HMRC ponders pushing MTD penalties through third-party software
Commercial tax software providers could be used to display Making Tax Digital penalties and surface HMRC nudges and prompts under proposals laid out to members of the tax authority’s Penalty Reform Representative Body Forum.
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And the chances of any of this being remotely accurate are.................?
The existing data feeds into the tax return are shockingly bad
Ditto the 'real time' payroll which is anything but.
Sounds like some half baked ideas coming in very late in the day to cope with the fact that the new penalty regime is virtually impossible to understand for the average person, or keep track off. Not least as there may well be different parties carrying out different parts of the job.
The year accountant may not have a clue the client is late with their VAT, or filing their junk MTD quarterly filing data.
The new regime is too complex and if anything encourages people to miss deadlines. You can miss a year of VAT before getting a £200 penalty. Nice!
If HMRC can get it to work correctly, then this is a great idea, as it starts to move the agent's interactions with HMRC's client data off their portal and into a better designed portal from the accountant's chosen software provider. The other key data that needs to be pushed externally by API would be tax payments received by HMRC, so that we can see in a single portal what's due and has been paid, which will allow the tax and PM software suppliers to produce reports for accountants that highlight missed payment deadlines and upcoming taxes due across the entire client base.
+1
But it confirms that HMRC are serious about penalty farming, which suits the current government because penalties are not tax increases
HMRC have lots of good ideas (yes really) but usually fail to get any of them to work.
As mentioned above, even now the quality of API information picked up for Tax Return completion is appallingly bad and incomplete even after years of trying to get it right, and even basic information about the State Pension someone has been paid in a Tax Year is non-existent in the API.
A great idea but still years from being of any practical use.
When will someone senior in HMRC realise one thing ... that it's essential for any automation to result in very near to 100% accuracy (because otherwise it quickly becomes viewed as unreliable and therefore can be safely ignored whenever you feel like it)!
95% (HMRC's favourite measure of 'excellence') just doesn't cut it, if it means accepting that 10s of thousands of incorrect penalties are auto-generated every year/month/week.
Trust is rapidly lost and then almost impossible to regain ... and the experience of the average punter (aka taxpayer) of HMRC's ability to get things right first time (let alone in under a year) are already at rock bottom.
Oh, and the other message that needs to be understood by someone senior in HMRC ... when you find yourself in a deep hole - stop digging!
They can have all the good ideas they like - the road to hell is paved with good intentions. In this instance it's a super-highway.
HMRC is nothing more than a parasite furthering its own growth and should be treated as such.
The State (HMRC) weaponizing private enterprise to force its will. You can be as good intentioned as you like - but let's call it for what it is.
It has been recognised for a long time the degree to which we first work for the state, in many spheres it is now very apparent that the aim of the state is to essentially "have" everything with the occasional benevolence of "allowing" us to have something, the oppressive aims on the private residential sector effectively amount to the state control of private assets with no compensation; let's call it for what it is, communism.
When talking about HMRC
- under proposals laid out to members of the tax authority’s Penalty Reform Representative Body Forum (where are these proposals, link?)
- HMRC has told tax body representatives (no link/source/date?)
- HMRC confirmed to AccountingWEB ….. who confirmed this? Quotes? Link?
- After consultation with vendors during the API development, appeals and disputes will not currently feature in third-party software. (According to…hearsay, source, quote?)
- and HMRC stated (who stated this, source, link?) that penalty notices at this stage will not be issued via the Digital Tax Account or third-party software.
Others
-According to Richard Wild, head of tax technical at CIOT…
-Tax expert, writer and former accounting firm partner Paul Aplin …
-Kevin Sefton, co-founder of tax app Untied…
we only get names, roles and quotes for these?
According to HMRC, the rules …. Yay a source finally… published Jan 2022.
And a name…. Chris Jennings from HMRC on an AWeb webinar
Please improve the editorial here, this is the same on every MTD article, it gets cheap views and comments.
