Stripped back MTD delayed until 2020

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John Stokdyk
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AccountingWEB.co.uk
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An HM Treasury statement from Paymaster General Mel Stride this morning confirmed that the requirements for digital quarterly reporting were being stripped back to cover only VAT in a revised roadmap for Making Tax Digital (MTD).

Those above the VAT threshold will have to start filing with MTD-compatible software from April 2019, but small businesses below the threshold “will not be asked to keep digital records, or to update HMRC quarterly, for other taxes until at least 2020,” the Treasury said.

Until today, the government’s public stance was that mandatory quarterly reporting under MTD would come into force from April 2018 for businesses over the VAT threshold that paid income tax. The requirement for all unincorporated businesses to join MTD at the same time was delayed by 12 months as part of the Budget announcements in March.

Introducing MTD under the original timetable was becoming increasingly improbable ever since late April when Theresa May called the general election and sent the civil service into purdah. The MTD clauses were stripped out of the Finance Bill to ensure it could be passed before Parliament dissolved, and the post-election chaos left no time to reintroduce them.

On the software side of the fence, HMRC has continued to work on the infrastructure and data exchange standards to make digital tax filing possible, but progress has been painfully slow. Reports from specialist accountants working in the sector suggest that significant numbers of freelance computer programmers have stopped working for HMRC because of the public sector IR35 rules that were introduced in April.

The MTD pilot scheme started with the new tax year, but only a few of the application programming interfaces are available for commercial software to share data with HMRC’s computers. HMRC is now indicating that these may be ready for testing by December 2017, but that would not leave a suitable gap for testing the system before the original deadline.

As the new financial secretary to the Treasury, Paymaster General Stride inherited responsibility for MTD and has “listened to concerns raised by parliamentarians, in particular the Treasury Select Committee, businesses and professional bodies about the pace of change”, the Treasury said.

As a result, “All businesses and landlords will have at least two years to adapt to the changes before being asked to keep digital records for other taxes,” the Treasury said. Those below the VAT threshold will be able to choose when to move to the new digital system.

Under the revised timetable:

  • Only businesses with a turnover above the VAT threshold (currently £85,000) will have to keep digital records and only for VAT purposes
  • They will only need to do so from 2019
  • Businesses will not be asked to keep digital records or to update HMRC quarterly, for other taxes until at least 2020
  • Small businesses will be able to file digitally on a voluntary basis for other taxes.
MTD timetable

The Treasury thinking - previously explained by numerous AccountingWEB members and professional representatives - is that VAT already requires quarterly returns, no business will need to provide information to HMRC more regularly than they do now.

Making Tax Digital for VAT will go into a public beta test in the spring of 2018 and from April 2019, businesses above the VAT threshold will have to file their VAT returns with MTD-compatible software.

More reactions and analysis to follow

Replies

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13th Jul 2017 14:22

A welcome relief.

Really pleased I haven't spent any time encouraging my clients with t/o below that VAT threshold into using any digital products.

Evolution rather than revolution

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to killer33
14th Jul 2017 14:46

I am in total agreement, killer33

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13th Jul 2017 14:25

It seems like everyone was taken a little by surprise by the announcement. When I asked Xero's Gary Turner about it he commented that while he supported MTD in principle, he has had concerns about the aggressive timetable for its proposed roll-out for some time.

"The decision to rephase it is very welcome, and I applaud HMRC for taking account of the need to do so. It's now up to the software community and the accounting industry to use this extra time to comprehensively engage on how to deliver it," he said.

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By Tornado
to John Stokdyk
13th Jul 2017 14:36

"The decision to rephase it is very welcome, and I applaud HMRC for taking account of the need to do so."

Regrettably I do not give HMRC any applause at all. They have been pushed into this situation due to their own arrogance and stupidity and failure to listen to those that have a better understanding of the situation.

They deserve no praise whatsoever.

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to Tornado
13th Jul 2017 16:14

Tornado wrote:

Regrettably I do not give HMRC any applause at all. They have been pushed into this situation due to their own arrogance and stupidity and failure to listen to those that have a better understanding of the situation.

