MTD: Mix and match of VAT software allowed

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Draft regulations to enable MTD for VAT reporting expose the muddled thinking behind the digitally linking of accounting software and spreadsheets.

Timing

Draft VAT regulations, and a notice to require taxpayers to comply with MTD reporting, were released for consultation on 18 December 2017, with a deadline for commenting set at 9 February 2018. This consultation period fits neatly over the busiest period for accountants and tax advisers, thus reducing the likelihood of detailed feedback from those who will be at the sharp end of the MTD regime, but I’m sure that is just a coincidence.   

Digital records

What HMRC calls “functional compatible software” must be used record and preserve prescribed VAT related data (see below). That software must be used to calculate the VAT due, report the VAT figures (as per the current VAT return) to HMRC via an API, and to receive information back from HMRC.

The VAT related data includes: for each sale and purchase the business; the time of the supply, value and rate of VAT charged, or in the case of purchases, the amount of input VAT allowed. There is no requirement in the draft regulations that the electronic recording of this data must be done at the time the supply is made, or when the purchase is received. As long as the data is recorded electronically by the earlier of the date that the VAT return must be submitted, or is actually submitted, this will be sufficient (reg 32A para 8).

Mix and match

The business can use more than one piece of software to keep its digital records, but those separate software programmes must be “digitally linked”. HMRC provides three examples in the draft notice of what it means by digitally linked:

  1. The business records transactions in accounting software (A), transfers the totals to spreadsheet (B) where adjustments are made for say partial exemption, then it uses another software package (C) to transfer the totals to HMRC. The transfer of data between A, B and C must all be done digitally. 
  2. The business uses accounting software to record all its transactions and to submit the VAT return. However, it uses a spreadsheet to work out the VAT adjustment on road fuel scale charges. That adjustment is manually typed into the main accounting package as a journal entry. As the road fuel adjustments are not part of the records which are prescribed to be kept digitally, the manual journal entry is permitted and the business is compliant with the MTD regulations.     
  3. A VAT group uses three different accounting packages (A1, A2, A3) for different companies in the group. The totals are collected in a spreadsheet (B) to create the VAT figures needed for the group VAT return. Spreadsheet B is then digitally linked to another software package (C) which is used to submit the group VAT return to HMRC. As long as software family A is digitally linked to B, which is also digitally linked to C, the requirements of the MTD regulations are met.  

The digital linking of the accounting software to other submission software or to any  spreadsheets used will apparently be a legal requirement, but the definition of exactly what digital linking means isn’t included in the draft VAT regulations currently out for consultation.

The reasoning behind digital linking is to avoid errors being introduced by human hand, but as it will be acceptable to make manual journal adjustments, and to perform manual calculations on spreadsheets as part of the process, the logic behind the digital linking falls completely flat.  

It is clear from the slide pack provided with the draft regulations, the taxpayer will be permitted to record his transactions in a spreadsheet and transmit that spreadsheet by email or even on a USB stick to his tax agent. The agent then imports the data electronically from the spreadsheet into his own accounting software which is used to submit the figures to HMRC.

What remains the same

The VAT reporting dates won’t be changed. Businesses will report their VAT information by the same deadlines and for the same VAT quarters as they do currently. There will be no requirement to change VAT quarters to align with the accounting period or tax year, if those quarters do not already align.

The data provided to HMRC will be exactly the same as the totals currently submitted in the nine boxes of the VAT return. No additional information to back-up those totals will be required, but businesses will have the option to voluntarily submit supplementary data, such as the split of sales between different rates of VAT.

Exemptions

A business may be exempt from MTD reporting on any of the following grounds:

  • Its turnover for the year ending with previous month is less than the VAT registration threshold;  
  • The owners are practising members of a religious society, whose beliefs prevent the use of computers;
  • Disability of individual, or location of the business, which makes it impractical to use digital tools; or
  • It is subject to insolvency procedures.

If one of these circumstances applies the business will have to contact the VAT helpline to discuss alternative arrangements to submit their VAT figures. A business can’t choose to be exempt. If it is in fact exempt from MTD reporting, it can elect to submit MTD reports using suitable software before the start of the next accounting period.  

Deregistration from VAT  

Both the draft VAT Notice and the VAT regulations make it clear that a business is drawn into the MTD reporting regime if its annual turnover (which would be subject to VAT) exceeds £85,000. If the business turnover drops below £85,000 the business must continue to make MTD reports until it deregisters from VAT.

Next stage

If you have comments to make on the draft regulations or VAT Notice you can send them to [email protected]. or post them below and AccountingWEB will include those in its response.

