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MTD: Taxpayers must make six submissions to HMRC

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4th Apr 2017
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Close reading of the draft Finance Bill 2017 has uncovered another annual submission which taxpayers will be required to send to HMRC.

What we were told

In March 2015, when George Osborne outlined the new concept of “making tax easier”, he said it would herald the death of the tax return. All the tax information relevant to an individual would be gathered into the taxpayer’s digital tax account, and the annual paper tax return would be consigned to history. 

This was sold as reduction in the administrative burden for taxpayers, but by the end of 2015 we were told that Making Tax Digital (no longer easier) would involve sending HMRC four updates per year. Accountants started to grumble that this would mean effectively four tax returns per year instead of one.

I have now discovered that the tax return is not disappearing; it is merely changing its name, and that MTDfB will involve five additional submissions per year, not four.

Quarterly updates

The requirement to make periodic updates to HMRC is set out in a new schedule A1 to Taxes Management Act 1970 (TMA 1970), which is introduced by FB 2017, cl 121. The financial information required to be transmitted in those updates will be specified in regulations, and Sch A1 para 7(4) says:

The regulations may not require financial information about the business to be provided more often than once every 3 months.”

Those regulations have not been published yet, but HMRC has made it clear that the maximum period an update can cover is three months. Although a taxpayer may submit more frequently updates if they wish, anything more than quarterly updates will not be required.

It is worth noting that a set of quarterly updates will be required for each trade or business undertaken by the taxpayer. Thus, a self-employed individual who also has some rental income will have to submit a set of quarterly updates for their self-employed trade, and another set of quarterly updates for their lettings business.  

End of period statement

The updates are not required to include any accounting adjustments, as those adjustments are to be included (if necessary) in an “end of period statement”. This is the fifth submission to HMRC, which is required by TMA 1970, Sch A1, para 8.

This end of period statement (EoPS) is the point at which the taxpayer declares they have submitted complete and correct information regarding their trade. Regulations will define the timetable for providing the EoPS (TMA 1970 Sch A1 para 8(4)). HMRC has said this deadline will be set at the earlier time of 10 months after the accounting period end or the next 31 January.

Note that a separate EoPS will be required for each trade or business undertaken by the taxpayer.

Final declaration

In addition to submitting the end of period statement the taxpayer will be required to make a “final declaration”. This is the new name for the annual tax return (see new TMA 1970, s 8(7) - introduced by FB 2017, sch 25 para 3).

The final declaration is needed to report any income which has not been reported to HMRC through an EoPS, such as savings or employment income, and to make any necessary claims. The deadline for submitting the final declaration is set by TMA 1970, s 8(1HA) as on or before; 31 January in the year after the end of the tax year, or if later, the last day of the period of three months beginning with the date of a notice issued by HMRC.

Example

Pete has a sole-trade business with a year end of 30 April, which has a turnover of £90,000 per year. He will start making quarterly reports under MTDfB from the accounting period that begins 1 May 2018. His quarterly updates must be submitted within one month of the end of each three-month period that starts on 1 May, and the other declarations and statements must be submitted as follows:

table311

Conclusion

We are still waiting for sight of the regulations which will specify the deadlines for submitting updates, statements and declarations to HMRC. It is possible that those regulations will change the deadlines from those outlined above.

What is clear is that a self-employed taxpayer will have to interact with HMRC at least six times a year to submit or confirm the following:

  • 4 updates (per trade)
  • 1 End of Period statement (per trade)
  • 1 Final Declaration.

Replies (157)

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By uncle_adolph
05th Apr 2017 11:35

Hey, six times the work = six times the fee!

I'm sure my clients won't complain.....

Thanks (3)
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By steve 12321
05th Apr 2017 11:38

Fire the lot of idiots and save the tax return. Hire a few more staff at HMRC. Make it work better. They will send us all insane (is being insane an exemption from MTD?)