You are correct Tom, it is about trust.
Lack of trust is not being placed in your ability to piece together an article, it is your "reputable sources" that most people would take issue with.
Thank you Tom, I really do appreciate a response, I trust you....
Its not just this piece...no one trusts this vague entity called HMRC that the real policy makers hide behind.... (source: any article on here about MTDfB ;) )
In general I would like to see less articles talking about 'HMRC' which ultimately means nothing, and more references to the policy makers linked to the topic being discussed...
"some of the team aren't keen on giving out their names..."
... now this is a real story, and speaks volumes, would love to hear more about it. I'm confident the people impacted will be the employees and not the department heads, product managers and or policy makers, this is wrong of course and anyone dealing in such behaviour should be exposed and dealt with.
But, no 'company' would act like this, someone somewhere has accountability and its not 'Mr HMRC'. No one acts like this and no other company would get away with it. And as long as we continue to blame 'HMRC' there will be no change.
due to personal abuse dished out to some of their colleagues here, via email and on social media, some of the team aren't keen on giving out their names...
Now this is finally something interesting, more details please. I mean there is no place for abuse of any kind, but there is place for well placed criticism and abuse is a strong word, the details of what abuse we are talking about would be interesting.
OMG. What is wrong with these people? Maybe Bruce Willis can save us? It's pretty desperate. The train crash can be averted!
Perhaps HMRC should redirect resources to MTD itself and to the education and adaptation it will require to succeed, and less to fine tuning the penalty regime, which clearly is a significant part of the regime and is big part of their focus.
HMRC keep telling us that imposing penalties is not their aim and they do not like to impose such, really?
Perhaps, in support of their tongue in cheek comment that they do not like imposing fines, they pay closer attention to those taxpayers that have failed, investigating reasons and helping them to improve their compliance management and to avoid penalties and to consign penalties to wilful, careless taxpayers who have no real desire to follow the rules.
HMRC are making themselves obsolete. Just think this through: if everyone did use third party software to calculate their tax and either they paid voluntary or had the tax collected by debt collectors, just what is left for HMRC to do?
Unbelievable, and I thought HMRC were understaffed.
What brainbox is sitting there at HMRC thinking what other new idea can I stick out there, spend lots of taxpayers money, add something new to the pile of a long list of things that don't work at HMRC and then move on to the next bright idea.
When will someone in government reign these people in!
An excellent idea in principle but needs a lot of detailed work to ensure if does not create more work than it saves. In Agile terms it is not needed for the Minimum Viable Solution so should be parked for the moment. An implementation date of 2023 is far too early.
HMRC should focus it efforts and the effort of others on fundamental concerns about the Minimum Viable ITSA Solution such as how corrections to quarterly reporting will work in practice and how will data be used/shared for the reporting of joint property income.
"The proposals could also involve the use of automated nudges ... with the stated aim of assisting taxpayers to avoid or minimise penalties."
I attended a HMRC MTD meeting in 2016 during which HMRC announced that prompts and nudges would be central to MTD. These are necessary if HMRC expect Joe the Plumber, with no accountancy experience, to be turned into an instant bookkeeper by just using software. We all know that leading accountancy software has no intelligence and will permit users to reclaim VAT on wages, business rates, drawings, even the VAT payment to HMRC. As the software industry have been permitted to continue to sell software that is not fit for purpose (ie not fit to be used by millions of self-employed with no bookkeeping experience), prompts and nudges are essential to at least get some degree of accuracy in what Joe the Plumber is inputting into his software. But after 2016, HMRC quietly dropped prompts and nudges. So why is HMRC now announcing them as if they're a great new idea? HMRC has a very short memory. No doubt, this will end up going the way of the 2016 announcement and so many others by HMRC: nowhere.
Agreed, the AI in online bookkeeping software isn’t good enough for now, let alone anything more complicated.