The regulations will be subject to the negative resolution procedure - which means that if no MP, or member of the House of Lords, objects to the draft regulations, they are passed with no debate in Parliament. 

This is effectively your last chance to influence the MTD rules for VAT.

About Rebecca Cave

Consulting tax editor for Accountingweb.co.uk. I also co-author several annual tax books for Bloomsbury Professional and write newsletters for other publishers.

Replies

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By mumpin
21st Dec 2017 12:24

Example 1 is very simplistic. I have a client that sells static caravans and tourers. There's a mix of new and secondhand (using the margin scheme). Multiple rates of output vat. Difficult to imagine any digital system that could cope with it.
I guess an Excel working file to a csv file being imported is "done digitally".

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By ShayaG
to mumpin
30th Jan 2018 14:20

Keyboards work by tapping with digits.

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By Tornado
21st Dec 2017 12:57

What a load of tosh (Not you Rebecca!). Has April Fools day come early?

Legislated or not, it simply will not happen. Nothing more to say.

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21st Dec 2017 14:25

I read all the consultation documents this morning and drafted a response but decided it was too impolite to submit so deleted it all. The trouble is that if no one comments HMRC will think we are all really happy with all this. They even use principle not principal in one place and some dreadful jargon about "journeys".

I keep impeccable manual records inputted several times a day and this has worked incredibly well for 30 years without errors.

I am not keen to store data in the cloud for confidentiality reasons and do not have a lot of time for learning new products - change usually means mistakes and time wasted.

I hate Excel and would not like even to be pushed to using an Excel spread sheet.

I am not quite old enough to use "age" to be excused.

I am pretty set in my ways and I could probably get an adult aspergers diagnosis (do I jest... may be - hard to tell.... I certainly feel pretty cross about the impending imposed change in 2019) - I have pychiatrist relatives who perhaps should team up with the accountancy bodies for this purpose to disagnose people ...... but again I don't want to spend a second of time on any of this. I do not like change. I have only just got a smart phone because of communicating with the children and I don't use that other than for text.

I don't hire products if any kind (eg buy a car out right, buy Word out right, would never hire office equipment, always buy a freehold house not leashold) and even that issue seems a problem - I was looking at digital software products and they all seem to require huge monthly fees to be paid for the next 50 years rather than something that I buy once now and never have to pay for again. May be I also fall under the "religious" requirement - against my views to lease not buy - can we like that into "usury"?

Indeed why should HMRC not make software available free of charge?

I also feel they should fully indemnify me against all loss and liability caused if there are data / confidentiality breaches caused by their forcing me into this system I do not want which is in the cloud and thus hackable.

(I am over the VAT threshold so come into digital tax in 2019).

There never seems to be any detail - eg can they not set out what I will need to buy, what it will cost and how it will work going from I go tou to the shops and buy stamps and an evelope. I come back and record on my comnputer the costs. I attribute some percentage of the cost to work (it is not always 100%).

It sounds like HMRC trusts computers much more than humans. It thinks we tax payers are the arch enemy engaged in daily tax evasion when the truth is that in fact I pay loads of tax and pay their salaries and am their esteemed friend. They serve me. My record keeping will be as good as electronic, probably better as a human brain double checks everything, no automatic transfers without thought.

I do not think they have properly thought out the complexity of some of our affairs.

God help us in 2019.

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to EnglishRose
29th Dec 2017 13:46

EnglishRose wrote:

forcing me into this system I do not want which is in the cloud and thus hackable


Whilst I am not a fan of the way in which HMRC are implementing MTD, your fear of the cloud and its ability to be hacked is rather misplaced.

Do you maintain an air-gapped computer that is never connected to the internet (or to any other computer or network that is itself never connected to the internet) and then manually re-key data from that computer onto another internet-connected computer from which you file your returns with HMRC? Or do you do what most of us do and connect your working computer to the internet? Assuming the latter, your computer is more likely to be hacked than the cloud systems you fear. Not one of the major cloud accounting providers has yet been hacked, yet users like you and me are hacked in their thousands every day.

There are lots of reasons to abhor the MTD initiative, but "cloud" is not one of them.

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to charliecarne
29th Dec 2017 20:55

Sadly, your apparent confidence in "The Cloud" is ill-informed and complacent in the extreme.

What on earth is an "Air-Gap" computer? I believe you mean a Stand Alone System.

The Term "Cloud" is wholly misunderstood by journalists and a majority. Likening the Internet to "A Cloud" has always been employed by technologists, since it is amorphous; whilst the WWW is a physical system, whereas the Internet is not.

