The problem with 'Making tax digital'

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The government has launched ‘Making tax digital, outlining its long-term play to digitise the UK tax system. But its ambitions could be too much for small businesses to cope with.

Since the Chancellor’s announcement in March heralding the death of the tax return, HMRC has received a £1.3bn boost to make his digital dream a reality. “This government is bringing the digital revolution to Whitehall – ensuring that the services it provides are similarly transformed. The tax system is no exception,” wrote Treasury secretary David Gauke in the introduction to the latest policy paper.

AccountingWEB member Steve12321 responded in terms that will be very familiar to small business owners and their accountants: “How is it better to have to produce accounts and calculate tax four times a year instead of once?”

He’s not the only person asking the same question. “If you have to update quarterly what will the deadline be? We’re almost going to give the information in real time. It will be impossible to run business because you will always be reporting to HMRC,” said Rebecca Benneyworth.

“Businesses won’t be able to cope. There’s essentially going to be four self assessment deadlines”, continued Benneyworth. “That’s going to be horrific, especially if we lay the existing penalty regime on top of it.” [NB: Since making these comments Benneyworth has been named as HMRC’s lead consultant on digital for small businesses - see belowEd]

Accountant and tax campaigner Richard Murphy also bristled at HMRC’s perceived misunderstanding of accounting. “What HMRC seems to think is that accounting is just an exercise in totting up the books,” Murphy wrote.

“It’s assembling the data to populate the return that takes all the time. HMRC’s claims utterly ignore that fact and want to increase the time-consuming part of the job fourfold. That they do not seemingly understand this is deeply troubling.”

Not all of AccountingWEB’s members were negative, though. “Once it comes in and becomes second nature, I think it might be a positive,” wrote Cstwragby. “Clients will HAVE to give us their records once a quarter rather than this nightmare every December and January chasing up disorganised people to bring in their records.”

“It’s still self assessment,” said SteLacca, referring to page 10 of the ‘Making tax digital’ document, which reads: “Of course, taxpayers will still be responsible for ensuring that their tax bills are right and telling HMRC about information that is not reported through other means. But digital accounts will make this much easier, quicker and simpler.”

On behalf of the software trade body BASDA, chairman Kevin Hart responded: “Yesterday’s document both consolidates numerous separate pieces of information that have entered the public domain and confirmed speculation in the industry with regard to timeframe. It is, however, rather light on detail, such as how the many complexities of tax are to be addressed.”

Hart added that one of BASDA’s primary aims will be to balance the department’s aspirations with the regulatory burden it imposes on the tax/accounting software industry and its customers.

Personal tax accounts

Ahead of the digital strategy paper, HMRC launched the trial version of its newly renamed personal tax account (PTA) on 1 December. The system relies on the GOV.UK Verify identity management system to control access to the system. Verify uses third party companies like Verizon, Experian, the Post Office and a Dutch company called Digidentity to verify the identity of the user.

Set-up is supposed to take 10 minutes, but that flies out of the window as the user faces a series of tricky questions, some not answerable off-hand. In the case of Digidentity, the user needs to download an app to their smartphone.

The service is certainly secure. Steve Checkley, director at TaxCalc, observed on TaxCalc's blog: “The nature of the hoops that I had to jump through would suggest that it could only have been me that was trying to gain access to the account.”

But the worry is that many accountants’ clients could find Verify too difficult to navigate. “Despite providing my passport details, address details, bank account and credit card details, the Experian software also wanted answers to ‘lifestyle’ queries such as my mobile phone supplier/contract,” wrote Hugo Fair on Any Answers. “Not only does this feel invidious… but it brought my attempt to register to a dead end as I’ve never possessed a mobile phone.”

Gauke told delegates at the HMRC stakeholder conference on Monday: “By 2020 HMRC will be a world-leading tax administration that is efficient, effective and easier for customers to use, enabled by £1.3bn of extra investment announced in November’s Autumn Statement.”

HMRC may be ready for its digital revolution, but many normal Britons might not be.

About Francois Badenhorst

Francois

Francois is a writer, editor and broadcaster specialising in business.

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15th Dec 2015 10:38

Seeming ready and thinking they are ready does not mean they are ready and if you go on past performance..........