I have been involved with software development where a lot of help text was provided to online screens. It was very time intensive and involved multiple subject matter experts who had to consider all the ways how the help text could be misinterpreted. A lot of wording was revised after going life based on user feedback. We had planned for this and after a year the we had a good product.
I am concerned that the wording will be left to software houses to develop; each software house using their own wording; they are not tax experts and have little experience of handling incorrect tax submissions. They will not have to pick up the pieces if the wording is wrong - this will be a mix o HMRC and the taxpayer.
If HMRC want to use nudges they must take ownership of the content and staff it accordingly.
“upfront honesty declarations”
These are not nudges. It's like software T&Cs: who reads them? Everyone clicks "agree". It's the same with honesty declarations. We all tick them without thinking because we see them all the time. If someone is knowingly being dishonest, a tick box is not going to stop them. In most cases I expect errors will be down to lack of knowledge by Joe the Plumber. If his software is Sage and it defaults to standard rated VAT on his drawings, he might think this is correct because the software made the selection, not Joe. So when he sees the honesty box, he has been honest, he's not a bookkeeper so he doesn't know the software made the wrong default choice.
No, nudges are when the software by default should know the business cannot reclaim VAT on drawings so it should default to Sage T9 and if the user changed it to T1 it is as that point a prompt appears explaining to the user why T1 would not be appropriate.
I can't believe there are replies saying this is a good idea (granted that they don't think it will happen).
World peace, a super food eliminating world famine and FTL travel to the stars are all "good ideas" but totally unrealistic anytime soon (not that we shouldn't be working towards those goals). They're still much more likely to happen than HMRC's latest wet dream.
So if I've got this right HMRC are giving us more to do, which we have to fund as apparently they can't afford to provide us with any software (other than payroll) whilst doing virtually naff all themselves. Hmm sounds like a plan...
It used to be considered that businesses were acting as unpaid tax collectors for a number of different taxes. These "fining schemes" do seem unreasonable in that context, even if it does seem to be an increasing and widening trend, particularly amongst larger businesses, in both public and private sectors. With I would suggest local government and Whitehall setting the trends. The definition of "late" does seem unreasonably arbitrary, and of course it is policed by HMRC - summary justice!
Thing about the EU tax called VAT, it is supposed to be simple to administer, but in practice it is anything but. Perhaps we should consider a "fining scheme" be applied to HMRC based on the complexities they introduce. As a starter for 10, how about a "fine" of £1,000 per return for partial exemption? It wouldn't cover the pain, but it might make them think again!
Your post raises the question as to whether there is a limit to how complex a tax can be. If a tax is so complex that it can't reasonably be understood by Joe the Plumber, is it reasonable to expect Joe to operate the tax correctly? If it is not reasonable, is it reasonable to expect Joe to have to hire a professional to assist him? If it is too complex, and it is not reasonable to expect Joe to pay for professional help, can the courts enforce penalties for failure to operate?
The changes to income tax a few years ago introducing the Dividend Allowance and Personal Savings Allowance and the interaction with the Personal Allowance are a good example of complexity: even HMRC's own software couldn't optimise the Personal Allowance correctly until Tim Good sorted them out (well, it's not completely sorted out yet and he's still battling with HMRC). So if HMRC can't get it right, how is Joe the Plumber expected to get it right and in turn, can he be fined for getting it wrong? As we all know Joe can be fined for getting it wrong no matter how unreasonably complex it is, why can't we fine HMRC when they get it wrong? I know that's different to fining them for making it complex in the first place but HMRC need to realise that if something is too complex to be reasonably applied, it won't be applied correctly and so won't be adhered too, so why introduce it in the first place?
Maybe if Jim Harra’s pay was linked to the number of complaints received we might see some progress.
No one expects everyone to get everything right first time, but HMRC expects us and our clients to do so. However, there are no repercussions on them when they get something wrong or fail to respond in a timely manner.
Personally, I would love to be able to charge them for just the time wasted on phone calls, let alone sorting out their errors.