"Cloud Technology" has been mainly enabled by what is called "Virtualisation": which simply means physical data servers are replaced by software-driven systems.

For some considerable time, what are called Data Farms and Data Centres, have been used to host major companies growing records, mainly using fibre connection.

The main difference in the new approach is processing and subsequent data output and storage is hosted by remote Data Centres ON BEHALF of the software system seller.

The core problem is data records: the user has total reliance upon the system seller!

Hosting software on one's own system means backup of records can be simply achieved in numerous ways.; i.e. the user exercises control.

Be aware of the stringent new Data Protection obligations under GDPR. Just because the UK is supposedly leaving the mighty EU (In theory), the new UK a new Data Protection Bill will be passed by UK Government, prior to Brexit: and thus far it would appear EU law will rule for many subsequent years...

It will be NO Defence if your cloud provider suffers a major data hack: the ultimate liability lies with YOU!

In the early days of the Internet, ISPs came, went broke and vanished on a regular basis same with cloud accounting system vendors. Zero, for example, has yet to make profit.

A few years back, techies were eulogising about the concept of "Applets". The concept was application software and processing would be sold identically to utilities. Why buy an expensive (e.g.) productivity software suite if one could rent a WP process to write a letter or two? Pay small fee per application download the finished product print on letterhead; job done.

One provider of accounting systems tried the same approach: loads of hooplah, flags and promotion on launch; and the company soon went bust! Mainly since users wholly distrusted the security of uploading private and sensitive client's financial information to an amorphous third party.

Major Cloud Data Hacks:

http://www.computerweekly.com/news/450418692/ICO-reports-record-number-o...

http://www.computerweekly.com/news/450425184/Security-professionals-name...

http://www.computerweekly.com/blog/Investigating-Outsourcing/Cloud-secur...

http://www.computerweekly.com/news/450421850/CISOs-in-Australia-Singapor...

http://www.computerweekly.com/news/450425416/PCI-DSS-compliance-reduces-...

https://gizmodo.com/one-of-the-worlds-biggest-accounting-firms-hacked-af...

http://www.foxbusiness.com/features/2016/12/16/why-hackers-love-cloud.html

https://www.techworld.com/security/uks-most-infamous-data-breaches-3604586/

https://www.reuters.com/article/us-usa-cyber/cyber-attacks-disrupt-paypa...

As we know, the UK Government enjoys a rich history of enacting major ICT projects which fail - dismally. Mainly since they do not understand technology and fall prey to the blandishment, promises and false bill of goods sold to them by major tech companies.

Thus far MTDfb is no different to this grizzled old accountant and IT systems bloke: this is no different.

Rather, it is an incipient disaster waiting to happen.

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to Michael C Feltham
31st Dec 2017 12:58

I agree (and I fteon advise on data protection law). The cloud storage contracts exclude liability on a grand scale. HMRC will not be indemnifying me against losses caused by its forcing me to move to digital VAT. I expect I will only feel confident enough if I keep with my current non cloud systems and paper record and just have to add this digital VAT on (once I find a product to learn) to the minimum extent necessary to satisfy HMRC and try to ensure it is as unconnected as possible just as I try day in day out with matters on-line. I like total separate, never sign in from a face book account, never "join the dots", never let my knitting circle know about my sexual activities (random invented examples but they make the point). HMRC, Big Data and large companies wanting to market to us all of course want the exact opposite.

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to EnglishRose
31st Dec 2017 13:38

@English Rose

One major concern is a practice having to reconstruct a whole year's Trading and [email protected] Accounts and BS, from primary records: since the cloud service provider has imploded.

If one is tempted to use ANY cloud bookkeeping package, one primary test before signing up is to ensure you can download and store locally, all the records and processed data.

However that is not necessarily a total solution if the provider has refused to provide their Source Code!

Which, of course, commercial software houses utterly refuse to do. The ONLY online resources where Source code is freely available are Open Source communities, since they rely on external developers to constantly develop and improve their product offering.

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to Michael C Feltham
03rd Jan 2018 15:07

Michael C Feltham wrote:

Sadly, your apparent confidence in "The Cloud" is ill-informed and complacent in the extreme.

What on earth is an "Air-Gap" computer? I believe you mean a Stand Alone System.


I'm not a computer expert, so I used terminology ("air-gapped computer") that I understood to refer to what you describe as "stand-alone". We both clearly mean the same thing. But, instead of arguing with my terminology, perhaps you might answer the point that I'm making?