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15th Dec 2015 11:02

Making Tax Digital

Given the state of HMRC's current performance where they cannot even answer the phone and the number of ridiculous technical problems in the Self Assessment and Corporation return software that I encounter not to mention Basic PAYE Tools, the entire idea fills me with utter apprehension. HMRC wold do much better to kearn to walk before attempting to sprint.

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15th Dec 2015 11:11

Working with HMRC to make this work
My sceptical comments made last week spurred me to offer my help to HMRC to understand the issues for small businesses and better understand the needs of those who are currently digitally excluded. I'm really pleased to say that they have taken me up on the offer, and I will be leading a small group of external people who will help HMRC deliver the proposals with the smallest businesses and their needs in mind. I am still opposed to mandation, but feel that it is very important to ensure that the needs of the smallest businesses and indeed their advisers if they have them, are catered for. Wish me luck!

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15th Dec 2015 11:43

Digital tax accounts

I accept that businesses that are office based and with full accounting software, quarterly reporting might be feasible albeit yet another burden.

However, think of the people who are working away from home in remote locations, for example in the film industry. Probably 6 days a week, 16 hours a day and possibly without internet apart from a once a week return to a base hotel. If they are VAT registered, it will almost certainly be in the Flat Rate Scheme and they will probably be able to access online bank accounts and get remittances electronically - so can cobble together a VAT return that is reasonably accurate. As for their expenses - well that's hardly going to be a priority on their one day off a week.

All of us in the profession know that clients start the year with the best of intentions and then actually running a business and earning a living takes over - so I can see this as nothing other that a government cash cow for more penalties.

The clients would be no more able to do digital tax accounts than they are to do annual accounts - so are they to pay accountants 4 times as much???

Sadly this is the brainchild of salaried office based people working regular hours and getting paid holiday, sick pay etc who have absolutely no idea how hard it is to be self employed. generate the work, get it out on time, get paid for it, do the admin (and no doubt sweep the floor at the same time!!!)

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16th Dec 2015 01:32

CRAZY CRAZY CRAZY

Ye Gods

Why are we actually reading this drivel.Its been knocked up by a person who has Never worked in the real world and thinks all self employed people work in a nice cozy a/c office with Wi Fi at their fingertips

4 times a year .....it will then be 4 nightmares a year....how in the name of SANITY is this an improvement!

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16th Dec 2015 09:22

Its not 4 times a year....and CT61

taxbakbristol wrote:

4 times a year .....it will then be 4 nightmares a year....how in the name of SANITY is this an improvement!

My understanding is not that it is 4 times a year but AT LEAST 4 times a year.

It seems to me that HMRC have been sold a pup by online software companies with vested interests.  Along the same lines as they sell to us  'anyone that uses our software, with its bank feeds and other wizardry will by definition has perfect books and without any additional effort, this perfect information can be transmitted to HMRC'. 

On another note, I foresee that the CT61 process will be revamped so that dividends and interest are reported by the paying company on an RTI basis and so pre-populate individual's digital tax accounts.  It has always struck me as odd that there is no automated process for HMRC to check that dividends paid in a company's accounts tally with the SA returns. I would in fact say that I have never been asked by HMRC to prove the dividend figure.  This is a massive compliance risk.  I also expect to see a similar RTI system for letting agents to report rental income.  You heard it here first folks.

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By Nemesis
15th Dec 2015 13:06

Rebecca - No luck necessary

You will find a way through.

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By DMBAcc
15th Dec 2015 13:24

I use current HMRC Software

Rebecca, having read many comments on this site I know I am not alone in using only HMRC software. Most of my clients are straightforward sole traders.  I have only 4 ltd companies one of which is a housing association of sorts.  I am really concerned that HMRC think it will be relatively simple to pull their software and make us buy commercial software.  The annual charge for me would be more than my fees to these 4 bodies. I live in Cornwall and my clients are some of the poorest in Europe, leave alone the UK. I get angry when I hear so many London/Whitehall based comments which leads me to think that they don't believe that anyone worthwhile lives outside the M25.  Ted Heath, in response to a media hack, once replied that the South West was irrelevant (politically). Sadly the older I get the more I think that is the pervading attitude in Whitehall.  I really do hope you can bring some common sense to this nightmare.  I thought this government was all about individuals being rewarded for working hard.  It seems they simply want us to be good tax collectors.