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By steve 12321
05th Apr 2017 11:38

Fire the lot of idiots and save the tax return. Hire a few more staff at HMRC. Make it work better. They will send us all insane (is being insane an exemption from MTD?)

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By Fitzz
05th Apr 2017 11:47

Am I right to assume that the quarterly returns will involve creating a P&L? Or will there be any simplification such that a full set of accounts does not need to be done quarterly?
An awful lot of businesses don't do regular accounts of this kind, and until recently have just produced enough information to do Flat Rate VAT returns. There will be a bit of a shock as all this filters through.

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By RPTAS
05th Apr 2017 11:50

I just don't have the words. Well, maybe I have but you won't be able to print them!

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Phil Nickson
By Philip Nickson
05th Apr 2017 11:51

Remind me again as to who benefits from MTD ? I see no upside for any of my clients and given I am working to near capacity reckon I will have to ditch several clients to cope with the extra work and charge the remaining clients £00s more for no benefit to them whatsoever.

Is there no one sane in charge who can stop this madness ?

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Replying to Philip Nickson:
By DotasScandalDotOrg
05th Apr 2017 12:12

Philip Nickson wrote:

Remind me again as to who benefits from MTD ?

Those with stakes in the commercial software companies that will make out like bandits in this new captive market.
You might find that they are related to those people who pushed SO hard for MTD in the first place. Who knows.

Thanks (3)
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By sammerchant
05th Apr 2017 12:31

HMRC have estimated the transitional costs to average £280 (yes!) per business between 2017 and 2021. I intend to make a FOI request to see their calculations.
It is becoming increasingly obvious that HMRC are unwilling to hear any adverse comments or criticisms and that the MTD juggernaut will go blindingly on.
If you are curious, have a look at HMRC's most recent organisation chart at https://www.gov.uk/government/uploads/system/uploads/attachment_data/fil... and you will see that the two individuals in charge of MTD appear to be lower down the hierarchy than one would have expected.

Thanks (4)
Replying to sammerchant:
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By Ah Choo
05th Apr 2017 13:15

I have already made a FOI request myself Sammerchant as I too thought the estimate total rubbish and wanted to understand how HMRC made up, I mean calculated, these figures. However the request was refused on the grounds that it was formulating government policy and so couldn't be released. Anyone else think this smells fishy and HMRC realize these figures are rubbish!? I then forwarded the request on to my MP as she can ask to see the figures and hopefully she is doing just that. I'll let you know when I hear back. I think you should still ask too though and go through the same process, the more people that jump up and down and make a fuss the better!!!

Thanks (3)
Replying to sammerchant:
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By The Black Knight
05th Apr 2017 14:37

So they can chop them when it don't work. typical psychopath behaviour.

Thanks (1)
Replying to sammerchant:
By DotasScandalDotOrg
05th Apr 2017 15:39

I estimated the cost at £2.80 per business. Don't ask me how I did it. I used a proprietary formula devised by Professor David Gauke that he used at great success in the past to force very unkosher laws through Parliament.
https://www.dotas-scandal.org/gauke-performs-magic-trick-transforms-847-...
I'm sure it will work this time again.

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Replying to sammerchant:
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By ruth.julian
08th Apr 2017 13:49

Interesting to see the current organisation chart. It looks like there has been about 95% change in the people at the top over the last 2 years. There are now only 3 Directors who have been in HMRC or its predecessors more than 10 years at or near the top.

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By Mr J Andrews
05th Apr 2017 12:23

Emporer Osborne's fall from grace has resulted in a sweet smell of roses as far as his current fee income is concerned. He's not bothered with the lunacy of his concept two years ago . God knows why his successor[s] continue with this fiasco. Have they all borrowed Osborne's ''New Clothes'' ? I'm still watching this space in the hope that common sense must surely prevail.
Meanwhile several of my clients are leaning to the religious orders whose beliefs are incompatible with electronic communication. Other clients [ atheists ] with similar beliefs will be taking the view that HMRC are discriminating against them.
Other EXEMPTIONS within the original so called consultations [ aka dumb dossiers ] include AGE { I certainly have a few of those clients ; myself included } , DISABILITY , REMOTENESS OF LOCATION , and wait for it 'ANY OTHER REASON'.
HMRC are not competent to determine who and who may not be engaging FOR WHATEVER REASON.
Can I coin a new word - 'HACKOPHOBIA' . How many doctors prescriptions will bear this malady caused by Osborne's stupidity come 2020 ?

