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MTD law shelved in wash-up

25th Apr 2017
Tax Writer Taxwriter Ltd
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The largest Finance Bill in history has been shrunk in the “wash-up” before Parliament is dissolved for the General Election. The scrapped clauses include those which impose digital reporting and record keeping for MTD.

Wash-up

This is the term for the last few days of a Parliament before the dissolution prior to a General Election. Public Bills cannot be carried forward into a new Parliament, so they must be passed or scrapped.

The Finance Bill is too important to be abandoned, so the opposition parties and the Government must come to an agreement as to which clauses to pass and which to drop. Normally only the non-contentious clauses survive to be passed into law as part of a much slimmer Finance Act.

What’s out?

The majority of the Finance Bill has been cut from the version of the Bill which will pass its committee and report stages in the House of Commons on 25 April, and be read by the House of Lords on 26 April 2017. No amendments of the Bill can be made once it has passed its report stage in the House of Commons. The Finance Bill is expected to receive Royal Assent to become Finance Act 2017 by 28 April.

The CIOT has produced a handy list of what is in or out of the Finance Bill. The abandoned clauses include:

  • Digital reporting and record keeping (MTD) for income tax and VAT
  • Dividend tax rate for 2018/19
  • £1000 tax free allowances for property and sundry income
  • £500 tax free pensions advice
  • Changes to taxation of terminations payments
  • Reduction in money purchase annual allowance from £10,000 to £4000
  • Power to tax capital gains made from UK land as income tax not CGT
  • Deemed domicile for all taxes for non-doms
  • Changes to substantial shareholding exemption
  • Changes to EIS, SEIS, SITR and VCT schemes
  • Restrictions on corporation tax losses
  • Tax relief for cost of Museum exhibitions
  • VAT in relation to goods stored in UK warehouses

What’s in?

The following significant provisions remain in the draft Bill:

  • Income tax rates for 2017/18
  • Corporation tax rate for 2018
  • Air passenger duty rates for 2017
  • Insurance premium tax rates from June 2017
  • IR35 for the public sector
  • VED duty rates from April 2017
  • Alcohol and tobacco duty rates
  • Soft drinks levy
  • Changes to salary sacrifice schemes
  • Deduction of tax at source
  • Abolition of Employer Shareholder Scheme

Note the IR35 provisions for workers performing contracts in the public sector remains in the Bill, although it is a contentious and badly drafted piece of law.

What happens now?

This is not the end of MTD, and it may not even delay its implementation. The provisions taken out of the Finance Bill 2017 are merely deferred, and are likely to be reintroduced in a very similar form when Parliament resumes after the General Election. However, that does depend on which Party is able to form the next Government. 

If you are concerned about MTD you have an ideal opportunity to quiz your prospective parliamentary candidates about it during the General Election campaign. 

Replies (114)

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Replying to Tornado:
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By carnmores
26th Apr 2017 11:34

thanks will have another go :-)

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Chris M
By mr. mischief
26th Apr 2017 11:30

I am optimistic that MTD will be kicked into the long grass in a good solid U Turn by "Twirling Teresa".

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By MontyB
26th Apr 2017 11:30

Bangs. Head. Off. Desk.

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7om
By Tom 7000
26th Apr 2017 11:38

Thats disappointing I was looking forward to MTD.
Am I the only one who sees the silver lining?

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Replying to Tom 7000:
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By raju m
26th Apr 2017 16:44

Tom

you are the only one who wants MTD.

Raju M

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By Ian McTernan CTA
26th Apr 2017 11:44

I'm glad my Making Tax Difficult preparations so far have been minimal- I've mentioned it in passing to a couple of clients, but most of my client base don't want or need constant updates or warnings of what might happen in 2-3 years time- they are busy running their businesses.

Hopefully the Tories will use the election as the excuse to scrap the whole idea. Then reverse Section 24 before it's too late...

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Replying to Ian McTernan CTA:
RLI
By lionofludesch
26th Apr 2017 11:59

Ian McTernan CTA wrote:

I'm glad my Making Tax Difficult preparations so far have been minimal ....

Been saying this for ages.

The level of uncertainty is breathtaking.

