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MTD: More than we bargained for

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17th Aug 2016
Tax writers and lecturers
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The long-awaited MTD consultation documents are with us. Over the next 12 weeks, there is going to be a lot of hard thinking needed and some detailed suggestions to be fed into HMRC about the practical implications of the systems change envisaged. But to go with a first impression now, what does it all look like?

Breath-taking

The con docs make quite surprising reading; breath-taking, in fact. The surprises? They included the very much appreciated fact that HMRC has listened to some of the initial input from businesses, agents, professional bodies and organisations like the Federation of Small Businesses and adapted the programme accordingly.

Exemptions

So we have exemptions for unincorporated businesses and landlords with turnover under £10,000 p.a. There’s a year’s grace for a tranche of other small businesses – threshold here yet to be determined. There are some concessions on the digitally excluded. Other aspects have been outlined here, and include the possibility of financial support to help businesses make the transition.

Encouraging

All this is very encouraging. It can’t but help public confidence in government if stakeholder engagement can be used constructively in this way.

MTD - Plus

But on a first consideration of the proposals, perhaps the biggest surprise is that we’re not just looking at Making Tax Digital.

‘The way you interact with the tax system is changing. From 2018 it will become increasingly digital and most businesses, the self-employed and landlords will need to use software or apps to keep their business records, and to update quarterly,’ to quote the overview document.

That’s the news we were expecting. But the plans are even more ambitious and far-reaching than that. We’re looking at Making Tax Digital – Plus. The Plus involves all sorts of ancillary changes to make MTD ‘fit.’

‘The underlying tax rules will be simplified to support these changes,’ as the overview puts it.

Some of these changes are quite radical, and they’re proposed for the same timescale as the MTD roll-out.

Simplifying tax for unincorporated business

The simplifying tax for unincorporated businesses con doc is a case in point. The issues dealt with here are increasing the turnover threshold for use of the cash basis of accounting (s31A ff, ITTOIA 2005) and redefining basis periods. Note the simplified expenses rules are not being reconsidered (s94Bff, ITTOIA 2005).

So we don’t just have MTD, we have MTD Plus fundamental change in basis period, non-GAAP compliant accounts and new rules to simplify decisions on deductibility of capital expenses.

Basis periods

The basis period suggestions are quite radical, and could see a move towards a system similar to that for companies, or even to non-annual tax periods. This would open the door to, for example, three-monthly updates where the tax liability would crystallise for each quarterly period, without any annual computation.

For universal credit claimants, there would be the possibility of monthly tax periods, so giving finality in each claim period.

From a practical point of view, simplification of basis periods could be a significant advantage, once the initial hurdle of overlap relief for pre-existing business with non 31 March / 5 April year ends is overcome.

And digital as well

Quarterly updates are likely to comprise three-line accounts for businesses that are under the VAT registration threshold, but more detailed accounting analysis will be required behind this.

The big question is who will make the quarterly submissions? Client digital records will be linked to their Business Tax Accounts, and all the HMRC examples in the con docs assume the client presses the button, and catches up with their accountant at the year-end. For some, one self-assessment return becomes four self-submitted quarterly updates, plus a final, fifth, update by the accountant.

With one month from the end of the quarter to make submissions, the nine months offered to complete the year-end submission looks generous.

Non-GAAP accounts

More generally, the consultation suggests the possibility of ‘non-GAAP’ compliant accounts. For businesses unable to use the cash basis, but which don’t require GAAP compliant accounts for other purposes, the suggestion is to modify or relax rules for closing stock, long-term contracts lasting up to one year in length, bad debt provision, and accruals and prepayments.

From a business point of view, it seems a mixed bag, potentially offering limited real advantage. But taking a step back, it’s all very busy. There’s a lot of tinkering around the edges going on.

Cash basis: looking at the capital - revenue divide

Here again, we’re not just looking at MTD, we’re looking at new rules, and we’re looking – ostensibly - to simplify decisions on deductibility of capital expenses.

The aim is essentially to give 100% immediate relief for most tangible depreciating assets, excluding cars; while disallowing expenditure on property, long-life intangible assets and more complex items such as financial instruments. For an overview, see

This is an acknowledgement that the current capital deduction rules for the cash basis can require significant expertise.

Simplified cash basis for unincorporated property business

The proposal here is to extend a slightly modified version of the cash basis, as available for trading income, to unincorporated property businesses.

It is suggested that this could apply to property businesses with a turnover of under the compulsory VAT registration threshold (£83,000 in 2016-17).

On the plus side, this would give immediate relief for unpaid rent. On the downside, interest relief would be restricted. The trading cash basis limit of £500 would not apply, but mortgages would need to be tied to property used in the business, and not exceed the value of the property. Interest relief on residential property would be restricted to basic rate (in line with 2015 Budget).

For residential lettings, furniture etc would be allowed on a replacement basis. There are potential complexities around security deposits: where these are held by the landlord, the cash basis would treat them as income.