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Replying to Mr J Andrews:
By DotasScandalDotOrg
05th Apr 2017 13:46

A while ago I remember reading about a French MP who invoked "administrative phobia" to explain away 2 years of unpaid taxes...
So who knows? Try it, it might stick!

Thanks (1)
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By timothyvogel
05th Apr 2017 12:32

who remembers schedule a b c d(I to VI) and E returns,all done separately, before my time but the textbook refers to them. They were dropped because it was considered more efficient to have 1 return for all income.
Who remembers separate VAT registrations for separate businesses, my text book does, abandoned because of added complexity.
Making tax digital is reinventing a wheel that has been got rid of because it did not work, and will use a system taht is not tested and manifestly cannot work for everyone. Sure some will benefit, more will lose out. What we MUST do as a profession is tell people and get them ready, or as ready as they can be.

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By david wilks
05th Apr 2017 12:34

Gauke is a dork. I make no apologies for the insult. He has made no apologies to those who pay his salary for the chronic imposition he is proposing or is overseeing.
The problem is is that all those of us who are up in arms about the MTD rubbish will, more likely than not, comply without a whimper. Yes, we obviously do not wish to be responsible for clients being penalised, of course we don't, but a strong protest is really called for by all professional bodies and their members. As has been observed there are a lot of matters surrounding MTD that have not been made public as far as the taxpayer is concerned. By the same token I cannot see any strong protests by the professional bodies.
Something really should be done to stop this madness. Which organisation will be prepared put their head above the parapet?
Gauke & Co you are making a big mistake which will continue to have repercussions long after the Brexit negotiations have been completed.

Thanks (4)
Replying to david wilks:
Tornado
By Tornado
05th Apr 2017 13:10

David Gauke was a Corporate Lawyer and feels at home doing deals with the likes of Amazon.

He neither understands nor cares about a business like yours (or mine).

"The problem is is that all those of us who are up in arms about the MTD rubbish will, more likely than not, comply without a whimper."

Not me.

Thanks (1)
Replying to david wilks:
By DotasScandalDotOrg
05th Apr 2017 13:16

david wilks wrote:
Which organisation will be prepared put their head above the parapet?

Answer: None of them. That's a British curse in a way - no one ever wants to rock the boat or appear "badly behaved"!
Some orgs may draft a "strongly worded" letter...and then? Then nothing.Just look at the ICAEW's savaging the "2019 charge"
https://www.dotas-scandal.org/the-icaew-savages-hmrc-over-latest-retrosp...
No result whatsoever.
The Treasury and HMRC know all too well they can ignore protests entirely.

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By Fitzz
05th Apr 2017 12:35

Wow. I'm just waking up to what this means.
For the small business (e.g. a one man band consultant), effectively this requires real-time recording of transactions and sharing an accounting package with your accountant, doesn't it? With only a month to report a quarterly return, there isn't time to send a box of receipts and some bank statements.
That's quite a step up for many businesses.

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By Ammie
05th Apr 2017 12:39

Much more simple, Osborne!

Like I have said this will certainly lead to a significant number of

* taxpayers "disappearing"
* accountants retiring or leaving the profession.

The second of which will pave the way for the "big boys" to "hoover up" much business, as has already been suggested is an alleged underlying HMRC mission.

How to de-incentivize the small business world in one swipe. If this comes to pass some gaping holes will appear in government budgets, which will then be passed on in the form of tax hikes.