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By Paul FD
26th Apr 2017 11:54

I wrote to my MP twice about MTD (the reporting bit that is exercising all) The response came from Gaulke - complete whitewash. If you live in his constituency nail him as much as you can - he and the team just display total arrogance. What I would like to know is why the PM's concern for the Just about managings does not extend to the self-employed.
It's a platitude not matched by action. The state just wants complete control - even telling you how to keep books.

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By johnjenkins
26th Apr 2017 12:28

It took a couple of days for the imminent U turn on NI, yet the controversy over MTD is not getting through, why?
Oh yes, if our bodies create too much fuss they might have to do something about the large corporates that seem to be hiding away.

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By martinjrichards
26th Apr 2017 12:40

Even more uncertainty!
I would support MTD a bit more if HMRC would have the decency to provide a free tool, then at least clients have the option of doing it for themselves alongside their VAT return.

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By North East Accountant
26th Apr 2017 13:07

If there are circa 4/5 million small businesses that is one heck of a lot of voters to cheese off.

Kick the MTD ball past the election and it becomes a non election issue.

HMRC will probably wait until Autumn budget to re-issue draft rules applying from April 2018 creating yet more uncertainty over the summer.

The way HMRC are dealing with MTD implementation is a total disgrace.

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Tornado
By Tornado
26th Apr 2017 14:11

RE-THINK MTD : AGENT RATHER THAN SOFTWARE BASED

One of the biggest problems with MTD (in my view) is the mandatory requirement to pay for and use Commercial Software and despite the apparent expectation that Accountants and other Agents will readily assist the Software Developers to make £billions out of this, at considerable cost to themselves, the project might have a better chance of success if the emphasis was on encouraging those that do not already use Agents to 'have' to use them.

It is simply a matter of making it mandatory for traders, landlords and similar groups to register with an Accountant or other suitably approved Agent, and then the Accountant can decide the best and most efficient way to complete the client Self-Assessment Tax Return. This may or may not require the use of special software but that would be for the Accountant to decide.

This would be relatively easy and cheap to introduce and would ensure that the the do-it-yourself Tax Submissions are eliminated and thus most likely substantially reduce the tax gap.

This is a tongue-in-cheek suggestion of course, but my point is WHY is it that the software developers are going to be the biggest winners out of the MTD proposals when there are alternative possibilities available.

And perhaps the biggest question is if there is essentially only one way that MTD software is required to work, why are there so many software developers all doing the same thing when all the Government had to do was commission one software suite which would do everything they required and be free for all of us to use.

I still think there is something not quite right about this whole project, especially when it may come to a situation where using a Simplex Accounting Book to keep your records might be illegal.

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Replying to Tornado:
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By daveforbes
26th Apr 2017 14:16

... and rather than lots of competing accountancy firms providing these agent services, the HMRC could have an accountancy division where they provided accountancy services centrally to the self-employed for free ( by free I mean paid for by other tax payers ).

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Replying to daveforbes:
RLI
By lionofludesch
26th Apr 2017 14:24

Brilliant, Dave.

Then employed people could pay for self employed people's software.

I'd definitely go for that.

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Replying to lionofludesch:
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By daveforbes
26th Apr 2017 14:40

They probably wouldn't notice. Last time I was given figures it was costing around £47 for every tax return sent in using the HMRC "free" software ... and nobody seems to worry about that.

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Replying to daveforbes:
Tornado
By Tornado
26th Apr 2017 14:41

I think you have missed the point again.

I was simply trying to question as to why Software Developers have been handed these vast potential profits on a plate when Accountants and Other Agents are equally as deserving.

As I said, of course, my comments are very much tongue-in-cheek and the real problem with this project is the appalling way that it has been planned. More prior consultation with Software Developers, Accountants and other Agents and people in business themselves would have perhaps resulted in a plan that was good for everyone.

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Replying to Tornado:
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By carnmores
26th Apr 2017 14:47

even tho i qualified as CA in '78 i know my limitations , software developers are worth a hell of a lot more than us pen pushers

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Replying to carnmores:
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By Michael C Feltham
27th Apr 2017 19:22

@carnmores.

There are software developers and software developers; just as there are accountants and err, accountants; and good wine and very bad wine.

Most "Software Developers" are what we used to call, cynically, ScriptKiddies"!

