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Prepare for MTD impact and costs now

17th Oct 2016
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Making Tax Digital (MTD) is the most pressing issue to hit the profession in a generation. Given the ambitious timescale, accountants need to figure out how it’s likely to affect clients in terms of costs and technology, and what they can do now to prepare.

AccountingWEB looked at the potential impact on accounting practices along with some practical guidance and advice for accountants concerned about adapting to MTD.

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Many accountants have been frustrated with the lack of certainty, timescales and scope of the MTD initiative, but while there have been widespread calls for a delay, the move to a digital tax system is happening and accountants need to deal with it.

According to Paul Bulpitt, co-founder of The Wow Company and head of accounting at Xero, accounting and bookkeeping firms need to take stock and start making plans.

Along with participating in the consultation process, Bulpitt said there were three main things accountants can do to prepare: “First of all profile your client base, figure out which of your clients are using online accounting software and identify clients that are either using spreadsheets or the ones that come and dump a box of receipts once a year. Have a targeted strategy and segment your client list.

“Then you need to figure out your service offering, so if you now have to engage with small clients four times a year what does that service look like? Re-define your service offering. The biggest risk is if you don’t re-define your offering and you get inundated with client work that you don’t get paid for,” Bulpitt said.

His final point was on the importance of digital skills: “There are a lot of people without digital skills. Firms will need to up skill  staff and teach them to be able to train clients. It’s about up skilling internally, but then being able to pass on that education to clients,” Bulpitt said.

Leading accountant on the burden of MTD

Practice Excellence Awards winner Graham Lamont, of accounting firm Lamont Pridmore, recently worked out the possible cost of MTD to small businesses.

HMRC had previously suggested that MTD would reduce the administrative burden on businesses by £400m. However, following an assessment of the proposals Lamont estimated that 2.6 million small businesses are likely to face costs of more £1,250 a year as part of the MTD plans, meaning the SME sector will face a bill of £3.25bn a year following full MTD implementation.

According to Lamont Pridmore, the £1,250 a year figure will be as a result of spending on accountancy costs and software fees.

Graham Lamont said that the shift to MTD will also require businesses to have a working knowledge of not only tax legislation but also some fundamental principles of accounting, including the difference between income receipts and capital receipts; receipts that are taxable and those that are not; capital receipts that are taxable and those that are not; expenditure that is tax deductible and expenditure that is not; tax allowances and reliefs including private use restrictions; revenue expenditure versus capital expenditure together with their tax treatment; and understand prepayments and accruals when preparing accounts or returns.

He added that much more detailed recordkeeping will be needed to prepare accurate quarterly tax returns.

Given all of this, Paul Bulpitt added that while MTD is tough on small businesses, accountants could see MTD as an opportunity: “It’s a chance to work more closely with clients and help them through all of this,” he said.

AccountingWEB members have also been looking at MTD cost and valuation issues on Any Answers, including a thread called ‘Valuing a practice in this new world of MTD

The original poster’s view was that MTD would be a sufficient justification for bidding at the lower end of market for a practice in a post-MTD world.

However AccountingWEB member Duggimon replied that a practice can be more or less equipped to deal with MTD when it does come along: “If they already have a significant proportion of clients on digital bookkeeping systems and working well on them then I would consider that a benefit that would add value, you can't just say ‘well the profession has a challenge ahead so all practices are now worth less’, some will benefit from MTD.”

In many other posts AccountingWEB members have talked about the anticipated extra workloads, but so far conversation has been quiet in terms of itemised costs to clients.

How does Lamont Pridmore’s workload estimate match with yours? What would you estimate the average and culminate cost will be on your client base? What approach or strategy are you taking to MTD?

The MTD consultation period ends on 7 November 2016.

Replies (58)

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By ireallyshouldknowthisbut
17th Oct 2016 15:10

I disagree entirely.

Right now we do nothing, expect communicate to clients "this might happen - or the government might yet make a significant climb down"

As far as I can see HMRC simply cant dictate how bookkeeping happens at the ground level. Cant happen, as accountants can interject a "compliant" system between the clients chosen method and what is filed, which can use "day books" to cover whole swathes of data. So if johny the window cleaner keeps a little red book of what is being paid, and drop that off to his accountant, the accountant can create a quarterly sales transaction. HMRC cant force Johnny to fart about creating invoices in the cloud.