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15th Dec 2015 18:17

The very best of luck

Thank you for taking the time to represent small businesses, and indeed sole practitioners like myself.

Might I suggest a petition against quarterly reporting to help voice the concerns of what seems to be the majority of the accountancy profession to substantiate the points that you will be trying to get across. Surely Accountants the length and breadth of the country would support it, not to mention all their clients.

(Reply to post by Rebecca Benneyworth)

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By Sparkly
29th Dec 2015 20:55

Good luck!

I wish you all the best and do please feel free to ask for other real experiences of accountants dealing with small businesses some of which don't even use e-mail ! I'm ex-Revenue and now MD in a practice in the North East of Scotland with a diverse client base. I normally embrace change, I loved the introduction of ELS and later FBI but this proposed change troubles me. I can see it working fairly easily for VAT registered clients, but for those "receipts in a bag clients" (often busy farmers) and the small businesses struggling to keep jumping through all the hoops it will be very difficult. 

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30th Dec 2015 17:03

Yes it will be difficult, but

Sparkly wrote:

but for those "receipts in a bag clients" (often busy farmers) and the small businesses struggling to keep jumping through all the hoops it will be very difficult. 

From conversations with various inspectors I think HMRC expects all businesses to write up and 'balance' their records at least quarterly.  Anything less is seen as inadequate.  Therefore, effectively arguing that the new system will fail due to inadequate record keeping by taxpayers, won't carry much weight!

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By Old Greying Accountant
31st Dec 2015 17:12

Might carry little weight ...

Vaughan Blake1 wrote:

Sparkly wrote:

but for those "receipts in a bag clients" (often busy farmers) and the small businesses struggling to keep jumping through all the hoops it will be very difficult. 

From conversations with various inspectors I think HMRC expects all businesses to write up and 'balance' their records at least quarterly.  Anything less is seen as inadequate.  Therefore, effectively arguing that the new system will fail due to inadequate record keeping by taxpayers, won't carry much weight!

... but it will still be the situation.

Just saying something should be done just so doesn't mean it will be.

This is making me really cross, because the small businesses may not have "adequate" records or may not pay the "full" amount of tax they should, but conversely they do not drain the state purse.

This is the wrong response to the wrong target.

 

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30th Dec 2015 19:46

Balancing the books?

We ought to start training HMRC Inspectors in accountancy and treating them to the delights of the various regulatory requirements in accounts preparation.  As we accountants understand, balancing the books is not the same as preparing the accounts.   

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By Sparkly
01st Jan 2016 02:45

It isn't just bookkeeping though is it?

So how will loss relief claims be dealt with? Let's also chuck in Farmer's Averaging claims into the pot too, how will that be dealt with/reviewed, at least quarterly too? Will they be expected to do stock takes/valuations at least quarterly too? There are many businesses with fluctuating busy times, I've only used Farmers as an example of one of them - it would be completely unreasonable of HMRC to insist that bookkeeping was kept bang up to date at all times in every single business. I will again use Farmers, harvest time - and they are working often ridiculous hours to harvest crops against the weather, and HMRC want them to down tractors to write up their books?

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15th Dec 2015 11:46

Verify’s dubious track record

As Steve Checkley indicates, identity assurance has been a troublesome issue for HMRC during the evolution of its digital strategy. The problem of how to accommodate accountancy firms where more than one person might work on a client’s online accounts hasn’t been resolved, but the individual identity system implemented as Veryify also appears not to be operating particularly well.

A few weeks ago the NAO released a review of the common agricultural policy delivery programme that slammed DEFRA for cost overruns amounting to £40m. The government auditors noted: “The department expected applicants to be able to register using the government’s identity assurance system, Verify, from October 2014. Although the Verify team had advised the Department that they would need to make alternative means available to access the service, Verify was not sufficiently ready for widespread use by farmers in October 2014 and no alternative was initially put in place.”

In March 2015, the online application system was withdrawn and replaced by a “paper-assisted” system. Improvements have been made since, leading to some of the 40% cost increases identified within the CAP project by the NAO. But the experiences of a typical taxpayer group - farmers - does not bode well for the wider application of Verify within the HMRC’s new vision.