All in all, not only do we need to think about MTD - as a profession, we are being asked to think through the implications of these proposed changes for our clients, and get that input back to HMRC.

Rabbits from the hat

So when it came down to it, the MTD con doc launch wasn’t just about MTD, it was very much wider than that - and it has produced some unexpected rabbits from the hat.

This means there are number of major challenges ahead. We have the prospect of smoothing a digital path for client and business alike – something we have hardly touched on here. But not only that, we have simultaneous add-on changes as well.

Mostly to be effected by 2018.

I think we cancel the Hebridean cruise, Jeeves.

Over the next three months AccountingWEB will be collecting feedback to HMRC's package of MTD consultations. Feel free to raise any points about the different issues by commenting here, on the individual consultation summaries or our MTD frequently asked questions article. If you'd like to find out more about Making Tax Digital, register for our online MTD sessions at Practice Excellence LIVE! on 24 October.

AccountingWEB is working with Thomson Reuters Digita to collate the profession's feedback to the MTD consultation documents. You can participate in our quick survey here to share your thoughts. The survey responses will feed directly in to the official AccountingWEB response to the consultation documents.

Replies (51)

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By youngloch
17th Aug 2016 17:59

....and deal with the 2017-2018 tax returns between April 2018 and January 2019 at the same time as dealing with all of the above.

Personally I think a one month window is impossible from a practical perspective for those of us whose firms provide the full supporting package to clients once a year. Our clients are not bookkeepers and do not want to be either because of time or ability.

We outlined this to 100 of our self employed accounts in April asking for those interested/wanting to do more themselves via either apps or an online solution to let us know. One client responded and alas she only has about 50 pieces of paper a year to deal with!

If the window for filing a quarterly update became three months then it feels "possible" and with a greater degree of accuracy whilst affording us the chance to consider a holiday and not fear staff being off sick.

1 month window = at least 7 days before clients probably instruct, leaves say 23 days to complete, take away weekends..... say no more.

Can you imagine the standard of quarterly submission made by the average self employed individual who needs the help of an accountant to do everything currently?

Self assessment gives them best part of 10 months and yet when are the majority of returns filed.... yes January.

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By Vaughan Blake1
18th Aug 2016 14:12

I do wonder if Universal Credit is the main driving force behind the more regular reporting. HMRC make many references to in year tax 'estimates' being a major benefit to people. If clients really wanted to know their tax liabilities sooner they would deliver their records to me in May!

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By Chaztax
18th Aug 2016 21:18

I thought that the key argument behind MTD was that technology was – allegedly – now sufficiently advanced to handle the complexities of tax.

However it appears that the government is planning to simplify the tax system so that the technology can cope with it?!

This rather feels like “the tail wagging the dog”.

If simplifications which have no adverse side effects can be found, then clearly that’s a good thing – but if it’s all so easy, why hasn’t the OTS already identified such improvements?

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By sparish
19th Aug 2016 09:48

.

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By steve 12321
19th Aug 2016 10:41

I can see why HMRC / the Government would like this to happen. However it will be extremely damaging to businesses etc. Why cant they focus on keeping it simple and reducing the burden. We will not be able to cope. Clients will be caused addition costs if we can assist them. It will decrease tax take. It has to. People will have to buy software. Costs of accounting and book-keeping will increase. Of course tax relief will be given. Less tax. People will be put off being self-employed and running businesses as they will not be able to cope with this or afford to be able to do it.

The examples of people HMRC give are laughable and insulting. Someone needs to stop this and do it now.

It will mess up my business. I will have to close. It will be damaging to my other business as I will spend more and more time on admin. All this App talk is rediculous to the extreme. We have people with sheer ignorance pushing this through. Madness. Can they really be that cruel to impose this on businesses. People who are trying to get on and make a living and pay their tax?

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Replying to steve 12321:
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By Rosalinda Taylor
22nd Aug 2016 21:01

You are absolutely right. What can we do?

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By youngloch
19th Aug 2016 14:57

I've given this thought all week and today had a brainstorming session with to other practitioners who are also despairing.

Few points though from looking at the HMRC video:

HMRC are pushing cash basis: You watch the video though and John the plumber is taking a photo of his material bill. He's probably got an account with them though so that's an accrual based system?

He enters it (look closely) as name, date, amount and allowable expense yes/no. As they say "and that's it it's as easy as that"

Equally he apparently uploads his sales invoices - what if he's not paid? So the app sounds accruals based versus a cash base suggested taxation basis?

Will John be expected to manage sales and purchase ledgers and identify costs from his bank that he does not have receipts for? Really?

If you want a cash based system may I suggest forgetting the whole "take a photo of the bill" part HMRC as that's just ASKING for trouble!!