Moreover the quarterly data is not actually used for anything, so quality is irrelevant.

Now is not the time to be jumping into using software that may be unsuitable for a given client, you should still be advising on what is best for the business.

Thanks (35)
Jonathan@Aiteo
By [email protected]
17th Oct 2016 17:44

A lot of the talk (rightly so) is about the gargantuan task of moving a not insubstantial millions of small businesses to digital book-keeping - but I'm not sure quite how much we've all grasped that it's not simply about this. (Maybe it's just me - slow and steady etc.).

HMRC is also expecting business users to have digital book-keeping AND a digital tax return all rolled into one platform.

Just a quote from the HMRC condoc 'Bringing business tax into the digital age' to illustrate this point:

"Once a business’s software has compiled the relevant data, they will feed it – via the updates – directly into HMRC systems, *eliminating the distinct step of transposing data from their accounting records to a separate tax filing product*." (my emphasis)

So under these proposals, the digital software will have to cope with personal allowances, disallowable expenditure, capital allowances, AIA [insert every variant under the sun here]... etc. There is not a single system on the market at present that can do this end to end.

Am I over-thinking this?

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Replying to [email protected]:
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By North East Accountant
19th Oct 2016 10:53

Jonathan-AT-Aiteo wrote:

A lot of the talk (rightly so) is about the gargantuan task of moving a not insubstantial millions of small businesses to digital book-keeping - but I'm not sure quite how much we've all grasped that it's not simply about this. (Maybe it's just me - slow and steady etc.).

HMRC is also expecting business users to have digital book-keeping AND a digital tax return all rolled into one platform.

Just a quote from the HMRC condoc 'Bringing business tax into the digital age' to illustrate this point:

"Once a business’s software has compiled the relevant data, they will feed it – via the updates – directly into HMRC systems, *eliminating the distinct step of transposing data from their accounting records to a separate tax filing product*." (my emphasis)

So under these proposals, the digital software will have to cope with personal allowances, disallowable expenditure, capital allowances, AIA [insert every variant under the sun here]... etc. There is not a single system on the market at present that can do this end to end.

Am I over-thinking this?

No you are not and correct that there is not a product on the market which can do it end to end.

Over to you software companies, who will be first?

We use Sage but am looking at whole market and whether to move to another. One that can deliver on the above would be very attractive, and not just to me I would guess.

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Adrian Pearson
By Adrian Pearson
17th Oct 2016 22:17

"First of all profile your client base, figure out which of your clients are using online accounting software ..."

Desktop accounting software does still exist and would be a significant part of many firms' client base profile right now.

Just saying ...

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Chris M
By mr. mischief
18th Oct 2016 08:36

What I am doing right now with my clients and in the Chamber of Trade, FSB meetings and the local paper is saying:

1. How would you like to do 5 tax returns per year instead of 1?

2. How would you like the first one to be 18 months earlier than the current deadline?

3. Would you like to be forced to use software which has not been defined?

4. Would you like to be forced not to be able to use a spreadsheet because that has been defined as "not software"?

The FSB are fighting this load of drivel and so am I. I will cope fine if it is implemented and in fact see an extra 15% or so in higher profits for my business. But unlike Xero and the other craven self-interested shills I am fighting this drivel with everything I have, I've written to my MP and TreasComm and Hammond is next.

I am putting my clients' needs before my own selfish economic needs. Some of them will really struggle with this. And most of the software is pants I am afraid, including - very much including - Xero.

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Replying to mr. mischief:
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By Alanpryan
19th Oct 2016 10:44

Xero is dreadful - and I see they are sponsoring this article.
A lot of self-interested software developers pushing this with not a clue as to the implications to small businesses and the fact that a large proportion of them will never be able to cope with this!

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By mrme89
18th Oct 2016 09:15

I've read a lot on MTD. I'm astounded that so many 'experts' that have never seen ground level know so much more than us. To the point that they are telling us what we should be doing, how we should be doing it, and when we should be doing it.

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Hallerud at Easter
By DJKL
18th Oct 2016 09:57

Well, it does appear, as the original post makes clear, that upskilling is the key (however ghastly an expression upskilling may be)

With this in mind I have compiled a list for my necessary training progression:

1. Play a lot of snooker to increase maximum break ever achieved-winter months are long and 27 is frankly embarrassing.

2. Start exercise regime so that a few Munros and Corbetts can be challenged in summer months- a walk to and from the pub each evening ought to suffice.