Many people believe that the cloud (or whatever other terms you may wish to ascribe to use of physical or virtual computers connected via the internet) is inherently dangerous because the user does not have control over it. This is to grossly under-estimate the risks of attempting to secure one's own computer systems, unless one is a security expert. I am not a security expert and so I entrust control of my data to those who are. Is there a chance that it may get hacked? Yes, of course there is. But the chance is so much slimmer than of my own systems being hacked. Do I use any old cloud provider recommended by the proverbial bloke-down-the-pub? No, of course not. I do my due diligence and check that my chosen providers are reliable.

You may be a security expert and so you feel confident in your systems being as hack-proof as possible. If so, that is great. But the overwhelming majority of users of this forum (myself included) are not. Encouraging people to believe that keeping their data on their laptop is not prone to hacking over WiFi by the teenager sitting four seats away in the coffee shop is to promote a false sense of security. I prefer to trust a company whose entire raison d'être is to protect my data 24-7 and who employ security experts to ensure that I can sleep easily.

As for your fear of the cloud provider going bust and taking all data with them, this is easily mitigated. Firstly, you can download spreadsheet copies of all of the data at regular intervals. Whilst this won't allow you to continue to run the software if the host goes bust, it will allow you to easily set up a new system with detailed opening balance records. But more importantly, the bigger players have so many hundreds of thousands (if not millions) of users that, even if the company went bust, someone would at least continue to provide access to it (for a fee) for a period during which the data could be migrated to a new host.

The alternative is to eschew all computers and go back to paper records; and hope that your filing room doesn't suffer a fire, as how were those paper records backed up in past decades?

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to charliecarne
04th Jan 2018 09:20

Everyone is assuming that I do not already now keep paper records! This is the huge issue with digital tax and VAT. HMRC has no idea how many of us do not use accoutants and keep impeccable and unhackable records in manual form. I don't even use excel as I find it difficult to use. Okay I use a computer but I will type the invoice and then it is printed out and kept for about 15 years in paper form here. I accept my office and/or my on site storage area could be broken into and that nothing is ever 100% secure but that is under my control.

The cloud storage companies give themselves the right to look at data and object to objectionable content so the cloud contracts are not as secure as some people think.

if HMRC would just let us have the choice paper, computer or digital/cloud products then you might find over the decades just about no one continues to use my kind of mostly off line systems. My teenagers at university do not always print things off as much as I like to do although they then get stuck (we were 8 hours in a car without signal in France at the weekend and I was the one with the paper print outs of air line times and references when all phones were dead and there was no signal).

I keep records on my computer, on my hard drive backed up daily and printed. Invoices I send to clients would be held by them too. I am not too worried about a fire but I accept the points on both sides of this. I just want a choice and a full indemnity from HMRC against all losses caused by forcing me into cloud storage of accounts data.

My greatest restentment is that I do not want to spend a second of time or cost on this and why should I unless they give me a £20k tax reduction per year to make up for it and what hope is there of that! I don't like change.

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By Tornado
to EnglishRose
04th Jan 2018 09:39

Well said EnglishRose

With the increasing awareness of the damage that addition to social media can do, which by nature means a dependence on electronic devices, we are still being railroaded down this MTD route by software developers with vested interests, gutless politicians and ignorant representatives of HMRC who are prone to make reckless statements. (Remember the assertion that 400,000 people would be taking part in MTD trials by Autumn 2016. I would be surprised if they got 400 people in the end).

As I have said on many occasions, legislation is one thing but unless it is sensible legislation, then it simply will not happen.

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21st Dec 2017 18:26

In my view any feedback to that bunch of clueless wallies masquerading as the UK tax system is a waste of time. Instead, a more effective approach is to give feedback to the Parliamentary Committees who successfully torpedoed the initial incarnation of Making Tax Diabolical.

This will be easy for me as I still have all their details from last time around.

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By DJKL
22nd Dec 2017 01:31

"The owners are practising members of a religious society, whose beliefs prevent the use of computers;"

Where do I sign up, we need a list of these religous societies asap, just need to persuade all my clients to convert.

Wonder how they define practising?

Discrimination on the grounds of religion, where is the ECHR when you need it?

Only one solution, we all need to go on strike and picket HMRC offices warming our hands on a brazier fueled by excel printouts.

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22nd Dec 2017 13:00

I'm not spending any time at looking at this until much later in 2018. I dread to think how many hours I wasted researching MTD before it got "delayed" to MTD-Lite and wouldn't put it past those in charge to delay even more

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22nd Dec 2017 13:04

Not difficult here to see that the Revenue, in their rush to save face regarding the MTD project and justify all the fuss, are making it up as they go along.