No doubt it will all be blamed on Brexit!!

Thanks (5)
Replying to Ammie:
By DotasScandalDotOrg
05th Apr 2017 13:07

Precisely.
This is not unlike the sweeping IR35 reforms in the public (and soon private!) sector, which aim at clearing the field for the Big Boys.
Gauke is an out of control, shameless corporate shill, Hammond an empty suit. With this team in charge we'll have full scale cronyism very soon.

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By tedbuck
05th Apr 2017 12:39

Somewhere I read that the uk is less productive than many other countries in Europe and beyond. If we are to take on the world in trade terms MTD is like a knife in the side of business apart from being pointless.

Is there no-one in Government who has done a real job? Obviously HMRC don't have such experience so no-one should listen to them.

I like Locutus' idea, why don't we file one return a year? - think of the cost of saving the data storage requirement and power usage caused by MTD.

Better still let's form a Taxpayers' Political Party and get rid of the people who dream up these crazy ideas whilst trying to spend their expenses allaowances.

Thanks (1)
Replying to tedbuck:
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By ruth.julian
08th Apr 2017 14:01

HMRC doesn't listen to its staff who have told the high-ups that forcing people to interface with the dept on line or on the phone is discriminatory for all the reasons aired on AWEB, but also because the average reading age is 10 in the UK and most of the "guidance" and other information is minimum 15 years and above reading scores. That and the closure of the local Enquiry offices that could give practical help on the increasingly complex tax system, the recruitment of call centre staff on £12,500 a year and no minimum qualifications working to scripts, the rapidly reducing numbers of experienced tax and VAT officers (baby boomers). Makes you want to weep somedays.

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By SteveHa
05th Apr 2017 12:47

Of course, the first line of protest is to simply not volunteer for the pilot. If no-one volunteers they simply can't pilot the system in the first place, and they may get a clue that no-one but HMRC is actually interested in this steaming pile of detritus.

Thanks (3)
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By tedbuck
05th Apr 2017 12:48

Now that the ICAEW has 'rebranded' itself could its first action to establish itself as the 'Super Brand' be to shout very loudly and publicly in the Chancellor's ear that this ludicrous idea will just stifle initiative and waste everyone's time and for what? Just some additional and largely useless data which no-one will have time to look at. Another RTI exercise!

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By Ang
05th Apr 2017 12:48

Somewhere along the line, Government/HMRC has forgotten the promise to reduce red tape for small business. The Flat rate VAT scheme was introduced to do just that, which Mr Hammond has swept away completely ignoring why it was introduced. On line tax reporting was introduced in the early 2000's to make life easier for everybody and now with complete disregard for that that has been multiplied by 5 times. Most self employed or one man Limited Companies require Accountants or Agents to complete their tax returns so not only have HMRC increased the time required to do this work 5 times but in many cases the cost will increase 5 times.

So come on HMRC where is the help for small businesses in all this. Loctus is quite right about one return and declaration and with tax revenue higher than they have ever been, "if it ain't broke don't change it!" or is this another rouse to increase penalty fines for last reporting. HMRC are very good at that, just a pity we cannot reciprocate that. We had a recent apology from HMRC for taking over 12 months to reply to a letter!! Perhap we should issue a fine invoice to them for £500!!

You just could not make it up!!!!

Digger
Tonbridge

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By tedbuck
05th Apr 2017 12:48

Now that the ICAEW has 'rebranded' itself could its first action to establish itself as the 'Super Brand' be to shout very loudly and publicly in the Chancellor's ear that this ludicrous idea will just stifle initiative and waste everyone's time and for what? Just some additional and largely useless data which no-one will have time to look at. Another RTI exercise!

Thanks (0)
By Nick Graves
05th Apr 2017 13:00

There's a real feeling of a 'conspiracy of silence' around this entire mess - despite the howls of protest, that we cannot get our clients on board because we cannot tell them anything reliable right now.