In addition, as an action plan:

1. Closely examine the list of Edinburgh University Open Learning courses to select one or two to be taken- need to consult with other half as to whether both taking same course at same time might precipitate a swift divorce.

2. Nudge offspring out of family home so we can sell and buy a two bedroom flat in the New Town- having only one spare bedroom will wake them up to the fact that more of an effort is needed by both of them to compete to be our favourite child.

3. Acquire a Tweed jacket and start wearing it in.

4.Whilst we still have the garden take all papers/books etc down from my study; November 5th is not long now so no time to lose.

Frankly HMG timing is not ideal, I really would prefer 2020 as other half gets her pension then ,with no adjustment, but if we have to go a little early, so be it.

Thanks (15)
Replying to DJKL:
7om
By Tom 7000
19th Oct 2016 12:40

1. Play a lot of snooker to increase maximum break ever achieved-winter months are long and 27 is frankly embarrassing.

You are good - I am not playing you for money....

Thats got to be 5 balls in a row at least....hustler...

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Stepurhan
By stepurhan
18th Oct 2016 10:20

How have Lamont Pridmore arrived at the figure of £1,250? Is that for all small businesses, or will that vary with size? If variable, how? Is Lamont Pridmore expecting businesses to do everything themselves? If not, why do they assert that business people will need a deeper understanding of accounts and tax? So many questions, so few answers.

As an aside, you were talking to Graham Lamont, but repeatedly treat Pridmore as the person you were speaking to.

We still know none of the detail about MTD, which makes it impossible to plan for. At most we can work out which clients don't have digital records, but we can't advise them to go digital now.

We don't know if MTD will go ahead, and we don't know what cheap/free options will be available if it does. There is even talk of permitting spreadsheets under MTD, likely a zero cost option for many small businesses. Anyone that advises clients now to go on to an expensive cloud accounting package is looking at being sued.

So this is another meaningless MTD article where two people get to promote their business names.

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Chris M
By mr. mischief
18th Oct 2016 11:21

Have I been blocked?

Thanks (1)
Replying to mr. mischief:
Hallerud at Easter
By DJKL
18th Oct 2016 11:25

mr. mischief wrote:

Have I been blocked?

You appear to still be in the land of the living and not consigned to purgatory.

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Chris M
By mr. mischief
18th Oct 2016 11:42

I am trying to post a perfectly simple reply explaining how I will be 10% to 15% ahead on MTD but this stupid site software is blocking it.

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By Robert Lovell
18th Oct 2016 12:53

Lamont Pridmore’s accountancy fee costing is based on producing monthly and quarterly financial accounts for clients.

The process includes:
• Quality and accuracy checks including:
• Checking cut-off procedures between purchases and stock value
• Checking cut-off procedures between sales and stock value
• Checking cut-off procedures between sales and work-in-progress on contracts for sale
• Checking prepayments including deposits for future work/bookings
• Checking accrued expenditure or accrued purchases where no invoices have been received yet
• Checking for expenditure that is not tax deductible e.g. private use or customer entertainment
• Checking receipts that are not taxable
• Checking for reasonableness and appropriate gross profit and expected financial results
• Checking for receipts that are capital in nature and not taxable
• Checking for capital expenditure that is not deductible for tax purposes
• Checking for capital expenditure that is tax deductible and at what rate
• Checking motor vehicle expenditure to ensure the correct tax treatment
• Checking dividend payments, directors loan repayments and salary levels of directors to ensure correct accounting treatment
• Checking personal expenditure to ensure correct accounting treatment
• Checking directors loan balances to check on credit or overdrawn balance positions for tax purposes
• Checking the capital allowance pool brought forward
• Checking the qualifying capital allowance between, equipment, cars, qualifying vans/commercial vehicles, short-life assets, etc.
• Taxation calculation based upon the above

The results would then be reviewed by a senior manager or partner to ensure that the results are correct before issuing the figures to the public (quality control expected under practice assurance).

“The cost of £1,250 is our best estimate of this quarterly process to ensure that the quarterly results are accurate and that tax estimated liability is correct,” said Graham Lamont.

Around £250 of the £1,250 cost would go towards the cost of the software.