Their examples and the "justification" for digital linking make no rational sense, as Rebecca has already pointed out in the article. The only explanation that works, for me anyway, is that this requirement has been left in because MTD is all about going digital.

Apparently, per example 1, we are not going to be allowed to type in totals generated by A into our spreadsheet (B) to reduce the chance of error. Re-typing does introduce error of course but a) 99.9% of these are small-scale stuff, b) the law of probabilities (and our own experience of our clients) tells us the errors will be in the Revenue's favour at least as often as not, and c) the Revenue appear to have totally missed the irony, whilst busy banging on about MTD being the future, of imposing a 20 minute import from A to B routine in favour of a 2 minute re-type exercise.

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to adam.arca
26th Dec 2017 16:07

I agree and I am very sure it is all going to take me a lot more time than now both for record keeping and doing the VAT return.

If they want to force me to record my expenses and invoices in an electronic product why can't they just supply that product on a CD posted to users or allow those of us with good enough internet connections to download it?

I have read most of the HMRC written papers on digital tax and VAT and they still do not explain to me, an ordinary reasonably bright tax payer who does not use digital accounting now, how it works. Eg I incur a work expense (eg this week I had a work phone bill). Now I type that into my accounts that day and once a quarter work out which of the expenses have VAT in them etc etc. It's really easy. With digital VAT I get that bill (let us say it has some non work calls on) so now I do a calculation and take off that sum and then record the work element. What would I do with these digital products? Do I do the same - input the proportion of the overall sum (but without having all the space I currently have to write my own notes and explanations and decisions taken presumably - ie be a worse product) by typing that cost into the digital accounts. They are then stored dangerously on line unlike now...... then once a quarter I am not given the chance to check anything and instead the machine decides the total VAT on the claimable bit of the expenses?

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By Tornado
22nd Dec 2017 13:09

The dogged insistence that everything must be transacted digitally is the very essence of MTD. Give up on this single criteria and the whole idea becomes redundant, or at least open to more realistic development.

What we are seeing now is the last gasp efforts to retain this key dogma to the extent of absurdity.

I am reminded of the love scenes in old films where one of the participants had to keep one foot on the floor at all times. This was a little awkward, of course, and rather restricted the effectiveness of the act but that was the rule. (Perhaps in today's more liberated world there would be ways around this such as standing up, but that is another story).

The absurdity of the situation was obvious and did not reflect reality so when this rule was relaxed, the film industry was able to move forward again.

I see the HMRC rule about everything digital as their 'one foot on the floor' equivalent. Get rid of this absurd notion and we can then all move forward with a form of MTD that is best for each of us and does better reflect reality.

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22nd Dec 2017 16:56

So basically,example 1 is 100% exactly what we do now apart from intspersing software package 3 which is currently HMRC's portal.

"digitally link" would seem to be meaningless and unenforceable.

All they are doing is changing the submission end, an making us pay for it, rather than the free bit we get now..

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22nd Dec 2017 17:20

If there are to be no changes to the VAT quarters to align with annual accounting dates or tax year end dates and they don't align then we are back to making 8 returns per year aren't we? Four VAT returns and four separate accounting returns - or have I misunderstood something about MTD (again)?

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By thacca
26th Dec 2017 15:37

Can I assume cut and paste will be a digital link?

Seriously, this puts an extra burden on every VAT registered business and HMRC for no apparent benefit.

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to thacca
05th Jan 2018 07:44

No you can easily cut and paste into the wrong boxes!

How exactly is it an extra burden - I would hope that all of your VAT registered businesses were running some sort of accounting software, it will just be a click of a button to submit the info, a lot quicker than running reports in one place then logging into HMRC and retyping the figures in.

To everyone else I guess you would all like to go back to the old days of adding-up machines, ledger books and paper VAT returns!

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By thacca
to Si_Woodhams
05th Jan 2018 18:05

How is changing software systems and the training involved not going to cost time and money for me, you, our clients and hmrc. To what benefit? none that I can see. we will just be filing the VAT returns in a different way. Apparently UK businesses have productively problems. This nonsense will not help it.

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to thacca
05th Jan 2018 18:34

that depends on what software you are already using - all of the software houses will built it straight into their various offerings. If you use Excel you may have to switch but you already will be paying a monthly fee for that so save that and spend it on proper accounting software - roughly costs the same each month!