A majority work for agencies contracted to companies.

I used to run, CEO and founder, both a Software House and a Solution Provider- System Integrator, thus I have a small idea...

A good CA can command large bucks!

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Replying to Tornado:
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By daveforbes
26th Apr 2017 14:57

My comments were lighthearted too.

However I don't see massive profits for software providers. Our software for individuals doing their own tax return is £20+VAT per annum. This is about the going rate. Our software for doing the same under MTD is also £20+VAT per annum and this might fall with competitive pressure. I don't see massive profits even before the HMRC push for providers to provide their software for free to 97% of self employed (whilst providing them with telephone support). We have pointed out we could only do this if exempted from paying the minimum wage.

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Replying to daveforbes:
Adrian Pearson
By Adrian Pearson
28th Apr 2017 10:35

Hi Dave

Where do you get your 97% figure from please?

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Replying to Adrian Pearson:
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By daveforbes
28th Apr 2017 11:14

From an HMRC breakdown into turnover bands of 3.3m self-employed returns filed in 2014-15. As the £83k is part of the way through one of the bands I interpolated assuming a binomial distribution. It could be nearer 96% but is between 95% and 98%. That was 2014-15, turnovers may have changed.

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By justsotax
26th Apr 2017 14:37

with he added benefit that you could sue the government for getting your tax wrong....

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By SpreadsheetUser
26th Apr 2017 17:51

The exclusion from the Bill has been widely reported today and referred to as unpopular. If the Tories try and introduce this again after the Election, they can forget ever being known as the party for small business again. Though that link was close to breaking anyway

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By carnmores
26th Apr 2017 18:28

@fishmonger there are a number of strong arguments to support a tax rise particularly in the relation to the need for social care but thats not what this thread is about. one of the good things that you can say is that auto enrolment pensions should empower generations of the future despite the fact that i hate the way its administered

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By sawebs
26th Apr 2017 19:39

At the risk of bringing the wrath of all you guys in practice, why are you so upset about MTD? Surely it's another opportunity to charge small businesses like mine even more in fees? I appreciate that the implementation has been botched by HMRC but that's normal I've realised.

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Replying to sawebs:
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By SpreadsheetUser
26th Apr 2017 19:42

You're one business. The logistics of trying to undertake every client's work every quarter is a nightmare.

And if you're happy being dictated to how keep your records then good for you.

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Replying to SpreadsheetUser:
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By sawebs
26th Apr 2017 19:55

No, not happy at all with it. It's all a bit nanny state and control freakery and would be a pain in the backside and extra admin and expense to me. What surprises me is the opposition from the profession who would benefit enormously from people like me.

I'm CIMA qualified by the way so not totally ignorant about what's involved.

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Replying to sawebs:
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By the_fishmonger
26th Apr 2017 20:51

We actually care about our clients and that is what this is all about.

The reasons we are up in arms are many (q.v. those given previously and on other threads). However, one that is rarely trotted out is that we know many of our clients are unable to afford much in the way of additional fees for the MTD work.

There is fear of a certain inevitability, that fees can become only slightly higher whilst the workload is disproportionately greater. Quality could be denigrated, by the requirement to meet deadlines under stress of volume, and for what? To provide 'proof' that businesses are complying with digital accounting by filing, with HMRC, figures that will never be utilised.

Some clients will run off and be at the mercy of HMRC's juggernaut. They will then suffer penalties and interest when they make the simplest errors, just because they can no longer afford proper representation.

Bring on new technology that has been well thought out, tried, tested and meets the aims of efficiency - that was why, mostly, we welcomed the SA system as it made sense and had been thought through before the world outside had heard the first thing about it.

MTD is a sows arsse, pronounced as "an great idea" and produced by computer modelling imbeciles. It could be, and would have been, so much simpler, cheaper and better if only the powers that be asked those of us who deal with the small business community.

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Replying to the_fishmonger:
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By sawebs
26th Apr 2017 21:20

Thanks, great answer.

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Replying to the_fishmonger:
Tornado
By Tornado
27th Apr 2017 16:04

My thoughts exactly.

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Replying to sawebs:
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By North East Accountant
27th Apr 2017 08:04

It's called putting your clients interests ahead of your own, something all professionals should do.