Is the £1,250 in the right sort of range? What would be your practice’s cost estimate?

Thanks (4)
Replying to robertlovell:
David Ross
By davidross
19th Oct 2016 11:13

What a load of nonsense

Thanks (2)
Stepurhan
By stepurhan
18th Oct 2016 14:09

Of the few details that have been made available, the following seem relevant.

1) That the quarterly figures will not be used for anything in year.

2) That there will be a final return to reconcile the figures at the end.

So Lamont Pridmore's approach to the quarterly figures seems way over the top. Unless our clients want more, we should be looking at compiling the quarterly figures as quickly as possible to minimise the extra cost. Doing extra work every quarter which no-one wants is just [***] clients over.

Do you know where they are getting their £250 figure for software from? (I am assuming the fees for an existing cloud package). After all, HMRC have "promised" that free software will be available. Is this a tacit acknowledgement that, unless HMRC themselves supply such an option, they cannot fulfill that promise?

Thanks (1)
Chris M
By mr. mischief
18th Oct 2016 15:54

My own figures of 10% to 15% are based on what I consider to be reasonable assumptions, such as that my software of choice - VT - will make the MTD cut.

In my view, basing estimates on any sort of woolly promises made by HMRC are just pie in the sky. Estimates should be based on current software in the market, and it is reasonable I think to assume it will meet the HMRC definition of software whenever they see fit to share that.

This whole thread highlights what an absolute [***]'s muddle MTD already is. Going forward if they carry on at full speed ahead then I expect icebergs to be holing the RMS Making Tax Digital, with not enough lifebelts available for the people who need rescuing.

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Chris M
By mr. mischief
18th Oct 2016 19:15

I think I have done my bit now. I've written to my MP, the Treasury Select Committee and the Chancellor - with the general principles I've set out on this site plus 4 specific case studies. I've never done any writing to MPs or anything like that in my life before.

But MTD is just bonkers beyond belief!

Thanks (9)
By ireallyshouldknowthisbut
19th Oct 2016 09:47

Re costs for quarterly accounts that is entirely dependent on:

1. The size of the business
2. Quality of records
3. What the management want to see on them.

Only one of my clients needs quarterly accounts, and only as there are 4 director shareholders and they need a dividend paid each Q. We take the output from their software, dump it into a spreadsheet, argue the toss on the adjustments and bang out a number as rolling YTD, cut down 20% and declare a dividend, and mop up at the year end with a proper cut off. Takes amount an hour or two. its a small ish company £2million turnover 11 empoyees.

Under MTD, we would just slam in the "unfiltered' data from the system, our adjustments for the dividend are not going to get entered, they are for management purposes only. HMRC can whistle if we are spending further time making reversing journal entires etc in the system for accrual/prepayents and all the rest for data they are not going to use. We dont need HMRC to tell the client what their tax bill might be, we do that. We are their accountants after all.

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By accountright
19th Oct 2016 10:27

I too have written to my MP (Mr Headinthesand-towthepartyline)
I have also written to Mr Hammond, Theresa May, Panorama and the BBC News desk.
I have taken part in the HMRC webinars and one of my questions to HMRC was "what about accounting standards" - the reply was "what are they"
Apparently the whole idea of Making Tax Difficult came from some Intern working at the Treasury and used this for his/her thesis - George Osbourne thought it was a good idea - say no more!
In my opinion (others are available!) this idea is 20 years too early.
my next course of action is to RETIRE as you just know this is all going to end up an absolute shambles
Polly

Thanks (10)
Replying to accountright:
David Ross
By davidross
19th Oct 2016 11:17

Perhaps not as much as 20 years too early (see how far we have come from 1996), but I agree that it is jumping the gun.

However .... throwing the problem to commercial software providers to sort out is brilliant. Government in the past has messed up all its technology projects. Using the talents of the marketplace is smart thinking, and who knows, we may get a pleasant surprise!

Thanks (1)
Replying to accountright:
By Nick Graves
19th Oct 2016 11:25

accountright wrote:

I too have written to my MP (Mr Headinthesand-towthepartyline)
I have also written to Mr Hammond, Theresa May, Panorama and the BBC News desk.
I have taken part in the HMRC webinars and one of my questions to HMRC was "what about accounting standards" - the reply was "what are they"
Apparently the whole idea of Making Tax Difficult came from some Intern working at the Treasury and used this for his/her thesis - George Osbourne thought it was a good idea - say no more!
In my opinion (others are available!) this idea is 20 years too early.
my next course of action is to RETIRE as you just know this is all going to end up an absolute shambles
Polly

Really troo?