We considered a small business client today and looked at his last accounts. Expenses of circa £1500 were genuine expenses but he doesn't have a bill necessarily say prof subs on DD, RAC, bank charges, interest, HP interest. He would pick up none of that and pay an extra £500 or so in tax as a result - and be doing all the entering.

Very noticeable on their video as well is the fact that the tax position is presented AFTER the submission goes in. I happen to know that a few sub-contractor clients who did their own SA returns in the past used to fudge the numbers until the tax refund looked about right.

Imagine the horror when John the plumber hits the button, sees the potential tax bill and panics.... more likely to send John the plumber to an accountant I think!

Lets step back though. HMRC are perhaps saying the taxpayer puts in 4 submissions and then the accountant/taxpayer tidies it all up within 9 months of year end.

So, how can this work with a one month deadline (we know it can't but.....)? Well personally we'd have to take on 2 or 3 very junior apprentices to liaise with clients who need help and they can literally "bung" the basics in for them (for a fee) and then review and properly prepare accounts to confirm things in the 9 month window. An apprentice will do at least as good a job as a taxpayer so HMRC cannot have an issue with it.

This quarterly submission process cannot be additional work for the skilled staff - or else it would indeed shut us down. Would I want the quarterly submissions properly checked in that one month window - no, because clients won't want to pay and HMRC's expectations are clearly very low. As our apprentices get better, they learn and it helps to improve the year end process for us.

How else could it possibly work? Clients are not accountants and they do not want to be. Most of our clients would end up inputting either nothing or a load of rubbish just to tick the box - many/most are going to run for the hills with this but in "selling" it we have to say to start that the onus is on them to do the quarterly part with their app or accounts package. This is when they'll agree to pay a small fee for us to "bung" it on

By the way we did a dummy run in uploading invoices using the Quickbooks Online app - average time per invoice including the photo was 2 minutes. How long for a client? Are HMRC really serious in believing that ALL business owners are going to do this?

Our staff would input a purchase invoice into a spreadsheet every 10 seconds - probably 15 seconds for Sage etc. By the way I believe some packages, like Quickbooks online, do provide for data upload from a spreadsheet - just a thought as to how to resolve the spreadsheet dilemma.

Some clients might do a good job and give us less processing work in the tidying up process so our fees would drop slightly (but only at the lowest time scale rates).

That to me sounds like heaven, but it seems that we all keep "fearing" this each time a new procedure comes in and yet look at us all now working longer than ever before.

Our workload is not running out the door though, after all between April 2018 and January 2019 we'll be busy preparing the 2018 tax returns as per normal with company accounts also running as normal until at least the start of 2021 in reality.

From then on our job will consist of trying to fix the garbage some of our clients would be submitting and ending up re-doing most of it - until they give in and pass it all to us so they have time to run their businesses.

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Jennifer Adams
By Jennifer Adams
19th Aug 2016 15:18

I've got to say this again... why should anyone use an accountant when you have to undergo the same process? ie you email the same information to your accountant to submit or you do it yourself? The majority of clients are cash account basis and, of course, they will have the benefit of HMRC's new system of 'nudging'. They will scan their receipts to go straight to HMRC. When they create an invoice they will send a copy to HMRC in their quarterly submission.
younglock says 'Can you imagine the standard of quarterly submission made by the average self employed individual who needs the help of an accountant to do everything currently?' but who cares if they dont get it right so long as something is submitted? There will be no penalties for getting it wrong - just for non submission.
The consultation document says; 'Instead of applying penalties to each failure, we propose a much more gradual model whereby each failure would attract penalty points. Only once the points reach a set level would a penalty be charged'.
steve says 'someone should stop this'. Tony at ICPA has been trying his best but he seems to be a lone voice - we've heard hardly anything from the acc professional bodies.
Rest assured this will go through whether we like it or not.
What annoys me is HMRC's crass comment in one of the documents that 'We recognise the crucial role that
agents will play in implementing these reforms; and have engaged extensively with the agent community in developing this document'... well if they have they havent listened.

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Replying to Jennifer Adams:
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By youngloch
19th Aug 2016 16:53

The issue is though that most businesses do use an accountant for a number of reasons, the main one being that we know what we are doing and they do not have the time or inclination to do it themselves.

They also want to know they are not being over-taxed.

So, ignoring the ones who already chance their arm and tweak their SA submission until they get a refund they like the real issue is how genuine, proper, businesses and their agents will cope with this.

HMRC need to stop and realise the contribution we make towards people paying their taxes, and being on the radar and remaining on it, and work with us not against us.

We are the bridge between many taxpayers and HMRC and HMRC seem hell bent on burning it right now.

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Jennifer Adams
By Jennifer Adams
19th Aug 2016 19:55

Not sure whether anyone remembers but in the dim and distant past there was something called the 'Working Together 'initiative''. In the beginning accountants were invited to attend meetings face to face. I went to my nearest in Exeter and although HMRC sent emails etc round to all accountants they thought lived near enough to attend (at least 200 the HMRC lady said) only 8 of us turned up. We were given the outline of MTD then.
After listening patiently one accountant made a very telling comment : 'you are asking people to do our job'....and he was right. We came up with all the protestations other respondents to this post have and still they ignored us. As I say - we can moan all we like but this will come in. HMRC have spent ages and spent a lot of money pulling this together and whatever we say at this late stage wont make them change their minds.