As one accountant told me this week when hearing the NAO story, “The problem is obvious. Farmers are stuck looking after their farms all the time, so none of them have passports.” 

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By Old Greying Accountant
15th Dec 2015 11:49

The biggest problems ...

... will be for those with stock and work in progress.

Small businesses do not have real time stock systems, stock taking is bad enough once a year and for retail outlets can lose them a lot of trade, 4 times a year!!

The only positive is if we think this government is bad, imagine what would be going on under labour!

This shows more than anything the government does not understand accounts, they are not prepared under cash accounting rules, also not everything is black and white and dealing with the grey takes time.

 

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By JimFerd
15th Dec 2015 11:53

I'm sure it'll just end up being a system with monthly payments on account, calculated via draft accounts.

We effectively already do this anyway to a certain extent, if we ever claim to reduce the default payments on account.

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By JimFerd
15th Dec 2015 11:54

It might even scare more people into using an accountant, who currently do it themselves.

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By 68fw
15th Dec 2015 12:06

Ho humm, NWO... on the road to globalization

 

I really hope the wealth creators of this country - self employed micro business' -  "WAKE-UP NOW" to avoid sleep-walking into the sub-conscious stupor which is aggressive State over-regulation of the self employed.

Contrast this proposal for "inverted totalitarian digitisation" for the great unwashed, with the total de-regulation of banks and global corporations that we have all been mute witness to.

Wake-up now.

 

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15th Dec 2015 12:07

Tieing in with VAT quarter if registered?

 

Compulsory registration?

Change the tax year to calendar?

 

time to head off into the sunset ..........

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15th Dec 2015 12:08

This is what will happen

What I see happening is that people will very rapidly learn that HMRC can't possibly check this many entries, so entering accurate figures becomes optional.

Then people will just throw in low estimated figures for a while until they get around to doing their books properly and then submitting an actual Return using actual figures.

As usual, a system is being proposed which will work fine for those with accounts departments and the largest firms of accountants, but screws over the smallest businesses.(think mortgage interest relief for small BTl compared to multi property HA's or corporates for another example).

Going to be interesting to see how they penalise incorrect entries given that many adjustments will need to be made.  there's a reason accounts are generally finalised once a year, and that's because there can be many items that need a second or third look at before finalising.  Quarterly filing takes that away.

Rather than face hugely increased fees from accountants, many smaller businesses will be tempted to not use an accountant at all- and we all know what a mess that can turn out to be.

Best of luck Rebecca, you're going to need it.  I'd offer to help (paid work only!) but I don't think my straight talking approach would be welcomed by HMRC!

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By DJKL
15th Dec 2015 12:48

Breaking down time re particular tasks.

[quote=Ian McTernan CTA]

As usual, a system is being proposed which will work fine for those with accounts departments and the largest firms of accountants, but screws over the smallest businesses.(think mortgage interest relief for small BTl compared to multi property HA's or corporates for another example).

Going to be interesting to see how they penalise incorrect entries given that many adjustments will need to be made.  there's a reason accounts are generally finalised once a year, and that's because there can be many items that need a second or third look at before finalising.  Quarterly filing takes that away.

[/quote

Could not agree more.

I do a number of  retailers' accounts where expenses are recorded as and when paid and it is reviewing the cashbook post year end that assists deriving the creditors at year end. Getting stock figures is already a chore-reminding clients to do counts, reviewing the sheets, converting the items on the sheets from retail to cost, this all takes time.

For the shops in question I spend circa 2 hours a quarter (8 a year)  squaring the bank and reviewing purchase invoices for the vat returns,  circa  another 3 hours a year posting daybooks to ETB and adjusting stock/creditors/debtors/depreciation etc and reviewing/preparing accounts, so whilst the workload will not quadruple you are looking on moving from say 11 hours a year (8+3) to nearer 20 (8+3+3+3+3). Whilst some time savings  may arise from repetitive tasks there will still be the need to communicate to client the quarterly figures and obtain their permission to lodge, so really not much scope.