I always said this whole hare-brained idea was dreamed up by some embryonic twat[***] with no experience of The Real World at all.

I was possibly incorrect and it was actually a joke meant to be an oblique comment on the competence of The Establishment, which spectacularly backfired on the person...

I love the way some of these Software Houses are rubbing their hands (at least) with glee over Making Tax Disintegrate. Perhaps they ought to spend more time realising the enormity of the task before them, rather than wasting time writing empty-buzzworded marketing spiel...

Thanks (3)
Replying to accountright:
The triggle is a distant cousin of the squonk (pictured)
By Triggle
20th Oct 2016 08:52

accountright wrote:

Apparently the whole idea of Making Tax Difficult came from some Intern working at the Treasury and used this for his/her thesis - George Osbourne thought it was a good idea - say no more!

No. HMRC sold most of their premises to an offshore company in 2002 and leased them back on cheap 20 year leases. They don't now have the money to renew the leases as the rents will go up in circa 2020. Hence, shut all the tax offices and get the plebs to do the work.

https://www.theguardian.com/commentisfree/2010/apr/08/revenue-tax-offsho...

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By CJaneH
19th Oct 2016 10:28

I note that that the article estimates extra cost per business as £1,250. Most of my fees are will below that, most people £250 to £500 per annum. So my low income small business clients will be willing to pay 5 times as much!!!!

Thanks (6)
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By youngloch
19th Oct 2016 11:21

OK, this is long but you asked what strategy we are adopting....

I would estimate that probably 15% of our clients deal with their own bookkeeping in some way. Of that 15% only half I would say do anything like a good job. Of that 7.5% maybe 2% use software....

However, the 85% that we do everything for are already using some kind of software whether it be spreadsheets or a full package.

My thinking right now is:

1. Don't panic - I confess I have had my accountant type silent mental breakdown that no-one knew about as the potential change of MTD slowly dawned. I snapped out of it by beginning our transition to the cloud - one step at a time but I accept it is the way ahead so my eyes are open.

2. Look at the largest clients who are using software (us or them makes no difference) and move them to online within the next 12 months. One of the main reasons for this is that my staff are then becoming more and more comfortable with it and being in control of the software and knowing how WE can make it do what WE want it to do is vital.

3. Ensure that businesses that are best suited to being Limited are limited. Normally it's only the smallest that are self-employed but I'm noticing more than ever the ones that aren't but perhaps should be. I think MTD will encourage more incorporation in the short-term and, as such, helps spread the workload in terms of the year end final submission once companies join MTD.

4. Make clients aware of MTD in a gentle controlled manner. Let them know we are slowly piecing together a plan. Identify the abilities of clients and make sure that the way we work together is as efficient as possible - a client doing something that they didn't do before is better than keeping the status quo. That might even just be that they sort their receipts better between business and personal.... More constructively identify the ones who use their personal accounts for business and get it separated! Bankstream will be great if only the client can be trained to use a business account for all business transactions and personal account for personal. Try to encourage them to stop using cash (HMRC's master plan one day no doubt).

5. Start making the suggestion that clients who do not currently use software consider doing so. Not for them to do the whole thing (because most don't want to or just plain can't) but they may be able to do their invoicing and record their bankings - dipping the toe in the water is a less scary option and also makes sure we remain firmly in the loop as the worse case is a client who jumps right in and then we get to see it after they've done 4 quarterly filings and the whole thing looks a complete and utter mess (which we all know is exactly what will happen).

6. Let the clients know we work as a team - us and them - they won't like MTD and right now we don't like the idea of MTD either. If there was ever a time when clients needed support it's now.

7. Imagine what the office needs to look like when this comes online. In my mind that means we will have one or two more staff so we need to create more deskspace. We'll likely be looking to services like Bankstream, perhaps Dropbox folders with clients but most likely it will be 4 carrier bags a year so that's a lot more admin time re-training clients.