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By DMBAcc
20th Aug 2016 11:00

I will be unable to help my 50 clients in such a short period each quarter. Besides I'll be spending most of the time trying to figure out my business, my wife's, my mother's, my son's in law etc. ....

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blue sheep
By Nigel Henshaw
20th Aug 2016 11:11

what the powers that be just dont seem to realise is that above everything else there is a huge potential here for a massive decrease in the total tax take.
A few examples of basic errors we see when clients do their own books -
Not adding back for private use
Treating loan repayments as expenses
Including their weekly shopping at asda because they used the business card
Treating drawings as wages.

I could go on but my point is that it is far more likely that a person will claim too much expenditure than over declare income, either way the figures will be inaccurate. Not really what UK plc needs post Brexit

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By ringi
20th Aug 2016 13:13

The banks are key….

Firstly all banks must be FORCED to allow safe read only access to all the transaction details by any 3rd party wedsite/app that the client have approved.

Then I hope most banks will developer an extension to their on-line banking that allows transactions to be tagged, so a company that puts all transaction var the bank and only has accounts with one bank can do the quarterly returns var the bank.

For example why can’t I scan all invoices etc into my on-line banking, then have a PDF once a month that shows them along with the transaction data, clearly showing how they link up.

For landlords that use letting agents, there need to be a way for the landlord to get all the data from all the letting agents they use into one app, as the agents charges etc are deducted before the rent is paid over, so leaving the landlords bank statement lacking in detail.

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Replying to ringi:
blue sheep
By Nigel Henshaw
20th Aug 2016 14:00

Couldnt agree more, none of my clients want me to use bank feeds because of security, so this has to be a priority.

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Jennifer Adams
By Jennifer Adams
20th Aug 2016 15:18

I can see BankStream making a fortune here. Unfortunately its not a PLC so we cant buy shares.

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By youngloch
22nd Aug 2016 08:38

I am mulling over a bankstream scenario too just to have a constant flow of the key info for clients but we'll still need to see bills and then match them all up.

Bankstream quoted me between £6 and £8 a month though and that's going to add up to a hefty chunk per annum.

I'm just not comfortable with this one month dash each quarter though it's just far too short a window for everyone

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By ireallyshouldknowthisbut
22nd Aug 2016 09:13

I think you have to remember that HMRC are just asking for garbage data that is not used on a quarterly basis.

You will have to decide if:
1. Clients upload some [***]
2. You filter the [***] a bit and upload it
3. You just shrug your shoulders and submit any old [***], and don't even bug the clients about it.

There is zero point worrying about what is/isnt allowable for tax, the game here is quarterly filing for quarterly filings sake as "nanny state" believes this will cut by 30% (not a joke, this is the whole rationale in nanny dream world according to the consultation) the admin time spent on bookkeeping.

more widely it seems an impossible dream to expect every client to be using software, so agents can act as 'gatekeepers' between real world bookkeeping and HMRC digital fantasy land. We will provide that invisible clothing that HMRC can trumpet as a success whilst we all know in reality that they will be naked.

Plenty of work for accountants, unless you are in the "blindly copy client data and press submit" type of practice, in which case you probably ought to not exist in any case. The year end work is really just as now, with some different forms, plus we can charge for Q filing too.
It all amounts to "jobs for the boys" as far as I can see, just as those clients who used to file small PAYE's quarterly decided 'enough is enough' once RTI came in with monthly filing and needed help, this is much the same. The little person wont be able to cope, so will need an accountant.

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By why always me
22nd Aug 2016 12:12

Who are these people who always want to make it 'easier' on the taxpayer. All we have had recently is more work and grief for taxpayer - rti - auto enrolment etc.
More work for us, but really we do not want to do it and client does not it either.
Just bring forward when tax is due and start reducing benefits for the career claimers

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By wblewis
22nd Aug 2016 12:14

A quick comment while I digest the rest of this. I have had clients scan documents with phones and send them to me. The majority are illegible and give me a real headache.

Can I pass these on to HMRC to interpret for me?

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By Gone Sailing
22nd Aug 2016 12:17

Was it broke?

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By johnjenkins
22nd Aug 2016 12:27

I'm going to get all my subbies (CIS) to register for VAT. Put them on a flat rate and the profit they make will not only pay for their software, it will give them a bit extra.
I will then look into other trades to see if the same thing is viable.
I'm talking about all those not registered for VAT. If all business did that I wonder how much HMRC would lose?

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7om
By Tom 7000
22nd Aug 2016 12:36

Which App has everyoe got lined up/ are using. Might as well start now and get the clients used to it.