The costs re data submission of the accounts information to HMRC will then depend upon what is involved/ integrated solutions, so it is difficult to estimate, but lets assume  modest 1/2 hour per quarter re prep/client sign off and then same time as current re final return, so extra 1.5 hours on top of say 1 hour for existing return, so 2.5 hours re the tax return submissions.

So for a small sole trader business, which I currently charge for circa 12 hours work a year (11 accounts +1 tax return), the charge could now be for  22.5 hours (20 accounts and 2.5 tax returns), a near doubling of my fee.

 

And for those below vat registration threshold, where their accountant does not already review/square records quarterly, the time needed multiplier is possibly likely to be nearer three than two.

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15th Dec 2015 12:10

Mr Gauke

In all his recent messianic comments on  making this digital transformation work he keeps referring to businesses, and individuals who are in receipt of property income etc,  updating their digital account "at least 4 times a year" these  words appear in all of HMRC`S recent publications on the subject.  Could this mean that they are considering introducing a requirement for a  more frequent update? I would suggest that this is something that Rebecca might want to raise with HMRC as I am sure I am not the only one who is mystified as to how doing four returns a year can be simpler and more cost effective than only  doing one. The thoughts of any increase on this number would amount to real time reporting and would be  utter lunacy.     

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15th Dec 2015 12:11

And HMRC's response to small business will be ............

"it's no additional burden doing this four times a year, as you are already filing VAT returns".

It will not take any notice of the additional work required for the simple reason that the few remaining staff in HMRC will all be tweeting the thoughts of Liz Homer and will not be doing any of the additional work themselves.

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15th Dec 2015 12:29

Accruals accounting

This exists for a reason.  Imagine a construction business with a heavy level of work in progress that needs valuing in order to assess the taxable profit.  This is an exercise that is best left until well after year-end in order to get an accurate picture.

I used to work in a construction business where we had to produce monthly management accounts.  Valuing the work in progress each month was a nightmare.  Assumptions had to be made that could be completely wrong one month later.  I spent a lot of time explaining why figures from one month to the next fluctuated so much.

This situation will be repeated if "accurate" quarterly accounts are required, with tight deadlines. We will then have the tax man wondering why the profit or loss fluctuates so much from quarter to quarter.

We used to get regular VAT visits for the same reason.  They just couldn't get their head around why the business fluctuated so much during the year from quarter to quarter.

 

 

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15th Dec 2015 12:30

My favorite comment from Mr Gauke is

That this will "remove the risk of missing deadlines".  So Dave, having four deadlines instead of one will remove (NB not even reduce!) the risk how exactly? My grasp of statistics, human nature and the law of sod produces a very different answer.

I have no problem with the digital account system, it is a logical progression for HMRC. The notion that taxpayers don't have to tell HMRC what they already know, is music to my ears.  The bum[***] note is why does this mean quarterly (at least!) accounts?

What is driving the 'real time' mania, is it?

Cashflow, - play with the POA regime instead.

Universal credit, - don't lumber everyone with the reporting requirements.

Something else, - please set out the benefit for HMRC and the taxpayer.

There is a natural flow for an accounting year.  Seasonal profit fluctuations, buying patterns, allowances, AIA all have natural annual cycles.  Chopping up the year into quarters will create four sets of meaningless figures for most businesses.  One partial solution could be to do the quarters cumulatively to smooth things out a bit.

What of the non 5 April/31 March year ends, will they still be allowed?

What about partnerships where the PSR is determined by the annual profit?

Another quote from the proposal "businesses will find it easier to understand how much tax they owe". Really?

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By Ammie
15th Dec 2015 12:35

IT WILL BE ILL THOUGHT OUT

........and take a very long time to iron out into an efficient process, by which time I may retire.

The initial mayhem will cause uproar with heaps of additional paperwork of appealing and contesting cases, which HMRC will spend forever resolving.

I see generic estimations becoming the norm and quite a few alienated businesses.

HMRC may as well apply a PAYE or CIS style deduction to all business income and balance it out once a year.

I also sense here an element of "advertising" the proposals to test responses and whether revisions or a better planned phasing in programme is necessary.

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15th Dec 2015 12:40

"World-leading tax administration"

I am far from an international tax expert but, I am fairly sure that the UK tax administration was by far the world-leader in 1970. I sincerely hope that Ian McTernan CTA does join Rebecca Benneyworth's team but, even they stand little chance of restoring HMRC's reputation.  Has anyone asked Ken Frost FCA to help? 