Sure it’s going to cost the people that give you a paper bag at the end of each year a little bit extra, but if you have more up to date info on your clients you will be able to provide a much more proactive service (thus generating more income for you).

The processing of data will be most automated using Bank feeds and AI/Machine leading so the businesses productivity isn’t going to suffer - if anything should get better as they will know exactly how their business is doing at any given point.

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to Si_Woodhams
05th Jan 2018 19:13

I hate excel and don't use it. I don't pay for or have an accountancy software product. It is not the case that all UK VAT payers use accountancy software. We keep records according to the law. that does not current require us to use particular software products or buy or hire or train in them. I will obviously comply with the law when it comes next year but I will kicking and screaming into it and I don't see why HMRC should not provide a free of charge product I can download and use as they are forcing me into it against my will.

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29th Dec 2017 10:18

Why should there be exemptions, especially on religious grounds? All VAT returns have to be submitted "on line" or isn't that preceived to be digital. If you can't get t'internet, then you should be made to move to where you can. Business should not be allowed to operate where it's not digitally possible to submit. Yes Tornado April 1st has come early.

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By chatman
29th Dec 2017 10:33

Will there be penalties for submitting correct figures with some element of manual intervention?

Can we transfer the data digitally using the digits on the ends of our hands?

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29th Dec 2017 10:53

Sensible people will just ignore such obviously flawed reasoning.

The important thing is to ensure the records and accounts are correct- how you get there isn't. HMRC seem to want to impose some artificial system upon us that doesn't add any value to the business, so for most business owners they won't see why they should bother.

Next they will want us all using digital capture for all receipts. I just had another experience of that: client sent me the .csv file from some new pre-pay app that takes pictures of all receipts and links them on the report (but not the csv, so chances of errors in categories are high and not easily spotted). App doesn't link to my online accounting package. Spent more time finding out how to import into my package then if I had just received the receipts pile in the first place and entered them myself!

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By Jas28
29th Dec 2017 11:12

What about all the VAT-registered businesses which are below the VAT threshold? I thought they would not be affected by MTD yet, but the above article says:
"A business may be exempt from MTD reporting on any of the following grounds:
Its turnover for the year ending with previous month is less than the VAT registration threshold; .....
If one of these circumstances applies the business will have to contact the VAT helpline to discuss alternative arrangements to submit their VAT figures."
Does this mean that every small business, which is registered voluntarily, as it is below the VAT threshold, will have to contact the VAT helpline to discuss how they can continue to submit their VAT returns?

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29th Dec 2017 11:18

Ha!

Middle Digit Taxation just gets more laughable by the month.

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29th Dec 2017 11:36

"The reasoning behind digital linking is to avoid errors being introduced by human hand, but as it will be acceptable to make manual journal adjustments, and to perform manual calculations on spreadsheets as part of the process, the logic behind the digital linking falls completely flat."

I would say 95% of VAT errors are software package generated and this will get worse if traders are trying to use software and don't understand how to operate the software. I get this already from many clients who are quite savvy, it can only get worse!

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29th Dec 2017 18:04

"The regulations will be subject to the negative resolution procedure - which means that if no MP, or member of the House of Lords, objects to the draft regulations, they are passed with no debate in Parliament."

The people with most to lose, are the small businesses and tradesmen who are over the VAT threshold, and who currently keep perfectly fine manual records. These people are mostly unaware of the changes, so will not be bothering their MP.
This not democratic consultation.

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to chrisowen
31st Jan 2018 13:29

I am concerned about that too. the only hope is that loads of MPs have self employed income and many who earn enough pay VAT and they probably do not want their spouses/secretaries/themselves having all this hassle so they might peddle back on it although it seems very unlikely now.

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30th Dec 2017 14:43

Just a thought. If all returns need to be digital, does that mean all reviews by HMRC will have to be too? Or will they be allowed to use pen, paper, calculators, eyes, brains...

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By Tornado
to Huw Williams
31st Dec 2017 12:24

An interesting idea.

The reality is that it is still rare to be able to correspond with HMRC staff by email and even then it can result in a reply that advises you that your email has been received and will be dealt with in 30 days.

The 'digital revolution' for HMRC is driven by a relatively small number of people who not only do not understand how businesses operate, but do not understand how HMRC works either.

Basically, the HMRC digital revolution does not recognise the limitations of human beings.

I can see changes, however. Many of my clients did not receive payslips for 2015 and 2016, presumably because HMRC assumed everyone would pay online. This caused big problems for some of my clients with some of them sending me their tax cheques to pay in for them. This year it seems that HMRC have accepted the obvious and most of my clients are receiving statements and payslips which makes it much easier for them to pay their taxes.