I saw on the other AWeb post about landlords that HMRC said some suppliers had to produce free software? Really!! thats interesting. Perhaps its part of getting a licence to upload into their systems.

reccommendations please :)

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By Peter-S
22nd Aug 2016 12:58

I had a newish client in this morning. He has a company and I was explaining about record keeping for claiming mileage expenses. He thought this was rather a fag so I explained the joys that await him down the line under MTD. He was also going to complete his own VAT return but after struggling setting up an account (not really sure why) and considering his work load etc he asked us to do it. He's an intelligent chap but you have to think that MTD will cause a problem when it gets there for corporate bodies. The point though is that he is fairly representative of most of our clients that will be affected by MTD from day one and from reading on here he is representative of many firms' clients. His concern about passing VAT to us was cost, unsurprisingly although as they go this one will (famous last words) be straight forward. But if he (and his kind) are reluctant to pay fees and struggle to deal with submissions themselves you have to think, as I'm sure a lot of us to, that MTD really should be kicked in to touch before meltdown is reached at a very early stage. Of course the concerns will be glossed over and it will happen. I feel accounting armageddon is just around the corner!

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By itp3asso
22nd Aug 2016 13:24

THIS IS SHAPING UP TO VE A TOP DOLLAR GRADE ONE NIGHTMARE.

HINKLEY POINT TO THE PIWER OF TEN.

THANK GID I PRACTICE OUTSIDE UK

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By taxbakbristol
22nd Aug 2016 13:38

At the moment I deal with an Organisation that cannot answer a phone call, does not have e mail access, takes 3-4 MONTHS to answer a letter (assuming it has not got lost) , wants a 64-8 for PAYE when SA/CT /VAT are happy that there is one . takes 4 authorisation letters (still waiting for even 1 to arrive) to set up a CIS account.
I still have LTD clients waiting for there CIS refunds...
I deal with a bunch of disconnected harpies calling themselves DMb and now have the Dept of Woe & Pain sending me some of the stupidest letters I have ever read...
OK ..then I hear about another Organisation and my spirits lift...this one has ALL the answers , has IT Systems that work and can talk to other departments , has staff coming out of their ears (they will need them when all the utter crap starts coming in every quarter) but hold on ..its the same Groundhog Day Bunch ...MTD ...IT WILL NEVER HAPPEN and if it staggers off the ground it will fall out of the Sky , shot down by the same idiots who wanted to hear all this utter rubbish in the vain hope that it would increase the tax take but guess what ...it actually plummetted and MTD - RIP!

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By gordo
22nd Aug 2016 13:57

I don't believe this is designed to do anything other than accelerate the cash into HMRC's hands and maybe add to the collection of penalties.
The Government is bankrupt and is looking for ways to grab more cash:
https://www.gov.uk/government/publications/whole-of-government-accounts-...
An annual debt of £260 billion goes way beyond the alleged total annual tax gap of £36 billion.
http://www.politics.co.uk/opinion-formers/chartered-institute-of-taxatio...

Therefore, as far as the Treasury are concerned, this has to be implemented, regardless of the pain that might cause others.

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Jennifer Adams
By Jennifer Adams
22nd Aug 2016 13:58

We are all moaning about the new system and some of the posts have made some good practical points. But we need to decide whether we will put up with what is going on or try to do something about it now that we have more detail. It was impossible to do so prior to publication.

But we are not the only ones who cant see how it will work...a couple of months ago I was talking to an HMRC employee about this and he said that they too were very concerned as was their union. They know the real reason is to make job cuts.

I asked what could be done and he said that his colleagues are contacting their respective MP's to complain. He urged me to do so. I said my MP was (at the time) Oliver Letwin and he wouldnt be interested.
There is of course the petition method - but no one seems to have taken this up. Nothing on the parliament petition page today. Perhaps everyone is still on shock.
But as I've said before HMRC have gone too far down the road to stop now. We might be able to get some concessions but it will unfortunately happen.
What we need to do not is try to break the news to our clients.... carefully.... and start putting processes in place.

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Replying to Jennifer Adams:
By cfield
22nd Aug 2016 14:49

JAADAMS wrote:

There is of course the petition method - but no one seems to have taken this up. Nothing on the parliament petition page today. Perhaps everyone is still on shock.

There was a petition and it attracted the requisite 100,000 signatures very quickly. This triggered a formal Parliamentary debate which you can watch on their TV channel and at the end of it David Gauke stood up and effectively fobbed them all off with wishy-washy comments promising to take it all on board.

Perhaps a new petition when all this becomes much more widely known will attract a few million signatures and then they'll have to take it more seriously. Perhaps we could insist on a referendum (in our dreams!).

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Replying to Jennifer Adams:
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By youngloch
22nd Aug 2016 14:54

I wrote to Chris Grayling in detail about this on 11 July and got a reply on 18 July (amazing!). Considering there was a leadership election going on at the time I was very impressed.