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15th Dec 2015 12:44

Hope they listen


I wish Rebecca the very best of luck and sincerely hope this isn't an HMRC PR ploy to show they are listening when they just go and do their own thing anyway. Working Together springs to mind.

The only way it is likely to work is cash accounting and dumbing down the "Accounts". Ignore stock, debtors, WIP, Accounting Standards etc and just deal with Receipts and Payments. Simple break down into a few categories from bank feed (huge financial disincentives introduced for those who do not bank everything) and auto calc of "profit" with tax taken by direct debit. Not sure how they'll deal with private use or add-backs but sure they'll think of something. This may be the Tax Simplification they are on about and most clients can understand it.

Looking at  the Making Tax Digital document published by HMRC yesterday it made practically no reference to Agents.

If they go for the above who needs an agent? 

Initially of course, possibly more than now but as we all rush to get our clients on Zero, Sage One, HMRC free stuff or any new kids on the block over time we are helping HMRC remove the need for Agents altogether.

Anyone want to buy me out?

 

 

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15th Dec 2015 13:23

Digital Tools?

North East Accountant wrote:

Initially of course, possibly more than now but as we all rush to get our clients on Zero, Sage One, HMRC free stuff or any new kids on the block over time we are helping HMRC remove the need for Agents altogether.

Page 7 of the linked report suggests, to me, this is exactly what they are aiming to do.  Will this make traditional software redundant?  Will all accounts have to be done using cloud software?  From page 10 of the said document 

Over the next five years, the changes outlined in this document will bring about the end of the tax return for millions of taxpayers: • Most businesses will keep their records using digital tools and send that information at least quarterly to HMRC

My emphasis

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15th Dec 2015 12:57

What about personal data security?

If Verify asks for so much personal information, what safeguards are there going to be that it is going to be secure?  We should all be certain that every last bit of the data will end up in HMRC's hands so soon it will really be like George Orwell's "1984".  The electorate might have expected it from a Labour government but not the Tories. 

Many people arrange their online and personal data to give the lightest possible footprint. This type of system sweeps away personal preferences and exposes taxpayers' privacy completely.  I can already see a case going to the Court of Human Rights, and probably winning, but at considerable expense both to the individual taxpayer and the general taxpayer.

Will Verify send all the data to each of its third party companies for verification?  If so they will be able to populate their systems with everything which is supplied as well.  At the moment there are banks and others who do not supply data to third party identity management companies - Experian et al will be delighted to receive the extra free data at no cost.  But how secure are their systems going to be?  They will not have personal data which they have gleaned but data which has been coerced.  The data subject will not have given consent but have been forced to supply the information, so will have no say in how it is used.

I am delighted that Rebecca has volunteered to assist HMRC understand that accounts are more complex than sales and purchases, and wish her good luck.  Hopefully she will also be able to champion those individuals without mobiles, smartphones, broadband, passports, driving licences, etc., who would simply not be able to register with Verify in the first place - even if they wanted to do so. And what about disabled taxpayers? Those who do not work 9 through 5, five days a week, etc., as Helen Rolfe observes, need to be considered. Privacy for all is a great concern, particularly when there are hackers who can get into all sorts of systems with considerable ease.

Based on the results of past "consultations" with HMRC, Rebecca has a very hard job ahead and we should be most appreciative of her efforts.  I only hope HMRC makes all the discussions open and transparent and does not try to gag her or any of the other external participants.

 

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15th Dec 2015 13:01

Overbearing & Totalitarian

For some of my clients, this will mean 4 visits/meetings a year instead of 1 and considerable additional stress and time on their part to provide all the necessary records on time. One should remember that many micro-businesses under the VAT threshold choose not to voluntarily register for VAT simply because they feel that the burden of reporting on a quarterly basis would outweigh any advantages of VAT registration and associated small reclaims of input VAT.

Rather than allowing business owners to just get on with what they do best ie running their businesses, the net result of the actions of the powers that be (however ostensibly unintended) will be for them to be seen as overbearingly interfering and invasive, quite aside from the fact that compliance in itself will become more onerous and time consuming.

