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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 daveforbes
28th Apr 2017 10:03

For 97% of sole traders it will be April 2019 at the earliest. The current April 2018 mandation is for the 3% that have turnover over £83K, the vast majority of which are probably already keeping their books on a computer.

Are there many trades at that turnover level that have chosen not to incorporate already ? I think next April will be quite industry specific - professions where incorporation is not allowed.

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Replying to daveforbes:
RLI
By lionofludesch
28th Apr 2017 10:47

daveforbes wrote:

Are there many trades at that turnover level that have chosen not to incorporate already ? I think next April will be quite industry specific - professions where incorporation is not allowed.

You're wrong there, Dave. Still quite a few unincorporated businesses about, keeping their books on paper.

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Replying to lionofludesch:
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By daveforbes
28th Apr 2017 11:32

What percentage would you estimate of businesses with over £83k turnover don't keep computerised records (including spreadsheets) ?

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Replying to daveforbes:
RLI
By lionofludesch
28th Apr 2017 12:16

I wouldn't like to extrapolate the limited statistics I have, Dave.

If I worked for the Government, I'd probably come up with something like 8 billion.

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Replying to daveforbes:
RLI
By lionofludesch
28th Apr 2017 08:39

daveforbes wrote:

....writing them on a piece of paper and then taking a photograph with their phone is unlikely to count...

John the Plumber tells me that there's a free app which will translate the photo into MTD-ready accounts. There's an HMRC video of it on YouTube so it must be right.

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Replying to lionofludesch:
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By SpreadsheetUser
28th Apr 2017 08:42

What happens when John's receipt also has 40 Mayfair [***] and Reader's Wives on it too?!

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Replying to SpreadsheetUser:
Tornado
By Tornado
28th Apr 2017 09:18

"What happens when John's receipt also has 40 Mayfair [***] and Reader's Wives on it too?!"

That sort of expense will be allocated to travel expenses along some of the other interesting costs that appear on Hotel Bills. I am assuming, of course, that software which analyses photographs of receipts has enough intelligence to decide what sort of expenses it is looking at and allocate the INPUT VAT correctly as well.

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Replying to SpreadsheetUser:
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By SpreadsheetUser
28th Apr 2017 10:08

SpreadsheetUser wrote:

What happens when John's receipt also has 40 Mayfair [***] and Reader's Wives on it too?!

The word KingSize gets censored but not Reader's Wives? Brilliant!

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Replying to daveforbes:
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By Michael C Feltham
29th Apr 2017 17:13

This not correct.

See Rebecca Cave's article Here:
https://www.accountingweb.co.uk/tax/hmrc-policy/mtd-taxpayers-must-make-...

Note the covert bomb, "Per Trade".

Thus with Self Employed clients who also, for example, own investment property, then this becomes six returns per annum.

Some even operate more than one trade; I have had a number. Same applies.

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Tornado
By Tornado
28th Apr 2017 11:17

R101 - A GOVERNMENT PROJECT THAT ENDED IN FLAMES

Having attended a talk last night about The Dambusters, the presenter included some information about the development of Airships, which were successfully being designed and created by companies that knew what they were doing.

Our Government felt that we were missing out on something here and decided to create a Government sponsored project to build an innovative new Airship, which would be named the R101.

The presenter was pretty scathing about the R101 development team as it did not include many experienced scientists or engineers (people who knew what they were doing) and although outside specialist companies were consulted, their recommendations were not always accepted, such as not laying a 5 ton carpet in the communal areas.

The resulting Airship was a mess, too heavy and not fit for purpose and history records the dramatic and tragic demise of this Government project, which had effectively been run by inexperienced Civil Servants and for political purposes.

There are many articles on the R101 but this is a short review of the main points.

http://www.airships.net/blog/british-airship-r101-crashes-killing-48-day...

I have copied one paragraph from this article which is particularly interesting -

"R.101 was paid for by Parliament, built by a government agency, and controlled by the Air Ministry, and in an attempt to compete with the privately-built R.100 (which had just successfully crossed the Atlantic) and the German Graf Zeppelin (which had just successfully flown around the world), and to fulfill personal ambitions of the Air Minister, Lord Thomson, the government dispatched R.101 on a flight to India for which the ship was not prepared."

Note the bit about Lord Thomson, the ambitions of just one person over-ruled everything that common sense and experienced advice recommended.

Also note -

"R.101 was a good experimental ship that, with necessary repairs and proper operational procedures, could have been a safe platform from which important lessons could have been learned. She was intended as a prototype from which the British could learn how to build future commercial vessels, but the Air Ministry foolishly treated the ship as a finished product ready for intercontinental passenger service."

A good idea but effectively badly managed.

This sounds remarkably similar to the MTD project, and unless some sanity is restored to this project, I think it is likely to end up in flames as well. I hope no one gets hurt in the process.

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Replying to Tornado:
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By the_fishmonger
28th Apr 2017 11:44

One only needs go back 2-3 years and look at the Inter-City Express Train project which was specified by DfT rather than being left to commerciality. DfT wanted to introduce more vendors and Hitachi was convenient.

This huge contract sees the trains put together from a kit - mostly complete bodyshells are shipped in from Japan for starters. Just the ends to weld on, then fit it all out.

None of the franchisees wanted them over other readily available products from several European suppliers, they cost twice as much to lease and, because DfT let Network Rail (a nationalised body) screw up the electrification, taxpayers are now paying something like £300m to modify the contract (to increase the diesel version numbers) at this late stage.

NB If anyone who asks for renationalisation of the railways actually bothered to look at the reality, they would discover it is nationalised in all but transparency.

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Replying to Tornado:
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By Michael C Feltham
28th Apr 2017 21:30

The late Neville Shute Norway (the author) included much about this in his part-autobiography, Sliderule.

The core concept of the competitive nature of R100 and R101 was created in order to prove how a Socialist government could run a major design and manufacturing project much more effectively and at less cost than the venal private sector.

Shute Norway was of course the Chief Calculator for R100 and eventually, after Dr Barnes Wallace moved on to more critical matters (towards the end of the project), became the de facto chief engineer, project manager etc.

R100 met all its tender specifications: R101 didn't. By a long mile.

A Horse designed and built by any government becomes a Dromedary with three legs and five humps...

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Replying to Michael C Feltham:
RLI
By lionofludesch
28th Apr 2017 21:57

Michael C Feltham wrote:

The core concept of the competitive nature of R100 and R101 was created in order to prove how a Socialist government could run a major design and manufacturing project much more effectively and at less cost than the venal private sector.

Less cost - yes.

More effectively - errrm, no.

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Replying to lionofludesch:
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By Michael C Feltham
29th Apr 2017 16:52

It (sic; R101) cost far more actually; a lot more!

The designers and engineers spent public money like water.

For R100 the contract price was fixed.

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