He stated "I think the best thing for me to do is highlight your concerns with senior management at the organisation, and ask for their comments on the various issues you have raised. I have written to the Chief Executive of HMRC today and will be back in touch as soon as I have a response for you."

So I totally agree with JAADAMS - take an hour out of your life and write to your MP and also respond to the consultation.

There are hundreds of thousands of businesses out there who know nothing about what is coming. We gently nudged our clients to instruct earlier this year by signalling change may be coming - and it worked.

Biggest risk to a practice may be clients hearing about it via another accountant.

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Replying to Jennifer Adams:
By cfield
22nd Aug 2016 15:18

The only way to deal with this idiocy is submit quarterly estimates with as little time and effort as possible and then catch up at the year end same as we do now. We'll just have to humour them. Play along with their little game and keep the costs to a minimum.

It is so unfair on ordinary men and women who will have no option but to either pay good money they can ill afford to accountants and book-keepers or waste yet more of their precious time on admin.

The idea that you can do all this just by taking photos and clicking Send is so ludicrous it takes the breath away. It makes me wonder if they really are that stupid or if it's just a cynical line they've spun to sell to the masses.

You say they've taken our feedback on board, but it's still going to be mandatory. It's all stick and no carrot. An optional system would really test its market credentials. People will go for anything that saves them time or money and eschew anything that doesn't, so if they're right about it being the most wonderful advance since sliced bread, all they've got to do is give us the choice and let the market weave it's magic, but they don't want to risk that, so they force it down our throats instead.

What gets me is how they can make it mandatory to keep business records in digital format. Surely this is unconstitutional. It's got nothing to do with them how a business keeps its rec0rds, so long as they are good enough to work out their tax liabilities. Submitting tax returns in digital format is one thing, keeping records on a smartphone or computer is something else entirely. If a window cleaner or gardener or Joe Subbie wants to use a cashbook to keep track of his income and expenses, then let him. But of course, that doesn't fit in with the coercive approach they always adopt now. It's all part of a certain mindset - they know best and no arguments!

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Replying to Jennifer Adams:
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By steve 12321
22nd Aug 2016 15:52

We need to do something and raise awareness amongst clients and have a co-ordinated "no" campaign. It is an absolute liberty.

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Replying to Jennifer Adams:
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By steve 12321
22nd Aug 2016 15:52

We need to do something and raise awareness amongst clients and have a co-ordinated "no" campaign. It is an absolute liberty.

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By kfh
22nd Aug 2016 15:18

Having many years experience implementing accounting systems for companies from the smallest to the largest I think I have become a competent book keeper. But running my own one man business I have difficulty getting my annual accounts to the accountant in time for him to do anything with them. I am too busy trying to do work, to earn money, to spend time entering invoices, credit notes, payment, reconciliations into an accounting package. When working away from home this would be done with paperwork spread out on a bed and on the floor of a hotel bedroom and my accounts were much easier then. Even when VAT registered quarterly accounting was easier than this. I was planning on retirement, I am no longer planning I am doing it. Then I may have time to meet HMRCs requirements :-(

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By frankfx
22nd Aug 2016 16:08

An idle thought on cash businesses. And making tax digital.

The digital economy. All businesses should be required to issue a digital receipt to account for individual transactions. Cash or otherwise.

Imagine the first year when all individual sales transactions are recorded electronically.

How will sales turnover compare with earlier years figures. What a field day for the tax authorities.

I predict an amnesty.

Barbers, car wash, taxi takeaway food stalls at events and exhibitions, the list is endless. Would now be seen to be compliant.

Those of us who can remember the lump system of subcontractor pay, before the Sc60 and CIS schemes, would surely see the advantages to the Exchequer, with full digital accounting.

Digital should mean fully digital. The technology rests in the palm of my hand as I record this comment.

Simples

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Jennifer Adams
By Jennifer Adams
22nd Aug 2016 16:35

An invite has just landed in my email box from HMRC to attend a 'Talking Points' webinar session on 19 Sept at 4pm. Subject: Overview of Making Tax Digital : An overview of the 6 consultation documents issued on 15 August'.
Shall we all attend and complain?
Usually the turnout for such 'event' is rather low - about 70-80.
Here's the registration link
https://attendee.gotowebinar.com/register/7271014696184318466

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Replying to Jennifer Adams:
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By johnjenkins
22nd Aug 2016 16:57

We've been doing these for some time. Not only are they boring you don't get to put your point of view. You get the same crap that Gauke gave out in Parliament. HMRC really aren't interested in anything we say that is negative. This will fall flat on it's face.
The money would have been better spent on Agent strategy. So that by now we would have been up and running and HMRC could have seen how good we really are.