They deserve no praise whatsoever.

Absolutely! If only HMRC had listened to us in the know, earlier.

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By 0098087
to rockallj
14th Jul 2017 14:32

I still question the need for it for any business. Tax returns are filed online so why do we need this nonsense.

Remember this nonsense was conceived by a Chancellor who wanted HMRC to take over paying PAYE salaries, eg calculating wages and doing the BACS transfers. Never have a seen a government /civil service so out of touch with the real world.

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13th Jul 2017 14:26

Any news on if the information can be imput striaght to HMRC software as now or does it need a software interface

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By Tornado
13th Jul 2017 14:31

What a surprise (not).

AWeb members have debated MTD long and hard and I think even these proposals do not go far enough, but at least there is a chance now of the project succeeding in some form in the long run.

I see this also as a victory for common sense and a reminder to those 'in power' that they work for us, and they are not there to fulfil their own dreams but actually to fulfil ours.

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13th Jul 2017 14:47

I would very much welcome it being voluntary initially. It would enable me to test out softwares as pilot projects on a few clients before making final decisions on what's appropriate for the rest of them.

So - how much money, time and effort has been wasted on all this?

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13th Jul 2017 14:50

"Making Tax Digital for VAT will go into a public beta test in the spring of 2018 and from April 2019, businesses above the VAT threshold will have to file their VAT returns with MTD-compatible software."

Any idea what this gobbledygook means in real, practical terms ?

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to lionofludesch
13th Jul 2017 14:57

To me it sounds like VAT registered business will, from April 2019, have to carry on doing what they do now. How will they cope?

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to lionofludesch
13th Jul 2017 14:59

lionofludesch wrote:

"Making Tax Digital for VAT will go into a public beta test in the spring of 2018 and from April 2019, businesses above the VAT threshold will have to file their VAT returns with MTD-compatible software."

Any idea what this gobbledygook means in real, practical terms ?

The online VAT return will now have a new MTD badge.

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to lionofludesch
14th Jul 2017 09:18

It probably won't work as well as current VAT filing!

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to lisaknowles
14th Jul 2017 10:44

I'm sure it won't.

But that very much depends on what information needs to be extracted from the records.

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By Matrix
13th Jul 2017 15:04

Does businesses include Limited Companies? I have a few using VT but I think VT were developing a submission button so hopefully can use that. The software houses will have invested a lot. Luckily I haven't, so glad clients can carry on keeping their records as they wish.

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13th Jul 2017 15:06

I might be being a bit thick here, but aren't the first and third bullet points in HMRC's press release contradictory?

"only businesses with a turnover above the VAT threshold (currently £85,000) will have to keep digital records and only for VAT purposes"

"businesses will not be asked to keep digital records, or to update HMRC quarterly, for other taxes until at least 2020"

One statement suggests that digital records will not be a requirement for non VAT registered businesses (at any immediate future date). The other alludes to digital records being required for (all) businesses by 2020.

John, can you clarify please?

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By mabzden
to Adrian Pearson
13th Jul 2017 15:33

Businesses will have to keep digital records for VAT purposes (as they almost certainly are doing already), and VAT submissions will switch over to the MTD system (which users won't really notice).

But other taxes will continue as now, both for VAT registered and non-VAT registered business.

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to mabzden
13th Jul 2017 15:45

mabzden wrote:

Businesses will have to keep digital records for VAT purposes (as they almost certainly are doing already)......

Dreamer!!

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to mabzden
13th Jul 2017 18:40

@mabzden so you interpret the first bullet point in the announcement here https://www.gov.uk/government/news/next-steps-on-the-finance-bill-and-ma... the same way as I do: that for non VAT registered businesses, MTD now has no impact.

They (can) continue as they always have done. With paper records if they wish.

?

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By mabzden
to Adrian Pearson
13th Jul 2017 20:03

I almost agree.

Some businesses will be VAT registered but have turnover below the VAT threshold. They will also be unaffected by MTD, despite being VAT registered, as they don't meet the criteria in the first bullet point.