Can't see how MTD is of any benefit to client at all.

If they want to know real time tax figures this is easy enough without MTD.

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By Mr J Andrews
26th Apr 2017 20:03

For Dogberry and Verges , read Osborne and Hammond in one of the Bard's greatest theatrical comedies.

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By B.R.
27th Apr 2017 15:14

You can understand why people are against renewing Trident!!!!

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Replying to B.R.:
RLI
By lionofludesch
27th Apr 2017 15:34

B.R. wrote:

You can understand why people are against renewing Trident!!!!

Ah, yes, the nuclear button scenario.

"No - yes - no - ach, too late."

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By carnmores
27th Apr 2017 15:32

see Agent bulletin just released

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By rogertax
27th Apr 2017 16:03

I spoke to my MP (Jonathan Edwards, Carmarthen East& Dinefwr) some months ago and he was aware of the local concerns about MTD.
We agreed that we should consider the matter again after the Treasury Select Committee's report.
Subsequently, I wrote to him enclosing extracts from Rebecca Cave's article of 4 April. He replied, thanking me for keeping him informed. He also wrote, "... if returned to Parliament, I will revisit this important issue during the subsequent Finance Bill."
I hope that this will encourage other AW members to follow Rebecca Cave's advice.

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Replying to rogertax:
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By johnjenkins
27th Apr 2017 16:26

The only problem with that is re-visiting is not getting rid of. The only leverage we have is prior to an election. If the Tories get in with a big majority HMRC will do what it likes.
I have actually asked my MP to encourage the manifesto pundits to include the abolition of 1/4 figures for those business with turnover under VAT threshold. Fat chance.

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Replying to johnjenkins:
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By daveforbes
27th Apr 2017 17:21

97% of self employed business are below the vat threshold

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Replying to daveforbes:
RLI
By lionofludesch
27th Apr 2017 18:32

daveforbes wrote:

97% of self employed business are below the vat threshold

I take your point, Dave. That still leaves too many on MTD.

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Replying to lionofludesch:
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By daveforbes
27th Apr 2017 20:21

Or too few depending on your view point !

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Replying to daveforbes:
RLI
By lionofludesch
27th Apr 2017 21:00

Here's my viewpoint, Dave. Just so you understand the problem.

I deal mainly with micro-clients. A few use spreadsheets, a couple use proper accounting systems, most use paper. None of them are confident enough to submit their own MTD stuff. They want me to do it. So that's bad news for you. Very few software sales.

My problems are ....

1. Potentially, there's lots of work here but I don't really want to be a data input clerk.

2. I could set someone on to do the data input stuff but there's likely to be a shortage of decent staff because I'm thinking demand is going to increase.

3. HMRC have spent the last 20 years encouraging folk to have March year ends. So now we have potentially huge peaks of work in four months of the year and not all that much to do in the other eight.

4. I could get round that by changing folks' year ends but isn't that the tail wagging the dog ?

5. I'm not convinced that all my clients realise how much extra this'll cost. Will they be able to pay ? Am I just working for slow-payers or bad debts?

6. Nobody at HMRC can be a*sed to look at these submissions. They're wasting someone else's money so why would they care? (Until that £8bn becomes £10bn because of reduced profits.)

7. The Government are committed to reducing red tape. I've not seen much evidence of that.

8. I'm sick and tired of hearing the Government bang on about how smooth the RTI process has been. Most people already had their wages calculated by software so the changes weren't huge. But for the record, I was against that being mandatory too. And I still don't see why they need to have the data before the wages are paid.

Happily, I'm of an age where, if I don't like it, I can retire and take up a job as a Government Artist. But that's not really what I want to do either.

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Replying to lionofludesch:
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By daveforbes
27th Apr 2017 21:37

If they are below £83k, you or they, once a quarter will need to transmit two figures, turnover and allowable expenses. You could probably get away entering total expenses quarterly and adjust for disallowed once a year. I don't think a full time data entry clerk will be needed.

They however will be required to keep their records "electronically". writing them on a piece of paper and then taking a photograph with their phone is unlikely to count, so you may be moving them over to some spreadsheet or other record keeping.