8. Do I see spreadsheets disappearing - absolutely not! Even now Quickbooks online and others are able to accept import of data from a spreadsheet and I think this is likely to be the way a lot of this develops. Software companies, including TaxCalc, are understanding the issues in the real world and those that find a way of satisfying HMRC with as little disruption as possible to us, accountants looking after very small businesses, will succeed!

9. Do I see fees increasing, probably. Will they be doubling - no not at all. This has to be part of the hard-sell to clients, if they help and do some themselves (which of course we will have to review/correct) then best scenario fees stay around the same or increases are controlled.

Overall our larger more substantial clients could be doing this now - not an issue as worse case we just switch them to an online package. The quarterly write up is already happening and it's the fact that it's a quarterly experience already which makes it do-able. Remember HMRC have already said that it's only the final year end submission (Q4 plus 9 months) that is the submission they can penalise a taxpayer on for errors... which can only make people ask "why do it then!?"

It's the smallest ones e.g. anyone not VAT registered, that we have to drag in once a year after half a dozen reminders that's the issue.

and finally the old chestnut that 30 days after quarter end is just not a realistic window.

Best idea in my opinion?! Introduce MTD and the use of software but make the interim submissions during the year voluntary! If taxpayers think think this is such a good idea they'll do it anyway won't they?

Oh I'm sorry, I forgot, that would require some common sense to be introduced to the discussion

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By Ian McTernan CTA
19th Oct 2016 11:21

How to do quarterly returns:

Step One: divide last year's income, total expenses and net profit by four.

Step Two: Enter those three figures into whatever reporting system HMRC have decided everyone must use.

£1250 additional cost?

Taxpayers learning how to do accounts, deductibles, etc?

Dream on. Client have tax consultants and accountants for a reason- they have NO INTEREST in doing it themselves and aren't going to learn just because HMRC thinks it's a good idea.

STEP 3: prepare and file actual figures when the client drops off the usual package after the year end. Neat year, repeat step one.

Anyone in HMRC or in software companies that thinks even a minority of small and micro business clients are going to jump into cloud software and do things quarterly have their heads firmly shoved up their cloud.

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Replying to Ian McTernan CTA:
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By accountright
19th Oct 2016 11:30

HMRC have been using that system for years, although only bi-annually and calling it payments on account.
Like your thinking and yes, a cost effective solution to the whole nutty proposal

Thanks (3)
Replying to Ian McTernan CTA:
7om
By Tom 7000
19th Oct 2016 12:45

Step One: divide last year's income, total expenses and net profit by four.

Step Two: Enter those three figures into whatever reporting system HMRC have decided everyone must use.

Is that official Institute of CTA policy or perhaps a smidgen unethical?

Thanks (1)
David Ross
By davidross
19th Oct 2016 11:29

As a 60 year old next week, in practice 32 years and a one-man-band, I see MTD as a big opportunity. It could be a disaster, but it is my choice whether I let it.

I have relationships with some clients going back 30+ years and the way we work together, and the way I charge fees, is well established. MTD forcing change means I can/must 'purify the customer list'.

For many of course who are not caught by Quarterly Accounting it will be business as usual.

For the others I think I will be selling a support service. The best analogy is IT support, where customers pay a fixed monthly amount for the comfort of knowing that someone is monitoring their system and is available for crises. It might be that no intervention is required, but no-one complains about the cost of house insurance when the house does not burn down!

The software company that gives me the ability to include the client-side software in my fee, and to access and maintain client records, will get my business with a relish.

... and I will be dusting off my Dale Carnegie sales training because I will be re-selling myself like crazy to existing customers.

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By johnjenkins
19th Oct 2016 11:37

Robert, I'm afraid this article is "pants".
I don't think the small business will put up with MTD crap. Under 2 years to go (oooh maybe a year extension - why?). Software won't be capable of dealing with it properly for at least another 5 years.
There just isn't any purpose to quarterly figures.
TM is putting the "runway" on hold for 12 months. Perhaps we are in luck and MTD could be put on the back burner.

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By KIKISROSSIDES
19th Oct 2016 11:41

Do you mean to tell me they are still going ahead with this stupidity? Am i glad i shall not be around!!!

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By Ammie
19th Oct 2016 11:53

Another thread geared to "plugging" software providers and spreading anxiety.

Yes, MTD is coming, yes, we need to be thinking about it and yes we need to be mulling over how we are to deal with it, but not all by tomorrow as some may be suggesting, not without the full facts anyway.

