Wendy Bradley listened to the HMRC webinar: “Making tax digital: signing up to the income tax pilot", but she was left with a lot of unanswered questions.
I signed up for this webinar as an unrepresented business, rather than as a tax agent. I wanted to see what support HMRC were offering to a one-woman unincorporated business, to get on to MTD. The answer was disappointing.
The webinar began with an explanation of the benefits of MTD: the presenter argued it would be more efficient and simpler to keep business records electronically, and that you would capture your transactions electronically, asserting that: "there are tools and apps" you can use for this.
HMRC's view is that poor record keeping equals "failure to take reasonable care", which is one of those statements that makes you want to explore what is meant by "poor" and who determines the standard.
Businesses not landlords
The sign up for the MTD trial for unrepresented businesses seems fairly simple, there are just three criteria:
- Start keeping digital records
- The digital records have to cover the whole accounting or tax year
- The minimum information required is: the amount, date and category of each entry
The sign up process for landlords is not yet live.
At this point we were told to search for "record keeping applications" on gov.uk. and, crucially that a spreadsheet was an adequate form of digital record keeping.
A quick poll of the webinar attendees checked to what extent we already kept our records digitally, and the results were:
- Totally: 25%
- Mostly: 34%
- Partly: 26%
- Not at all: 15%
From a self-selected group at a webinar about joining a trial of a digital records system, this was not an impressive percentage.
The presenters told us about the benefits of digital record keeping. There would be less manual effort (as we all know, entering something in a computer is always easier than jotting it down on a piece of paper). The automatic prompts in the system (because having a computer ask you if you really want to click that is never annoying). Also you can see your financial affairs at a glance (because no-one in business has any idea whether they're making a profit or not).
I'm afraid I was unconvinced. The MTD "service" is available now and by joining it you can, we were told, get estimates of tax due (if you send in a quarterly summary) and you can "even" choose to make voluntary payments in advance. Oh, and you "may not" need to complete a separate SA return at the end of the year. "Joining now will help shape the service" we were told, although it wasn't quite clear to me how.
The webinar appeared to be well intentioned, and it is a good thing that HMRC will be trialing the system before MTD goes live, for those of us below the VAT threshold.
The problem lies in the availability of software. HMRC are not issuing any basic free software themselves and there is no indication of the market developing any.
Where to find MTD software
The instruction to search for "record keeping applications" takes you to a landing page and onward to a guidance page which has a link to a list, updated last summer, of suppliers of commercial software.
Unfortunately, this is no use at all in determining whether your software is capable of delivering MTD – which requires not only that you keep your records electronically, but also that you can transmit them to HMRC via an API.
How can you trial a system when the software to make it work is unavailable?
How can you get reliable results from a trial when the smallest businesses are excluded because there are no free products for them to use?
Here is a chicken and egg question: Why don't self employed people keep their records electronically? Because there are no free apps for them to use.
Why doesn't the software industry develop free apps for the self employed? Because no-one uses them so there's no way of monetising them.
Why doesn't HMRC put together a stripped down app that does the basics free of charge? That, to me, is still the sixty-four thousand dollar question.
About Wendy Bradley
Wendy Bradley is a retired tax inspector, now working as a freelance journalist.