I'm unsure whether those responsible are suffering form an advanced case of the Dunning Kruger effect, or are actually some sort of Fifth Column hell-bent on crashing the UK economy for reasons unclear.

Yes, we probably need some sort of taxpayers'/tax agent's strike to prevent this from happening, at the risk of incurring wrath/fines etc. We will be compared to Wat Tyler, deplorables, etc, by the fake news meeja.

I'd offer to lead it, but right now, I don't think I could say anything cogent between the tirade of invective I feel like hurling at the "establishment". It'd make a docker blush.

Thanks (1)
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By Homeworker
05th Apr 2017 13:04

So someone who has a sole trade business with a year end of 31st May and also lettings will have to file for the periods 5th July, 5th October, 5th January and 5th April for lettings and 30th August, 30th November, 28th February and 30th May, plus the extra end of year filings! So much for holidays!

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By leon0001
05th Apr 2017 13:06

Well, they have gone from Making Tax Difficult to:

Making Tax Daft.

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By KIKISROSSIDES
05th Apr 2017 13:13

On top of all that the government that is supposed to be on the side to the small business is now thinking of abolishing contracting!!! Mrs May you are not getting another vote from me!

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Sparkly Orange
By Sparkly
05th Apr 2017 13:23

OMG! I have lots of clients that are in a Partnership, have a separate sole trade and letting income so I make that 16 submissions for those clients per year. HMRC won't make a penny more out of them (I doubt we will either!)

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By Elvis11
05th Apr 2017 13:24

Just when you think that the MTD proposals can't get any more ridiculous, they do. So as I understand it, my self employed clients (non VAT registered) with rental income will now be required to make 11 returns a year instead of 1 and this will save them time and money.
There will be a major political storm about this in due course and in the end the Government will be forced to back down. Look at how quickly they caved in on the Class 4 NI increase. If you multiply that storm by a factor of about ten then you'll be near the level of outrage that will result from these indefensible proposals.
I have recently sent a single page circular to all my affected clients explaining the MTD proposals. As expected, many clients have reacted with horror and I have provided pro forma letters for them to complete and send to their Members of Parliament to highlight just how damaging MTD will be for them. I have had a good take up from clients in relation to this and I believe this is what all accountants should be doing in order to start building some resistance.

Thanks (4)
Tornado
By Tornado
05th Apr 2017 13:42

This thread includes a lot more posts than usual from people who are only just realising exactly what horrors MTD will bring if allowed to go ahead in its present proposed format.

I cannot decide if the Government are deliberately keeping quite about this so that by the time the general public realise what is going on, it will be too late ... or are they just incompetent ?

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Replying to Tornado:
By DotasScandalDotOrg
05th Apr 2017 13:51

c/ All of the above!

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Replying to Tornado:
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By johnjenkins
05th Apr 2017 14:01

Not only have I noticed this also but the tone of the comments are becoming almost revolutionary. Pity our bodies aren't taking the same attitude.
The Government clearly don't want to admit wasting £1.3b especially if they are going to have to find a few £b's for brexit.
TM and co are treading on very dodgy ground if they just rely on an inept Labour Party to win the next election.

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Replying to Tornado:
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By Ammie
05th Apr 2017 15:14

Isn't that how government slip in legislation they do not want resistance to?

Quietly, quietly in the still of the night. By the time the small print is publicised it's set in stone.

They look like and behave like buffoons but it's how they get to do what they want.

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By Terry Hyman
05th Apr 2017 13:59

The more I have seen the responses to MTD on AWEB the more I am convinced that we practitioners need to join together and make our presence felt in Parliament. I doubt that the Government understands the anger that MTD is causing, even though the House of Lords report is out there for all to see.
As extensive as that report is, it still does not go the full distance in covering our dismay and outrage at these preposterous proposals.
I am sure that HMRC are laughing their heads off at our inadequate response to their disgraceful abuse of power.
I am seriously proposing that an Accountancy Profession Action Group (APAG) be formed with the sole object of getting MTD abolished.
Without this action being taken a huge section of the accountancy profession will be destroyed - not yet perhaps, but within a few years. Not to mention our clients who may well suffer the same fate.
I hope these comments are seen by Prof. Richard Murphy, whose support and leadership we need.
If any organisations representing small, or even larger businesses wish to join this crusade, for that is what it is, all the better.

