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One wonders who the lowly client is supposed to file their VAT returns.
HMRC seems to forget many small business don't even hire an accountant to do the VAT, they file in year and the accountant has look to make sure they haven't made a hash of it at the year end.
Where are those clients solutions to a problem of HMRC's own making?
If I was a betting man I would happily bet £250 on even odds it will be voluntary (if at all) by April 2019.
Fundamentally there is NO benefit to any side of this, its just a face saver for HMRC for canning full MTD.
If you cant key in 4 numbers correctly into your VAT return, then the rest of your accounts will be garbage anyway given you will already have made 100's of keying entries. Something which seem to bypass the "brains" at HMRC who seem to think the data arrives by magic and photos of receipts (obviously)
We will be slamming in one quarterly sales invoice and two quarterly purchase invoices (one with VAT, one without) into whatever system we use and reccing it back to the 'real' accounts. HMRC wont care if the tax is right.
"If I was a betting man I would happily bet £250 on even odds it will be voluntary (if at all) by April 2019."
I think there is NO chance that MTD for VAT will be mandatory from April 2019.
This article sums up nicely the current situation with Bridging Software, and the current situation seems to that we are no wiser than we were this time last year.
I am even more intrigued now to know how bridging software will be able to magically extract the correct information from my spreadsheet based accounting system without getting a programmer in to tell it what to do. Likewise for tens of thousands of businesses, many of whom do not even know yet that MTD for VAT is coming.
We will be slamming in one quarterly sales invoice and two quarterly purchase invoices (one with VAT, one without) into whatever system we use and reccing it back to the 'real' accounts. HMRC wont care if the tax is right.
I have seen this as a tempting 'solution' for some while now. I certainly have little inclination and, more crucially, the time to teach clients who do not want to know anyway how to computerise their accounting systems. All by next summer and without the proper availability of software to do it.
I hope HMRC are planning on hiring more helpline staff for next July when Joe Public finds he can't use HMRC software anymore and doesn't know what to do about it.
Those who don't hire an Accountant don't need to worry. They know nothing about it for some reason! and as I've mentioned here before, I wonder why. I agree, the word 'voluntary' is what I expect to see before the end of this year, it cannot possibly work any other way. Yes, many may say I'm naïve, but I remember software providers telling me that pre April 2017 when I said it would all be postponed. I also think it's pretty appalling that HMRC promote SAGE, what's that all about?
"I agree, the word 'voluntary' is what I expect to see before the end of this year,"
Reviewing the chaotic way in which this is being handled, I am now thinking more along the lines that MTD for VAT will not even be voluntary from April 2019 and will simply not happen.
In my opinion now, there is absolutely no chance that HMRC, software developers and businesses will all have the necessary fully tested systems in place by April 2019, not even for a voluntary system.
It is easy for HMRC to continue trying to kid us otherwise as they have nothing to lose. They still have the ultimate last minute 'get out ' which is to just cancel the project and carry on as before.
As I have mentioned before, I think Mel Stride is going to be the scapegoat for all of this as he does not seem to have any real understanding of this project, and is being 'set up' as the person responsible for its ultimate failure.
I'd have a little more confidence in HMRC's requirements if HMRC were to exhibit even a modicum of understanding of technology.
Let's look at the most basic example that most teen schoolchildren these days could handle. Logging in.
Login in to the agent portal. Now, how many times did you have to enter your credentials? Once, twice, three times?
How many times last time.
Is there any consistency whatsoever?
Personally, I've started to think of it as a three number lottery. If I get in on the first go, jackpot.
The problem is, this is fundamental stuff, and by no means the worst that HMRC do with tech (possibly one of the most annoying).
So will MTD ever work. My guess, not whilst an understaffed, and demotivated HMRC are calling the shots.
I have only prepared a few 2018 Tax Returns as yet and I already have two instances where Exclusion 70 is applicable. This necessitates filing the Tax Returns on paper and all the hassle that goes with that.
No one can really take HMRC's grand ideas seriously when they cannot even create basic software that is able to calculate tax liabilities correctly ... two years in a row.
I also note that there are 31 (11/05/18) other current exclusions which are still waiting to be fixed. It is disgraceful really.
The tax system is far too complex and needs to be simplified before embarking on fancy digital projects. Even the very simple action of changing the year end to 31st March or some other logical date would help. It is laughable that a massively complex tax system is shackled to a reporting date of 5th April!
Why?
Until 1752, the beginning of a new year was on Lady Day (the liturgical anniversary of The Annunciation of our Lord to the Blessed Virgin Mary), which falls on 25 March. The year end for financial purposes fell on 24 March.
