HMRC checked the quality of the figures? I can imagine many taxpayers using the total debits from his bank statement summary as their SA expenses. The debits include personal items, loan repayments, SA payments, tax credit overpayments etc. In the taxpayer's mind these are all business expenses because they are debited to the business bank account. I've just spoken to a client who is convinced their SA payments are valid business expenses as are the childminder costs.
When you go to meetings with HMRC and some permanent Mtd IT staff ( not the legion of young male IT contractors ) freely admit that while they have been in post for 25 years and know nothing of accountancy and little about tax you just know the outcome.
When you have dealt with HMRC (and previous versions) as long as I have, their is a certain despair at trying to find anyone in HMRC who actually knows what they are doing.
This is in stark contrast to 20-30 years ago when District Inspectors were true tax experts and were more than pleased to talk problems through with you to arrive at the right solution. I do yearn for those days again.
These days it seems that the only way to get a proper hearing is to go to appeal but that now seems to be cracking up as there are so many people wanting to pursue this option that the Courts cannot cope.
I am looking forward to the day when all that HMRC send to a Tribunal Hearing is a computer as that will be the only representative of HMRC that knows what the hell is going on.
As always it would be nice if HMRC could get the basic facts right. I have had 4 PAYE underpayment letters from HMRC for various clients all of which are incorrect. One client has had 2 letters regarding 2 separate allegations of underpayment, the first reply is now almost 4 months old with no acknowledgement by HMRC and on top of that they have now sent a letter saying that he has overpaid for the year 2010-11!!! which is again incorrect. I have a complaint letter waiting acknowledgment (sent over a month ago for bully boy tactics by HMRC demanding a repayment program be set up on the phone for alleged outstanding CIS payments they could not say when these happened but the computer said he owed the money so he had to pay. No time given to research even though had had not employed any subcontractors for over 2 years.
Honestly you could not make it up!!
Thank goodness I probably will have retired in the next couple of year
Digger from
Tonbridge
'Thank goodness I probably will have retired in the next couple of year'
NOOO you cannot do that! We need everyone to man the pumps and fight this devastating fire before the country is razed to the ground.
Just kidding of course. In fact if I was not so incensed by this unnecessary project, I would be joining you. (and before the wags get hold of this I mean retiring also and not literally joining you in retirement)
Have HMRC worked out that 9 months after the tax year end is New Year. Presumably HMRC will be fully staffed throughout all of December and early January and the accountancy profession will expected to give up any form of holiday break in December and January. This whole consultation proves HMRC have absolutely no idea how small business works and that the more time business spends doing admin the less profit they will make and therefore the less tax they will pay
Webinar last week
what a joke - I joined the HMRC webinar on this subject last week. I make quite a few comments that were ignored. Asked questions that were ignored and the questions that were answered were standard stock answers referring back to the consultation document!
The freight train is on the move and I for one am doubtful that we will be able to stop it.
Webinar last week
what a joke - I joined the HMRC webinar on this subject last week. I make quite a few comments that were ignored. Asked questions that were ignored and the questions that were answered were standard stock answers referring back to the consultation document!
The freight train is on the move and I for one am doubtful that we will be able to stop it.
Sounds about right to me, (it must have been extremely frustrating though) but don't forget that there are ways to stop a freight train, such as changing the points to send it into a remote siding or even derailing it.
I believe somebody suggested that the MP's and House of Lords should be the first to trial MTD
I have written to my local MP to express my dismay
"I believe somebody suggested that the MP's and House of Lords should be the first to trial MTD
I have written to my local MP to express my dismay"
Yes indeed, a truly shocking idea.
Maybe we should all write to our local MP's. I have had a response from mine and he is interested and has said he will pass on my sentiments. These are the people (our MP's) that will debate and legislate the HMRC "Dream".
After all "Squeaky hinges do eventually get oiled"
Ah the old MP ploy eh.
Well after reading all these comments you really should know what your MP is going to come back with. Yes that's right, the standard Gauke reply which is basically "your story has touched my heart, now [***] off and leave me alone".
You're probably right Mr J
your response did make me smile though on a gloomy Tuesday morning.
Nothing ventured and all that!
MP's are already well aware of the problems. In Jan 2016 some met with HMRC to discuss (make that contest) the proposals in response to the original petition and got no where. You can see them making their attempt online here:
https://petition.parliament.uk/petitions/115895
You can view my follow up comments in my blog:
https://www.accountingweb.co.uk/community/blogs/jaadams/mtd-mps-tried-th...
MP's are already well aware of the problems. In Jan 2016 some met with HMRC to discuss (make that contest) the proposals in response to the original petition and got no where. You can see them making their attempt online here:
https://petition.parliament.uk/petitions/115895You can view my follow up comments in my blog:
https://www.accountingweb.co.uk/community/blogs/jaadams/mtd-mps-tried-the...
I am sorry but HMRC staff etc are employed by us via MPs.
Therefore if really MPs wished to stop this they can easily, the rest is just lip service.
Look at my actions not my lips.
So why don't we boycott all seminars and don't engage, then see what mess HMRC get themselves into.
They will then have to admit to wanting to destroy the small business.
On many occasions during my working life I have had to explain to new staff that the purpose of the client/business is not to prepare accounting records or accounts for us to audit. Rather it is to make/sell/earn a living etc etc, with the accounts, tax returns and so on being subsidiary to the main objectives.
It seems that I have been wrong.
Will someone work out the cost of all this to the economy please.