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Replying to daveforbes:
RLI
By lionofludesch
27th Apr 2017 22:44

And that spreadsheet is likely to be maintained by me - or my new data input employee.

It's a bit like a VAT return. Just four figures to enter for most traders - but there could be many man-hours of data entry on a computerised fag packet to arrive at those figures. Once upon a time you could decide how that record keeping was done - soon the Government will decide what's good for you.

So much we still don't know, Dave. How can we prepare when the Government keep changing their minds ?

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Replying to daveforbes:
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By Michael C Feltham
28th Apr 2017 08:29

daveforbes wrote:

They however will be required to keep their records "electronically". writing them on a piece of paper and then taking a photograph with their phone is unlikely to count, so you may be moving them over to some spreadsheet or other record keeping.

".....may be moving them over to some spreadsheet or other record keeping".

And amongst many other unknowns, this is JUST ONE of the uncertain elements!

Until the snap election, we had LESS than One Year to advise, train, re-educate clients!

Utter insanity.

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Replying to Michael C Feltham:
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By daveforbes
28th Apr 2017 08:51

You will need to keep records electronically. Whether you decide to do that in a spreadsheet, or in package A or package B is not really an uncertainty. I was joking about just taking a photo of paper records.

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Replying to daveforbes:
RLI
By lionofludesch
28th Apr 2017 10:15

daveforbes wrote:

You will need to keep records electronically. Whether you decide to do that in a spreadsheet, or in package A or package B is not really an uncertainty. I was joking about just taking a photo of paper records.

I know you were, Dave.

But HMRC weren't when they posted that John the Plumber video.

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Replying to Michael C Feltham:
Tornado
By Tornado
28th Apr 2017 09:36

'Until the snap election, we had LESS than One Year to advise, train, re-educate clients!'

Regardless of what happens after the election, legislation or no legislation, it seem obvious to me that it will be entirely impractical and unrealistic to assume that there will be any way that mandatory use of Accounting/Book-Keeping software will commence in April next year.

It just will not happen.

HMRC seem to have convinced themselves that 400,000 will be taking part in the MTD Pilot this year but, come on, I think they will be lucky to get 4,000.

There is every reason to believe that although MTD will not be scrapped, there will be a much slower and voluntary introduction of a much cut-back version of MTD for people to use from next April and this will effectively be the Pilot over several years.

I am not going to spoil my year worrying about an April deadline to commence MTD reporting for some clients, it will not happen. Instead, I am going to take my time to ensure that I invest that time in choosing software that is cost effective and does everything that my clients and I require, even if that takes several years to achieve.

We have been here several times before and one recent example was the original intention to tag statutory accounts with 30,000 different tags. This never happened with the final legal requirement being reduced to just a fraction of that number.

Common Sense has to guide us here. With the experience that we all have, if something looks impossible to achieve, then it probably is.

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Replying to Tornado:
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By johnjenkins
28th Apr 2017 09:51

Tornado I want to marry you. I feel you're my soul mate.
I have heard a little whisper that HMRC are actually looking at the policy that created MTD with a view to re-srtucture so "common sense" could well prevail.
(I don't really want to marry you but a chat over a pint or something would certainly be enlightening).

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Replying to johnjenkins:
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By SpreadsheetUser
28th Apr 2017 10:06

I got that inkling too from an email contact I have in the MTD team when I asked him for news after MTD was pulled from the Bill.He couldn't say anything due to purdah but the way he phrased his answer gave me a hint things are changing

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Replying to johnjenkins:
Tornado
By Tornado
28th Apr 2017 10:41

The marrying bit might have caused a bit of bother with my wife, but we might have been able to come to a compromise. It is an interesting thought though.

I have no special skills, but I have been around a long time and seen the MTD types of project before, although I cannot recall anything quite as appallingly bad as the MTD plans.

The pattern is consistent, set high targets at that start but settle on what you can get and back off dramatically at the very last minute. If there is no backing-off within the next few months then I am willing to bet that it will happen in March or April 2018.

Reminds me much of the Marketing Departments of many businesses where salespeople are always given impossible sales targets to achieve which is supposed to encourage them to achieve the impossible. No Accountant, of course, would fall for that but I guess there are no Accountants in the MTD Team.

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