I am not convinced HMRC have all the practical answers. There are many many stumbling blocks ahead which, typically, HMRC have not thought about. They will adapt as time goes on, thet will have to.

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By Glenn Martin
19th Oct 2016 12:27

Whilst I respect the resolve of those banging the drum with their MP and a host of other people to try and get this stopped I feel you are all wasting your time.

The Institutes who most will be a member of should fight this battle on our behalf and I for one would not waste my time writing to my MP. I prefer to save that for something may have a chance of getting somewhere.

There is a strong determination at the top of HMRC that this will happen. Those that have to deliver it are probably less positive about it.

Yes HMRC will make a hash of implementing it.
Yes it will end up getting delayed.
Yes clients will twist about it and the extra cost it will bring.

But complain as much as you want, you will not stop it happening so for me you need to start looking at how it can work.

As a new practice I am not overly concerned, I have 2 sole traders and 1 partnership as clients everyone else is either a Ltd Contractor or Smallish company.

Most of which use some form of bookkeeping system.

I suspect at present i will have to pass on a 30% to 40% extra costs to my clients, maybe less if they choose to get involved more.

MTD should not be the driver for your clients to keep better records, they should to for better MI to help them grow, plan for tax bills etc.

Most of my clients are fairly receptive and although they think its a daft system ultimately they will have to comply and will seek to use me at differing levels to deliver it.

I suspect any lobby to stop this will get no where other than maybe delay it a year or 2.

A more practical solution maybe to try and get the exemption pushed up to £30k or £50k maybe VAT threshold turnover business to remain on annual reporting this would then exempt the sole trader taxi driver and window cleaner from the system as it they who will be hit hardest as probably least able to do it themselves or improve their bookkeeping enough to save on cost increases. I suspect this is an achievable goal.

I see practices with a load of Sole trader clients on low fees as the ones who will be affected most.

Fortunately more by luck than anything else I dont fall into that bracket but I know a lot of small accountants who have been trading longer certainly do and I feel their pain.

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By johnjenkins
19th Oct 2016 12:31

It's time for the "Terminator". Arnie are you free? Oh and sort out "Mick and Griff" your end while your about.

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By Oppco
19th Oct 2016 12:51

One thing I'm going to set started with now is to get all my clients to set up Government Gateway accounts.

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By CJaneH
19th Oct 2016 13:38

I went to an HMRC presentation last week in Wolverhampton also attended by two local MPs.
Definitely gave impression MTD coming in regardless of our opinion.

The HMRC chap suggested it would help tax collection by improving tax payers(sorry customers!!!) accuracy because by sending info to HMRC quarterly they would keep more accurate records.

IF HMRC wish to ensure that they collect all the tax they are entitled to they need to.

A Find methods of locating the businesses that not registered.
B When registered traders get behind with their returns chase them earlier and not leave it for 4 yrs. just sending letters out, though it does give rise to large penalties.
C Discover if the registered business's that are not using accountants are submitting returns that are adequate. I rather doubt it from my clients capabilities.
D Monitor some accountants, particularly the unqualified.

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By Gimlet2008
19th Oct 2016 14:08

Do we know when we will know for sure what the proposals are ? (I may be being naive - it may be when they end the "consultation sham") and tell us what is what. I gather there is a telephone service for the Digitally challenged. But I could be being naive about that too. I've tried to avoid their drive by shootings but you have to be pretty alert these days as they come thick and fast...

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By Gimlet2008
19th Oct 2016 14:08

Do we know when we will know for sure what the proposals are ? (I may be being naive - it may be when they end the "consultation sham") and tell us what is what. I gather there is a telephone service for the Digitally challenged. But I could be being naive about that too. I've tried to avoid their drive by shootings but you have to be pretty alert these days as they come thick and fast...

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By Gimlet2008
19th Oct 2016 14:08

Do we know when we will know for sure what the proposals are ? (I may be being naive - it may be when they end the "consultation sham") and tell us what is what. I gather there is a telephone service for the Digitally challenged. But I could be being naive about that too. I've tried to avoid their drive by shootings but you have to be pretty alert these days as they come thick and fast...