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Jennifer Adams
By Jennifer Adams
22nd Aug 2016 17:15

cford says it 'unconstitutional' - probably not but I've found this quote which might help:
'In the recent VAT case LH Bishop Electrical Co Limited, the judge held that regulations requiring the online filing of VAT returns without exemptions (including people with disabilities or those with unreliable broadband access) represented a breach of human rights and was unlawful.' Mike Chapman:Corporate Tax manager Knill James.
But HMRC does say that there will be exceptions for those unable to comply e.g for religious reasons.

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Replying to Jennifer Adams:
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By johnjenkins
22nd Aug 2016 17:28

Please would you ask if the Mormon Transcending Disciples (of which I am a member) are exempt. My flock are anxious to know.

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Replying to Jennifer Adams:
By cfield
22nd Aug 2016 20:34

JAADAMS wrote:

cford says it 'unconstitutional' - probably not but I've found this quote which might help:
'In the recent VAT case LH Bishop Electrical Co Limited, the judge held that regulations requiring the online filing of VAT returns without exemptions (including people with disabilities or those with unreliable broadband access) represented a breach of human rights and was unlawful.' Mike Chapman:Corporate Tax manager Knill James.
But HMRC does say that there will be exceptions for those unable to comply e.g for religious reasons.

I wasn't talking about the online filing of tax data. We've been used to doing that for some time now. When I said it was unconstitutional I referring to the blatant intrusion into our private affairs. They are basically telling people how to run their businesses.

What's it got to do them with how we keep our accounts? It doesn't matter whether someone uses a software package, a smartphone app, an Excel spreadsheet, a cashbook or a shoebox full of receipts. So long as they end up with a good enough set of accounts to determine their tax bill, that's all they should concern themselves with. How dare they interfere in our business like this, making judgements about the right and wrong way to do things.

They might as well start telling us what clothes to wear and which TV programmes to watch. When you think about it, it's just as much of a damn cheek.

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Jennifer Adams
By Jennifer Adams
22nd Aug 2016 17:20

As I've said before where are the institutes in all this? We've hardly heard a peep from them.
The answer can be found here:
https://www.tax.org.uk/media-centre/blog/media-and-politics/david-gauke-...
>>> At the CIOT Annual Parliamentary Reception the Financial secretary commented:
“I am determined to continue to work with the tax profession, including CIOT, to ensure we do this in a way that works for all of us. We have a lot to learn from each other. We welcome the positive and constructive approach the CIOT has taken in the context of Making Tax Digital.
“My door is frequently open and I am keen to hear your comments and concerns and encourage HMRC to get out there and listen to what business have to say and tax professionals have to say.”
May I ask: what 'approach' is that then?

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Paul Layte
By Paul Layte FCA
22nd Aug 2016 18:03

STARTING POINT MATTERS: Personally I am quite comfortable (please don't take that as gloating or otherwise) with all this however if we were a traditional practice it would certainly be keeping us up at night thinking about how to transition! Being 100% cloud based with all clients and all of them having bank feeds setup (no arguments from any of them by the way) and having been "trained" by us to do their own bookkeeping and with others paying us to do it comfort comes from the fact we are in many ways already doing MTD just without the submissions.

MAKE OF IT WHAT YOU WILL: Clearly the software vendors will write extra code and functions to 'submit' the details to HMRC as they do with RTI/VAT etc but this for us is an opportunity to sell another service to clients on a check or full service basis. You can add to this a quarterly tax estimate report (paid for) should the client want it etc

BOTH ENDS: It is nice to see that HMRC are coming at things from both ends by also tweaking the rules as clearly this will allow the smoothest course to the final destination. Clearly the simpler the rules the simpler the software and therefore the cheaper it will become (as coding features costs money).

BE PREPARED: Having set up the firm on this all digital & all cloud foundation, setup each individual client along the way, trained them etc I can tell you it is not all plain sailing and click a few buttons! It is crucial to get training, support and leave plenty of time to onboard and train clients. Those that setup badly or don't leave enough time will really feel the pain.

EXAMPLE: The most recent comparable mini version of the process is the Ltd company confirmation statement replacing the annual return. This now includes more information (PSC) and has a reduced window to only 14 days after the made up date to be filed. So you could tackle that in 1 of two ways. 1) Pray the client is not on holiday, you have the resources during the 14 day 'window' and plan (as best you can) for success or 2) Keep all the information constantly updated for your client, talk to them well in advance for any upcoming changes, agree with them in advance a review and file on day 1 of the 14 day window.

TAKE AWAY: I only use the above to demonstrate how not just the rules, timeframes and process need to adapt but also the mindset of the whole chain from client>accountant>authorities and unfortunately once again the middle group will be supporting the whole chain and those that don't make enough of it will be doing it for free and on top of the not so extravagant returns the profession currently makes on average (which I firmly believe is below it's true value)

HELP: Having learnt lots doing the above and more I am now branching out to supporting other practices and individuals do the same (obviously charging a bit for it as well). Anyone looking for some help can get in touch should they wish as anything from a bit or mentoring to full blown consultancy can certainly help when it comes to all things digital especially for those born pre 90's.....