I thought the Conservatives were supposed to be the party for small business and deregulation? What they have demonstrated since the summer of 2015 is quite the opposite. Quite totalitarian in my view as well as very disappointing.

 

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By Nemesis
15th Dec 2015 13:03

A Different Perspective

As the foreword to a recent (5th December) FSB publication says

 

Few would dispute that we live and work in an era of rapid technological change. The digital and social media revolutions are already disrupting a wide range of industries, threatening to transform existing ways of doing things and existing business models. The changes witnessed since the advent of the Internet twenty years ago are nothing compared to what is coming over the next few years.

 

 Our small businesses need to ‘adapt or die’. They need to embed digital capabilities into the core of their business. The days of treating digital as a peripheral add-on are over. Many organisations have become, or are in the process of becoming, digital dinosaurs due to their inability to adapt. A recent report suggests that four out of ten industry incumbents, across a broad spectrum of sectors, will be displaced by digital disruption over the next five years.

 

 

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21st Dec 2015 21:25

FSB- are you sure?

Nemesis wrote:

As the foreword to a recent (5th December) FSB publication says

 

Few would dispute that we live and work in an era of rapid technological change. The digital and social media revolutions are already
disrupting a wide range of industries, threatening to transform existing ways of doing things and existing business models. The changes witnessed since the advent of the Internet twenty years ago are nothing compared to what is coming over the next few years.

 

 Our small businesses need to ‘adapt or die’. They need to embed digital capabilities into the core of their business. The days of treating digital as a peripheral add-on are over. Many organisations have become, or are in the process of becoming, digital dinosaurs due to their inability to adapt. A recent report suggests that four out of ten industry incumbents, across a broad spectrum of sectors, will be displaced by digital disruption over the next five years.

 

 

Really FSB? Try talking to your members. Not just a handful - all of them

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15th Dec 2015 13:15

Quarterly updating vs accounts
I have mentioned quarterly accounts at HO and been corrected several times to "updating". I don’t know yet what the difference is. Many of the questions on here I have already asked. There are no answers to these and other questions at the moment, but I expect advisors to small businesses to influence the final system design significantly. First up is quarterly stock take is out of the question for small businesses. Let's see what we can design (as accountants who know the sector) that will minimise the impact. Lots of work to do!

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15th Dec 2015 13:18

oh and
I have several clients who cannot use IT and one who has a mobile phone with a list of numbers on a bit of paper in his pocket. HMRC will be hearing from them!

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15th Dec 2015 13:18

If you do not have a uk passport or uk driving licence

which can happen in many cases, I have sole trader clients who are not uk citizens and they do not have a uk passport or uk driving licence so they need to contact HMRC themself with their NI number. 

Many of my clients do not want to access their electrocin account, they do not have access to their online self-assessment, simple they do not want to but they want me, their accountant to submit tax return on behalf of them. they do not want extra work, extra commitment for themselfs.

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15th Dec 2015 14:47

You're spot on!

freshapple wrote:

which can happen in many cases, I have sole trader clients who are not uk citizens and they do not have a uk passport or uk driving licence so they need to contact HMRC themself with their NI number. 

Many of my clients do not want to access their electrocin account, they do not have access to their online self-assessment, simple they do not want to but they want me, their accountant to submit tax return on behalf of them. they do not want extra work, extra commitment for themselfs.

This! This is me. And there are many like me. 

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15th Dec 2015 14:55

Oh please God no!

Francois Badenhorst wrote:

This! This is me. And there are many like me. 

:-)

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15th Dec 2015 15:32

We're everywhere

<Shifty eyes>

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15th Dec 2015 13:37

And pray
Who is going to take on the inevitable additional costs- our clients? Auto enrolment is bad enough but this as well. No doubt the penalty regime will be punative

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15th Dec 2015 13:44

quarterly 'updating'


I may have misinterpreted the intentions, but I thought the accounts would be taken care of much as at present, with estimate based on last year (subject to sa 303 claim) and final year end adjustment on preparation of accounts, and that benefits and bank interest etc would be updated directly to the PTA by the relevant bodies, and the taxpayer (sorry customer!) required to update their PTA with new/closed accounts or benefits etc, leaving HMRC to trace the account holders of all those accounts not allocated direct to a PTA (and issue fines no doubt!). seems I may have been wrong.