When Great Britain adopted the Gregorian calendar in September 1752, eleven days were skipped.
In order to preserve a fiscal year of 365 days, the year end was extended to 5 April 1753. It has remained as 5 April since then.
I know the historic "why" but I still ask "why". We are the only advanced economy in the world that has a fiscal year that does not finish at the end of the month. The next most important economy that does this is Iran. It causes no end of bother. CT converted to 31 March in 1965. SA brought the end of PYB. I don't see why the fiscal year cannot change. Personally I would change it not to 31 March but to the calendar year because even 31 March causes some confusion. Eg when HMRC refer to 2017 for income tax they are referring to 2016-17 but 2017-18 for CT.
When PYB went to SA many of us asked that the year end be either 31st march or dec 31st and that this would be a great time to change it. We also asked for balancing payments and on account payments to be changed to 31st march and 30th september, but unfortunately we were dealing with Gordon Brown.
The total lack of any credible specification from HMRC is driving the "myriad solutions". They really are utter numpties, the HMRC top brass!
If I were running a pizz up in my local brewery I most certainly would not sub-contract any part of it to HMRC!
Now let me think. What can I say to enhance this debate?
Yep got it. Why is Rebecca always up beat about MTD when surely a person of her intelligence has to realise that it is not if the software can be made to work, it's the smaller business that do not have the knowhow or finances to comply with it that will be the problem.
The software could be made to work better eg why does Sage default to T1 for insurance, council tax and even drawings. These are fundamental software errors. I've yet to use software that can handle retail schemes, partial exemptions etc in a user-friendly manner. We've had partial exemption and retail schemes since 1973 so why hasn't software caught up? FRS has been around for decades but software can't handle that eg the 1% discount finishes 12 months after registration which can be mid-period - Sage can't handle that. And when a business ceases to be FRS Sage brings into the next VAT period all the input tax from the FRS period. These are fundamental errors that have been in the software forever so why haven't these been fixed?
Your points are valid and demonstrate that VAT is too complex to be trusted to software.
If HMRC really expected every VAT registered business (over the registration limit) to file using MTD for VAT software from April 2019, then they would have also announced the abolition of the special schemes from the same date, with perhaps the exception of Cash Accounting.
The special schemes were introduced to specifically REDUCE the amount of book-keeping required by some businesses but if everyone is using MTD compliant software, then the special schemes would be redundant.
I find it increasingly surreal that HMRC and the Government continue with the delusion that this clearly unworkable project will happen, it clearly will not.
There are thousands of Accountants, Project Managers, Software Engineers who can see how ridiculous this whole project is.
We need to start from scratch and approach this in the same way as any substantial commercial project. The world is full of impressive projects that have been successful only because they were approached and managed in the correct manner.
As far as I can see, the driving force behind MTD are many of the highly influential giant software developers who are only interested in boosting the value of their shares. Why is it that Mel Stride chose to speak at a Sage sponsored event at Accountex and not independently as a Government Representative in one of the other Theatres?
Can someone tell me how MTD for VAT can be made to work in the case of a three company VAT group each with a separate piece of accounting software recording their data?
In my clients' case three separate Sage datasets.
No, but I don't think such practical matters will prevent HMRC from charging penalties until the first of such cases reach the Tribunals.
"An add-on developer for Xero and QuickBooks Online, DataDear starts from the premise that the business will operate its spreadsheet records in tandem with one of the main online systems"
I thought the purpose of bridging software was to bridge from the accountant/client's existing spreadsheet direct to HMRC and not via other MTD software eg page 5 of https://assets.publishing.service.gov.uk/government/uploads/system/uploa... makes it clear the API links the spreadsheet direct to HMRC. I know that Absolute are developing a product that will do this.
Hi Kevin,
You're absolutely right! We have both a direct to HMRC bridging solution, plus connected spreadsheet to cloud solutions with the digital links in place. It's the latter that's been mentioned here...
More complex VAT schemes / non MTD compliant software - direct to HMRC. Simpler ones where clients prefer to input in Excel - to QuickBooks or Xero. Ultimately, the choice is yours!
Thank you for the mention John!
Still don’t know why this is necessary. You’d think with brexit at the same time this would be delayed or moe realistically be shelved. More costs for businesses when most studies show brexit will cost us all more. Sorry, but hmrc and this government are more out of touch with reality then any govt I’ve known and I go back to the Heath government
It's not necessary but it is a necessity from HMRC's point of view that every transaction for every business is captured. Of course the software giants have said "we can do that".