(45 million people signing up to Personal Tax Accounts, what a laugh .... more chance of being hit on the head by a meteor)

Penalties and late submission fines are also being reigned back as HMRC take a more 'Risk Based' approach which is a very sensible way to proceed. Instead of issuing automatic fines, penalties and interest for relatively minor faults, time can be concentrated on those that are potentially serious defaulters. How much time must HMRC have wasted on dealing with appeals, phone calls and letters about a late filing penalty of a few pounds. It must have often cost more to administer the default charge than the charge itself.

So what we are looking for in 2018 is a more realistic and sensible approach to tax administration with the capabilities of us as human beings being the key criteria and not what some whizz kid says his computer can do.

A recognition of the damage that too much screen time time and social media nonsense can do to us would also help, so that we do not have to spend so much time of these insidious health and soul destroying devices.

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By 0098087
30th Dec 2017 14:51

Madness. Total madness. They have no idea of the real world. I can think of another very large piece of legislation going the House at the moment where the government has no idea about what they are doing.

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By adder1
30th Dec 2017 18:26

HMRC says everything must be done digitally, especially transfers from one system to another.

Is this an own goal?

I've always entered all data digitally - holding pencil, pen or biro held by my fingers (digitally) or with my fingers on a keyboard!

Am I taking the ???? as much as HMRC are expecting us all to spend millions to update systems to comply?

Approaching 71, although I had hoped to keep a dozen clients to keep the grey matter working, I've retired ----- but still enjoy reading Accounting Web's regular offerings

Many thanks.

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31st Dec 2017 11:24

SIs (Statutory Instruments) are an insult to our supposed system of parliamentary democracy.

Why?

In order for a Government in power, they only need to post an SI notice: most MPs do not even bother to check out the lists...

"Negative procedure is a type of procedure that a statutory instrument can go through. A statutory instrument under the negative procedure will automatically become law without debate unless there is an objection from either House. Conversely affirmative procedure refers to a procedure where a statutory instrument must be approved by both the House of Commons and the House of Lords to become law."

Since the negative procedure offers no option to debate, this will be an hostile act against the British taxpayer and their advisers.

Seems to me Government wishes to destroy SMEs, in particular and a major source of its own revenue! Despite spending borrowed sovereign risk funding like an octopus high on copious doses of speed! (methamphetamine).

Sadly, at present, we are "Lions led by Donkeys".

I urge you all to raise this matter with your MP ASAP.

Additionally, despite the current deadline pressures, make the time to write your own cogent input to the email address Rebecca has kindly provided.

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By 0098087
to Michael C Feltham
31st Dec 2017 12:23

I am afraid writing to our MP in Braintree is pointless. He is an ardent Breixteer. He does nothing for us but it sitting on a nice 18k majority. He is one who has signed a Commons motion to pay for a new Royal Yacht at a cost of £500m when homelessness is up 132% in 7 years. Rabid right winger who doesn't care and doesn't listen.

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By chatman
31st Dec 2017 13:20

EnglishRose wrote:
I never let my knitting circle know about my sexual activities

Me neither. Well, not since the last time anyway.

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03rd Jan 2018 09:14

Outgoing HMRC Chairman, Edward Troup, painted a picture of the future where;
"the taxpayer effectively just runs sensible accounting software or is linked up to an app on their iPhone and every few months we tell them this is where you are and here's what your likely tax bill is going to be for the year".

For such good ideas he has been rewarded with a knighthood!

How this is going to work for limited companies and LLP's with tedious things like accounting standards and Companies Act requirements has not been thought through yet.

Why don't HMRC get some people in from the real world and actually listen to reality?

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to North East Accountant
03rd Jan 2018 09:43

"We tell them this is where you are". They can't even answer the phone or sort out simple queries. Oh of course it's not "them" is it "it's a muppet" (sorry Brian).
The man to talk to is Mel Stride. He has common sense and I'm sure he will bring MTD forward in a rational and non mandatorial manner. That's not too much to ask is it?

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By Tornado
to johnjenkins
03rd Jan 2018 10:37

"The man to talk to is Mel Stride. He has common sense and I'm sure he will bring MTD forward in a rational and non mandatorial manner. That's not too much to ask is it?"

I tend to agree with you. I believe Mel has common sense and as he represents an area where there will be a lot of farming businesses, he will be more aware than some of the practical difficulties of complying with unnecessary legislation.

Whether Mel can fight the forces of ignorance successfully or not is yet to be seen.