In any event the quote 'By 2020 HMRC will be a world-leading tax administration that will be efficient, effective and easier for customers to use' had me chuckling into my butty.

 

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By txcjg
15th Dec 2015 13:45

Databases and info not joined up

It sounds good in theory but is not in practice

case1 - retired - two private + state pension SATR completed

Despite letters to HMRC they still give 2 full personal allowances in year making a U/P. HMRC could not match up the two PAYE records

case 2 - Bank interest - investigation case

bank reported wrong interest on joint account- took 8 months to sort out with no additional liabilty on taxpayers just worry and stress.

case 3 - Chargeable event- HMRC enquiry.

Insurance company system could not produce a correct chargeable event cert where a discounted premium paid. took months to sort out.

case 4 - PAYE payments

Agents unable to see clients PAYE payments. HMRC cannot at present open up system to agents

case 5 - Pensioners with SATR but not online

A straw poll of a pensioners club with 700 members, approx 150 HR taxpayers with SATR  but only 45 who can or do use a computer, tablet or smart phone.

Overall HMRC needs to fix some of the basic problems with their databases and access. They do not understand that some businesses and a lot of individuals do not/cannot  use a computer, tablet or smart phone.

Chris

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15th Dec 2015 13:47

Just been at a networking event for accountants

As suggested above the job of 4 sets of accounts is just not manageable.  I think that this practice would struggle unless we take on more staff, which increases the fee.

What came out of the networking is the feeling that some clients will goto bookeepers/accountants that are under the radar.  That is those without HMRC agent codes.

The general feeling is that HMRC should expect every one to register with them and if someone is caught not having done so a big fine should be levied.

THe main concern was that some who are under the radar will produce false accounts.  As HMRC's staff is becoming more and more stretched the chances of being caught are slimmer.  THe proposal that all have to register means that all accountants will be known by HMRC

 

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15th Dec 2015 14:17

Annual Tax Summary for clients on online self-assesment

in my online account with HMRC as an agent I can see an option "View Annual Tax Summary" for some but not all of my clients. The summary only shows the income earned and tax& NI payed by my clients. it also shows how these tax will be/was spent by the government. 

Is this feature already part of the digital tax account? right now it is very basic.

Has anyone else seen it?

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15th Dec 2015 14:30

Cash under the mattress

Paul Johnson is suggesting people will go to accountants under the radar - I think more people will start trading in cash and keeping their money under the mattress if this digitisation continues. 

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15th Dec 2015 14:46

I read in the latest HMRC document that when logging in to your Digital Tax Account much of the data will already be pre-populated by HMRC.  Great, but how does this work where an agent uses tax software like Iris?

Downloading the information from HMRC into Iris will be necessary in order to get the whole tax picture along with trading income and expenses but this is time that those using HMRC's own software will not need to spend.

Releasing this DTA information less than 2 weeks before Christmas does not bode well for the planning and implementation of these changes, but then this is what I come to expect from a government that has a summer budget when many are either on holiday or about to go on leave.

I want to sit down and plan effectively for the changes but will have to shelve that idea until early Feb 16 because of the January crush.  February was already going to be a busy time because of the imminent dividend tax changes and clients staging for Auto Enrolment, yet I read DTAs are going live in April 2016.

And what exactly ARE the ACCA / ICAEW doing to represent and defend our profession?  Not much, from where I'm sitting.

 

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15th Dec 2015 16:02

To quote FGTH - what are they good for? I'll say it again!

What have ACCA/ICAEW ever done to represent and defend small practitioners?

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15th Dec 2015 14:52

@DMBAcc - that's a pathetic argument. If you are charging less than £25 a year to do accounts and returns for a limited company client then you only have yourself to blame. For around £100 a year you can have the software you need, and if you really can't afford that then you don't have a viable sustainable business anyway, and if your clients can't afford to pay you more than that then they don't have viable businesses either. Why would you (or they) even bother?

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By DMBAcc
16th Dec 2015 13:53

please let me in on the secret

my quotes have come in with an extra zero on the end so please do tell me where I can find this wonderful cheap product.  I'll tell my friends too

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