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Replying to Paul Layte FCA:
blue sheep
By Nigel Henshaw
22nd Aug 2016 19:35

Oh dear, the folly of youth, i am quite certain those of us born before the 90s will cope just fine, but thanks for your concern. Lmao

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Replying to Paul Layte FCA:
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By johnjenkins
23rd Aug 2016 09:47

Oh to be the perfect Accountant with perfect clients sending perfect info to a perfect HMRC.
Then the perfect Government saying because we have been so perfect, tax (oops customer contributions) will be halved.
mmmmmmmmmmmm snooze snooze.

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By Mallock
23rd Aug 2016 12:01

We have many clients already using cloud based accounting packages and without exception they still make mistakes, some of them significant. On a quarterly accounting basis this rubbish would be uploaded without proper review. A recent issue was the posting of purchase invoices through the purchase ledger but the payments to those creditors were then posted as bank payments, resulting in a doubling up of expenses. Hours and hours of training and they still got it wrong.

We also have clients who have tried to use Cloud accounting and have found that their broadband signal is too unreliable or weak to sustain such a service in a manner that gives confidence that it is correct.

There is also no way we could provide the same service to self employed clients 4 times a year instead of one, without taking on additional staff and increasing costs to clients significantly.

How will contracts, valued currently at sales value under UITF40, be dealt with? For some professional clients, they paid tax on a few hundred thousand pounds, at higher rates of tax using the 3 year transitional rules. Are we going back to valuing these amounts at cost and how will large fluctuations in these figures be dealt with quarterly, particularly where the client relies on us to review the figures and make the relevant write offs etc. A one off benefit from writing back these amounts in a single year will result in much of the tax relief being received at basic rates with potential loss of personal allowances when the tax was originally all paid at 40% - is that fair and reasonable?

What about adjustments for private use of vehicles and other items or the incorporation of a mileage allowance for use of own car? Are these only incorporated when the accountant gets involved at the end of the year?

In my view MTD is unworkable for a large number of small businesses and landlords - they rely on us almost completely. In many ways this is an opportunity for us to staff up and provide the service but with a one month window, I see the volume of late month information from clients being a major logistical problem.

We also have landlord clients with significant portfolios who are of retirement age and don't even have e-mail. To force them to use an accounting package is a non starter.

If the system is about accelerating tax payments then move everyone onto monthly instalments but I am finding it hard to accept major changes to the principles which have been used for so many years, to determine what is true and fair. The cart appears to have been put well and truly in front of the horse.

Maybe we just need to incorporate everyone.

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Replying to Mallock:
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By wblewis
24th Aug 2016 13:56

[quote=Mallock]

We have many clients already using cloud based accounting packages and without exception they still make mistakes, some of them significant. On a quarterly accounting basis this rubbish would be uploaded without proper review.

We also have clients who have tried to use Cloud accounting and have found that their broadband signal is too unreliable or weak to sustain such a service in a manner that gives confidence that it is correct.

There is also no way we could provide the same service to self employed clients 4 times a year instead of one, without taking on additional staff and increasing costs to clients significantly.

I whole heartedly agree with your comments having spent many hours coaching clients on how to use accounting systems, answering their questions on an ongoing basis and then still having to correct, sometimes major, mistakes. Clients are not generally trained bookkeepers and don't have any desire to be.

Also, as I live and work in a rural area, I fight the battle with poor broadband service, more the interruptions than the speed, which can cause some interesting problems.

Frankly, I don't think HMRC should be allowed to proceed until the Government fulfills it promises regarding broadband service.

MTD is a recipe for disaster and a way for HMRC to further lower its service levels and pass the problems and costs on to taxpayers and particularly small business owners

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Morph
By kevinringer
06th Sep 2016 13:41

MTD is a misnomer because tax is already digital. I've been filing 100% digital SA since 1998! MTD really means Making TRANSACTIONS Digital because that is the aim. HMRC want to know about every transaction.

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Morph
By kevinringer
06th Sep 2016 13:43

Why are tax return software companies going along with this? Think about it, if I use say Sage to upload to HMRC, I don't need to submit a tax return, so why would I use PTP or Iris or whoever? MTD could mean the death of tax return software that doesn't have bookkeeping.

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By johnjenkins
06th Sep 2016 14:29

Surely all CIS subcontractors should be exempt due to the fact that HMRC already have their income on MONTHLY returns.

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Replying to johnjenkins:
Morph
By kevinringer
06th Sep 2016 14:33

johnjenkins wrote:

Surely all CIS subcontractors should be exempt due to the fact that HMRC already have their income on MONTHLY returns.

But what about expenses and non-CIS income?
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Replying to kevinringer:
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By johnjenkins
06th Sep 2016 14:43

As HMRC aren't doing anything with them anyway it's academic.

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