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to mabzden
13th Jul 2017 21:09

Thanks and yes, my wording was not quite precise enough there :)

I'm not sure many of the commentators who are referring to the news today have realised this. Most seem to think that these small businesses fall into the net in 2020.

Let's hope we're right!

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to Adrian Pearson
14th Jul 2017 10:14

It seems clear to me from careful reading of the announcement that businesses with a turnover below the VAT threshold are now fully out of scope for the newly redefined MTD.

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14th Jul 2017 10:35

The point is, however, what is included in turnover.

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to mabzden
14th Jul 2017 10:41

mabzden wrote:

Businesses will have to keep digital records for VAT purposes (as they almost certainly are doing already) ...

You've made the same mistake HMRC made. The vast majority (98%) of my clients do not maintain digital VAT records, they use paper or spreadsheets. So these proposals are still going to impact them.
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By mabzden
to kevinringer
14th Jul 2017 11:20

kevinringer wrote:

The vast majority (98%) of my clients do not maintain digital VAT records, they use paper or spreadsheets.

I think spreadsheets count as digital records? There are some businesses still fumbling around with paper records, but if they have turnover of more than £85K it's maybe not a bad idea to force them to modernise their record keeping.

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to mabzden
14th Jul 2017 12:11

mabzden wrote:

I think spreadsheets count as digital records?


Well, before yesterday they didn't.

Quote:
There are some businesses still fumbling around with paper records, but if they have turnover of more than £85K it's maybe not a bad idea to force them to modernise their record keeping.

The advantage of paper records is that hackers are still working on effective ransomware for these.

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By mabzden
to lionofludesch
14th Jul 2017 11:52

lionofludesch wrote:

Well, before yesterday they didn't.

Er.. yes they did. We've been talking for months about how taxpayers will be able to keep data on spreadsheets and submit MTD summaries to HMRC.

See here for example:
https://www.accountingweb.co.uk/tech/excel/spreadsheets-survive-mtd-cull

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to mabzden
14th Jul 2017 12:13

Quite. The spreadsheets aren't compliant but you can use them to back up the MTD figures which are.

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By mabzden
to lionofludesch
15th Jul 2017 13:31

Lino, the link doesn't prove you were right all along as you seem to be claiming. HMRC has said that using spreadsheets meets the requirements of keeping digital records.

So, in my experience at least, most businesses are keeping their VAT records digitally in some form or another.

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to mabzden
15th Jul 2017 13:43

Well, there we disagree.

Few of my clients use spreadsheets either to be honest.

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By mabzden
to lionofludesch
15th Jul 2017 14:44

If they send you a carrier bag of invoices and receipts, do you then enter their information on a spreadsheet or some other form of digital system? If so, they're keeping digital records.

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By Tornado
to mabzden
15th Jul 2017 14:00

I think there is a misinterpretation of what information HMRC require. I believe that MTD compliant software will send details of ALL transactions to HMRC, not just summary information. No software developer has denied this.

So whilst maintaining spreadsheets is OK, information must be sent to HMRC via MTD compliant software via conversion software that will extract ALL transaction data from the spreadsheet.

There was no further progress made on this idea, mainly because it is impossible to achieve I believe.

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to Tornado
15th Jul 2017 21:17

Transactional data was ruled out under MTD a number of months ago. Only summary numbers will be uploaded to the portal.

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By Tornado
16th Jul 2017 00:59

Jonathan-AT-Aiteo wrote:

Transactional data was ruled out under MTD a number of months ago. Only summary numbers will be uploaded to the portal.

If that was the case, then there would be no need to to use MTD compliant software, just do what most people do now and enter summary figures from whatever accounting system you use into a standard template.

I seem to remember that the answer to the question about what data would be uploaded to HMRC was that it would be summaries Initially.

There is no point in HMRC embracing digital technology if they are not going to make full use of it. There is nothing really difficult about uploading ALL transactions and if the software that we use is as specified by HMRC, and we all have to use it, then HMRC will know for sure that they will be able to look at every transaction of every business.