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Replying to Terry Hyman:
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By johnjenkins
05th Apr 2017 14:06

Can I be the one who pulls out Gauk's fingernails or nails his hands to the chair?
Seriously I'm in, but I think making it voluntary rather than mandatory would stand a better chance of achievement.

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Replying to johnjenkins:
By DotasScandalDotOrg
05th Apr 2017 14:28

johnjenkins wrote:

Can I be the one who pulls out Gauk's fingernails or nails his hands to the chair?

Nope, that spot's taken, sorry! We were there first ;-)

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Replying to Terry Hyman:
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By david wilks
05th Apr 2017 14:31

I'm in.

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By SpreadsheetUser
05th Apr 2017 14:02

I've emailed my MP and given him the link to this page.
I said if he though the backlash to NI was bad, wait for the backlash to MTD when Joe Public cotton on.
I also asked what happened to Theresa May's concern about JAMs, because there are many self-employed JAMs who will be affected by this

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By michaelblake
05th Apr 2017 14:20

Rebecca

Is it still the case that owners of more than one let property will have to report financial information for each property separately?

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Replying to michaelblake:
Head of woman
By Rebecca Cave
05th Apr 2017 14:44

No. Property income will be reported per each property business (UK business or overseas business), but the address of each let property must be recorded.

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By michaelblake
05th Apr 2017 14:20

Rebecca

Is it still the case that owners of more than one let property will have to report financial information for each property separately?

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joe
By Smokoe Joe
05th Apr 2017 14:31

Can we not start a class action under article 8 of Human Rights Act 1988?

Article 8
Right to respect for private and family life

1Everyone has the right to respect for his private and family life, his home and his correspondence.
2There shall be no interference by a public authority with the exercise of this right except such as is in accordance with the law and is necessary in a democratic society in the interests of national security, public safety or the economic well-being of the country, for the prevention of disorder or crime, for the protection of health or morals, or for the protection of the rights and freedoms of others.

I for one fail to see how the government has demonstrated that these changes fulfill the criteria stated in 2, i.e. the economic well being of the country (the country mind, not HMRC!) and as such breach this article.

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By The Black Knight
05th Apr 2017 14:35

How is this simplification? I'm not sure my records will keep up with this pace. And how are we going to cope with the extra workload this will present.
perhaps HMRC are clever and will know that the compliant must be fiddling? Utter madness.
Could be the end of small business full stop. Who has the time or money to cope with this instead of doing what you do to earn money? Some clients have been using computerised records for 20 yaers and have still not got it any where near right. I suppose we ought to be grateful for the extra fees. This really is a step backwards.

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By johnjenkins
05th Apr 2017 14:50

Come on own up. Which one of you lot has now got Ruth in their practice.

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By johnjenkins
05th Apr 2017 14:50

Come on own up. Which one of you lot has now got Ruth in their practice.

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By DotasScandalDotOrg
05th Apr 2017 15:38

To those professionals who discover the extent of the implications of MTD and are in total "but but but...!! they are supposed to be the party of small business!" stupor, just a reminder: because a politician states he will do "A" because of "B", doesn't mean that "B" is the actual driver. Also, because someone carries a party card with "Conservatives" on it doesn't mean he's a conservative.
I don't think there are many left at this stage to argue against the evidence that MTD, as many other policies pushed by the Treasury, existes solely to advance private special interests using public money.
As a rule of thumb: always disregard all they say, look at what they do, as ask yourself: "Cui bono?".

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