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to North East Accountant
08th Jan 2018 13:16

I never accept figures as they first appear. I always want to check, do an estimate to see if the calculator or machine is about right etc.
I did my tax return recently and helpfully and for the first time up came on the screen from HMRC details of the pension cash ins I made at 55. I had those figures in front of me but it was helpful because immediately I could see that they had put one pension pay out down as employed income and populated the employment boxes with it on my tax return. I have not been anyone's employee for25 years. I then did an upload of evidence and made a clear note in the Notes section (although 3 years ago they chose not to read the notes section and the year before's correspondence and raised a query which had been made clear on the notes so I hold out little hope they will read the notes this year).

However at least I could see what they were holding. I checked their pension figures for mine and they were exactly right so that was fine. I did not mind the reminder/nudge and it was also helpful to see theirs or the pension company's error over that part of the pension money being supposedly from "employment".

Then when I was about to submit they felt the income for investments was undeclaring or something because there was this rather large pension pay out of the whole fund. So I pasted their note into "notes" and gave the explanation. So elements of the pre population of boxes and the nudge notes are quite helpful BUT I would always want the right to check, correct etc.

"Open Banking" (don't accept it from this week) coupled with digital VAT 2019 (and in due course digital tax) could ultimately make it hard to change the details HMRC has - in other words I can foresee a time when they do not allow you electronically to submit if your own data differs from theirs even if they have been sent inaccurate data from a third party.

My sister was caught in the recent SA return on line submission problem and that was difficult because it was not clear if it had been submitted or not and she needs a lot of time to travel to her building society, withdraw a cheque there and post that cheque to HMRC with time to clear.

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By 0098087
05th Jan 2018 08:00

Actually quite a lot of mine still use paper records and just wait until they are told £300 a year for online accounting.

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to 0098087
05th Jan 2018 09:03

£300 only for the highest level of product which I would doubt most of the clients require.

You can get it for as little as £60 + VAT per year - and they get much more efficient at the same time!

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07th Jan 2018 11:48

My own approach will be to leave this to the last possible moment and do the absolute bear minimum to comply. Possibly even less than that, HMRC database was down about 10 hours last week and here they are talking about taking on miles more data than the "January rush." So I can't really see how they will get to find out. I am well enough off that I can just retire if they shove me around too much, though I am quite happy with my current work-life balance.

I use 3 Cloud products - Clearbooks, Xero and Quickbooks. I find all of them annoying and slow compared to VT for final accounts production. I only use them because clients came to me already on them. In addition, all in my view have significant areas of weakness and I would not, and do not, recommend them to clients and have explained to clients considering buying them what the weaknesses are. See earlier posts of mine about them for details.

In my view the Cloud security issue as a whole is a big pile of pooh which at some point will fall on users' heads big time. HMRC are, as usual, totally irresponsible in frog-marching us all down this road at the point of a gun and washing their hands of the negative consequences.

Well I for one will not be bullied by that bunch of clueless wallies waving a gun in my face.

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08th Jan 2018 09:41
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By chatman
08th Jan 2018 09:54

.

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08th Jan 2018 13:15

Normally over my 30-year career I would say writing to politicians is a waste of time. Like HMRC, the majority of career politicians would rather pursue a bad strategy until it crashes totally than admit the need to change course.

The current circumstances are very different, and we've already seen that in the first knock-back on MTD:

1. Confidence and supply Government, and we can be confident the DUP will be very wary of MTD and HMRC in general.

2. Regular policy changes and U-turns. Today's is on fox-hunting. In the manifesto, scrapped for this Parliament.

3. Very limited time to enact new laws due to Brexit barging its way through everything.

So the political calculus is very simple. Complex and potentially unpopular new laws are much more likely right now to be scrapped or knocked back than at any time in the last 50 years.

Our job is to ensure that MTD is one of the casualties in this legislative bloodbath. I think our odds are better than 50-50.

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By Tornado
08th Jan 2018 13:44

With today's news about some of the further complications that are likely to arise with Brexit -

http://www.bbc.co.uk/news/business-42595875

I reckon we are now looking at something like 10/1 against MTD for VAT actually commencing in April 2019.

The country will be struggling with the basic changes that Brexit brings and will have no appetite for dealing with the additional work involved with MTD for VAT.

Indeed, where is the accounting software that will be capable of dealing with all of this anyway?

These unrealistic proposals must be kicked into the long grass soon and a more pragmatic approach taken to gradually introducing MTD after we have left the EU Club, and when there is more certainty about what is required and what is practicably achievable.

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