Thinking in a modern mode, I expect they might be planning to create checking centres with row upon row of people staring at computer screens and studying all accounting transactions of selected businesses. Those businesses that also scan/photograph invoices will make their job much easier.

If I am wrong then someone will say so and provide proof that I am wrong but it all adds up to me that this is an ultimate objective of the MTD project.

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to Tornado
16th Jul 2017 10:21

They can examine every transaction now if they wish.

Make an appointment and visit.

If what you say is true, MTD is just to save HMRC the trouble of getting off their backsides and out in the fresh air occasionally.

Meanwhile, I have a client who sells maintenance contracts for gas appliances. Over 2000 bankings a month, all entered on spreadsheets. He'll need to keep up with the spreadsheets because he uses other columns to keep data which help him manage the business. Will he need to enter 2000+ bankings onto his accounting software or will he be permitted to enter a monthly total - which is what we do now ?

I'll be resisting any demand for change. It's not a reasonable request.

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By Tornado
to lionofludesch
17th Jul 2017 12:21

"If what you say is true, MTD is just to save HMRC the trouble of getting off their backsides and out in the fresh air occasionally."

I think it is a bit more basic than that. With data being transmitted to HMRC in the same specific format by everyone, it will be relatively easy to run that data through analysis programs which can quickly and accurately identify those businesses that do not follow the norm which can then be looked at in more detail by 'artificial intelligence' or even real people dispatched from one of their 13 Ivory Towers from which they expect to be able to run the whole Tax Administration System.

This is not science fiction, the technology exists today and HMRC really are going to operate from just 13 Regional Centres. I believe this is the driving force behind the mandatory use of MTD compliant software, an easy way to deal with masses of data quickly and efficiently with few staff.

Having said that, I don't think this has the faintest idea of working as each business is different and trying to get people to compulsory use 'approved' software and standardise the way they do business will only stifle and kill those businesses In addition, us humans have a talent for neatly getting around problems so HMRC are likely to be fed either the information that they want to see or completely wild and random information, both of which will confuse them even more and achieve nothing. There are myriad other reasons why this will not work, most of which have been discussed at length on AWeb

I also feel sure that Human Rights matters are relevant here. Forcing people do something that they are unable to do surely is a breach of Human Rights. This is not like speed limits or parking rules which are easy to understand by just about everyone. Forcing people to use complex accounting software is a completely different matter.

Evolution of the Tax Administration system by consent of the Stakeholders is acceptable, being bullied into change is most definitely not acceptable and cannot be allowed to happen.

EDIT "In addition, us humans have a talent for neatly getting around problems so HMRC are likely to be fed either the information that they want to see or completely wild and random information, both of which will confuse them even more and achieve nothing. "

I am not suggesting that Accountants or other professionals would do this, but some of those that are not represented might do this either deliberately or innocently.

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16th Jul 2017 10:51

Jonathan-AT-Aiteo wrote:

Transactional data was ruled out under MTD a number of months ago. Only summary numbers will be uploaded to the portal.


Aside from the three line summary for eligible businesses was there ever confirmation of exactly what non eligible businesses were required?
Dave
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By mabzden
to D V Fields
16th Jul 2017 11:35

D V Fields wrote:

Aside from the three line summary for eligible businesses was there ever confirmation of exactly what non eligible businesses were required?

Are you asking what they were required to submit? It was a mini SA103 form every quarter, containing the income and expenses section and using the same categories.

So no transaction data, but there was a requirement to keep the underlying data in digital format.

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to mabzden
16th Jul 2017 11:55

mabzden wrote:

D V Fields wrote:

Aside from the three line summary for eligible businesses was there ever confirmation of exactly what non eligible businesses were required?

Are you asking what they were required to submit? It was a mini SA103 form every quarter, containing the income and expenses section and using the same categories.

So no transaction data, but there was a requirement to keep the underlying data in digital format.

So how pointless was that ? The burden was keeping the records in digital form, not submitting it to HMRC.