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By Gimlet2008
19th Oct 2016 14:08

Do we know when we will know for sure what the proposals are ? (I may be being naive - it may be when they end the "consultation sham") and tell us what is what. I gather there is a telephone service for the Digitally challenged. But I could be being naive about that too. I've tried to avoid their drive by shootings but you have to be pretty alert these days as they come thick and fast...

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By Gimlet2008
19th Oct 2016 14:08

Do we know when we will know for sure what the proposals are ? (I may be being naive - it may be when they end the "consultation sham") and tell us what is what. I gather there is a telephone service for the Digitally challenged. But I could be being naive about that too. I've tried to avoid their drive by shootings but you have to be pretty alert these days as they come thick and fast...

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By Gimlet2008
19th Oct 2016 14:11

Sorry about the multiple postings...digitally challenged. There if I was uploading stuff I would have probably incurred £20,000 of fines by now...Tax world a bit different than when I started and gentlemen picked up the phone...

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By mr. mischief
19th Oct 2016 14:44

See my other posts on the subject of whether this is coming in. I don't waste my time writing to MPs and the like on no-hoper issues. This is a new Government we have, Hammond is himself an accountant and May and co. have plenty on their plates without taking on a [***]'s muddle in tax thought up by Osborne.

Bear in mind that on a personal level May can't stand Osborne and furthermore there is a definite wish for a change in direction of travel at Treasury, hence Hammond.

Hammond is a very grey guy who is already facing flak from the rabid "Brexit and we don't give a damn if the economy tanks" people. We can make axeing MTD a very easy call for him to make politically.

I actually think it's time the software companies stopped thinking purely about the massive profits they can make if MTD all works, and started focussing on the more likely outcome of the massive hits they will take if it all goes [***] up.

Bear in mind that at this stage in RTI the specification of what was required was much much tighter than where we are now in MTD, which is a significantly more ambitious project.

If I were running one of these software companies I would see MTD as a very real threat to my bottom line, that I will spend a whole lot of effort going down a dead end and have to report the dreaded words BIG WRITE OFF to my shareholders.

Because let me assure you, Xero and co, if it all goes [***] up and hits a big iceberg HMRC will make sure there are not enough lifebelts on the RMS Making Tax Digiatal for you guys.

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By Glenn Martin
19th Oct 2016 15:25

@Gimlet

It depends how you look at it. If the quarterly submission is simply your annual accounts divided by 4 you have just met your full filing obligation for the year and can have the rest of the year off.

Perhaps if HMRC appointed the same IT people who built the new aweb site we would be on easy street.

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By mr. mischief
19th Oct 2016 16:17

Great idea Glenzzy. Can the Aweb moderator please pass on the details of the Aweb designers to Philip Hammond under "highly recommended" ?

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By 0098087
19th Oct 2016 16:00

My taxi driver client who writes his book each week does not use a computer and has no idea. How are we supposed to sign him up? And tell him he has to pay more. No chance. govt and HMRC living in a dreamworld, totally.

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By lucy butler
19th Oct 2016 18:38

This is not an opportunity for my small practice, this is the loss of half my client base as they decide it isn't worth the effort anymore. The pressure of Auto-enrolment and the rise in the minimum wage was nearly enough, it simply won't be worth them trading any more. One has to wonder if this is the ultimate goal, to force these people out of self-employment and into the PAYE system.

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By mr. mischief
19th Oct 2016 20:11

I've just done a 5 minute slot at my local Chamber of Trade meeting - 5 tax returns instead of 1, starting 18 months earlier, software only and no spreadsheets, that sort of thing.

It really got their attention! Those who were aware of MTD had no idea this was the sort of idiotic drivel that was coming their way.

I really think that if we all get out there and tell small business owners the truth about Making Tax Diabolical we can kill off this ship before it hits the iceberg.

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By allenlunn
20th Oct 2016 10:05

One of the most important aspects of clients not embracing MTD is nerviness, anxiety, edginess. In other words - dealing with authority: HMRC for one. When it comes to pressing the key: 'submit button', then tension starts to erupt the nervous system. Utter bewilderment takes place at the reality of e-filing one's own income and expenditure accounts, on a regular basis. "Was it right or was it wrong?" I cannot see Mr and Mrs Right even attempting this?

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By johnjenkins
20th Oct 2016 10:32

The one you missed out is "common sense". Most clients use it on a daily basis and when they are told they have to submit 5 sets of figures, 4 of which are meaningless they then to get nervous etc.

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