What gormless idiots these people are !!

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to lionofludesch
17th Jul 2017 13:31

lionofludesch wrote:

mabzden wrote:

D V Fields wrote:

So no transaction data, but there was a requirement to keep the underlying data in digital format.

So how pointless was that ? The burden was keeping the records in digital form, not submitting it to HMRC.


Confirmation that only the summaries were to be submitted under MTD is https://www.gov.uk/government/uploads/system/uploads/attachment_data/fil... page 33 paragraph number 10.
HMRC wanted the transactions digitising so that the software would "police" how the transactions were accounted for and reduce errors. But this is tosh because look at paragraph 20 on page 20/21: VAT scheme and partial exemption calculations can be done on paper even for MTD! I would say the risk of error is far greater with scheme/partial exemption calculations than individual transactions. I suspect HMRC permitted paper calculations because software can't do them reliably. I've just converted a FRS scheme client on Sage to non-FRS then the following quarter the same non-FRS client went from cash basis to standard. My experience told me Sage was wrong: and sure enough it was. Several calls to Sage support were needed along with numerous manual adjustments. The real problem is the UK tax system: far too complex.
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to mabzden
16th Jul 2017 13:16

mabzden wrote:

D V Fields wrote:

Aside from the three line summary for eligible businesses was there ever confirmation of exactly what non eligible businesses were required to submit (edited)?

Are you asking what they were required to submit? It was a mini SA103 form every quarter, containing the income and expenses section and using the same categories.

Yes, thank you. That was my presumption but I had never found the definitive source that confirmed it.

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to lionofludesch
15th Jul 2017 21:36

Nice one

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to lionofludesch
17th Jul 2017 14:37

And paper records are "technology proof". I have several clients who can no longer access their accounting records from 5 years ago because they've changed their software whereas I've got one client with paper records going back decades which are as accessible today as they were when they were created.

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to mabzden
14th Jul 2017 12:40

"force them to modernise their record keeping"

Why?
Why 'force' anybody to do this?
There's much to be said for paper.
1. the audit trail is less easy to obfuscate
2. the storage medium is not limited by technological advances
3. deletion/destruction is definitive and assured

And whats to 'modernise'?
You are making assumptions about the transaction rates - they might have only one contract for £100k, invoiced in two tranches.

Records include paper receipts that you recieve from your clients in a carrier-bag a few times a year - whats the point of the extra work of transcribing these to digital - even using teh likes of Expensify, you have the same time of work 'cos you need to check the interpretation etc.

Millenials like digital because they can't write, or add - I know that from watching them add up and calculate change in shops. I remember watching an auditor checking some accounts in circa 1958. He went down the the three columns of £.s.d., about 60 lines, and just wrote the total of the three at the bottom, not even the £,s and d cols seperately. I weep when I look at the ill-education and lack of mental agility today.

Thanks (5)
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to dgilmour51
14th Jul 2017 12:35

I could never do all three at once. Always had to do the pence first, then I could do the other two. Yes, I agree, I still prefer paper, although we have everything on VT.

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By hpyatt
to johnjenkins
14th Jul 2017 13:19

I just missed £sd but I can remember being able to just scan the numbers looking for patterns that added up to 10. Then adding on the remnants. Later on I looked for 20's. Then the Olivetti Adding Machine came in and I was f****d. Nowadays I look at a number and promptly forget it 5 seconds later. My mental RAMability has gone from 100TB to 50k just through lack of practice.

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to hpyatt
24th Jul 2017 14:54

In my Revenue days I used to do the 30% and 33% tax calculations and the Class 4 NI just by looking at the assessable figure, and frequently picked up errors people had committed with a calculator.

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By 0098087
to mabzden
14th Jul 2017 14:50

We have quite a few who don't keep digital records.

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to 0098087
14th Jul 2017 15:19

Quite a few who don't ???

I have one who does.

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By GW
13th Jul 2017 15:16

So we are still no closer to having a definition of "digital records".
Where does this leave VAT registered businesses with a turnover under £85,000?

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