Nobody has yet mentioned VAT Return Manager from Neilson James Technology (https://www.neilsonjamestech.co.uk) .
I signed up for one of Neil Cudbertson's first agency licences and have successfully been filing VAT Returns from last month.
The software is quite new and not yet polished but works fine, and Neil is working on further MTD tools.
He's still finalising his pricing structure but I think it will be good value for money, and it imports VAT Returns directly from VT Transaction plus accounts!
"This is a subject that will run and run on AccountingWEB."
What would you do without us? :)
Thank you, I've bookmarked his website - I use VT a lot and am aware they have no plans to develop the software to file directly to HMRC , so was hoping for a compatible bridging solution.
The shambles continues....
Let's face it we all know what will happen. Some will move to software solutions and spend lots of time and money in doing so, some will use 'bridging software' and carry on as before and the vast majority will fudge it one way or another and HMRC will be powerless to do anything about it.
From HMRC's point of view as long as the data magically appears via the appropriate gateway they will be none the wiser as to whether the transactions are recorded electronically. Will they care? Will they open investigations?
Presently, businesses are obliged to keep sufficiently good accounting records but if they don't do they get fined? No. The same is likley to happen with MTD.
The big frustration is that HMRC will still only end up with the same 4 figures on the VAT return that they ever had (from most businesses). Can somebody remind me why this is happening?
I think everyone is missing the massive point, MTD was set up because?
I remember the earlier representations stating it would allow the general self assessed tax payer the ability to cut its costs because the quarterly returns would reduce the larger tax liabilities due after Christmas, they could maintain those returns without the need of an accountant! Then VAT MTD was announced digital copies of both Sales and Purchase invoices to be provided as proof of your calculations, then HMRC had spent millions on the development of a computer system that could correlate and match the Sales invoices with corresponding Purchase invoices and match that to the bank transactions that happened, there was boastful reports of said computer having the ability to track everyones digital footprint and then triggering investigations if our lifestyles did not match our returns.
My horror was not that HMRC had that power, but when a company fraudulently amends an invoice to help its cash flow or just because it is criminal who gets the investigation? If small entrepreneurs to save money decide to go it alone with their tax affairs because HMRC told them it was beneficial then to my mind HMRC are clearing the savannah for a mass feast, and their aggressive nature as of late is the writing on the wall that all they care about is targets and not the small enterprises that keep this country going
'HMRC’s answer is that commercial developers will provide the bridging software in time for the April 2019 go-live.'
On that basis there seems to be no compunction at HMRC to allow us much time to review/test/adopt/educate clients prior to April 2019. So much for any support from HMRC for my 'many many (mostly smaller) clients who rely on Excel spreadsheets for their VAT records and returns'. Merely confirms my long held belief that HMRC do not care about small businesses, perhaps because they do not have as strong a voice as the big guys?
I might be wrong here (no doubt someone will put me right) but it's my understanding that there has to be a year testing (meaning all components in place) before it can go live. So I'm assuming (as others) that, although it will go live in April 2019, it will be on a voluntary basis.
Lord Carter recommended 12 months testing when he published his review in 2006 http://webarchive.nationalarchives.gov.uk/20060719043117/http:/www.hmrc..... HMRC accepted the recommendations. I've reminded HMRC about this but HMRC has chosen to forget it and ignore it even though HMRC have never said HMRC has changed its policy.
This also applies to numerous other 'services' eg DDS which is still in beta (ie test phase) but is compulsory. This goes against Carter.
HMRC will say that MTD has been in pilot since April 2017 and that it is going wonderfully whereas in reality the one item of software we are all waiting for (the spreadsheet linking software) is still not available.
"HMRC will say that MTD has been in pilot since April 2017 and that it is going wonderfully"
Yes indeed, and 400,000 businesses were going to be signed up to the Pilot by Autumn 2017.
What are we missing here?
Indeed. I attended a HMRC meeting in Manchester where HMRC said they expect 400,000 businesses to participate in the pilot. HMRC expected this level of participation because HMRC mistakenly thought MTD would be easier and more efficient than the current system. We know from https://www.accountingweb.co.uk/community/industry-insights/rowleys-clai... that the actual number of participators is tiny. I have been told by someone in the know (one of the institutes) six months that the number was a couple of dozen and I've since heard that some have dropped out. I suspect the true number participating may now only be single figures. A far cry from the 400,000 HMRC anticipated. Surely HMRC should get this message loud and clear.
I am very confident that big business for once will help us shoot this down.
Before setting up my practice I worked for part of a big multinational. We used group vat accounting. Some parts were on sap, some sage, some small stand alone subsidiaries had their own setup. All brought together by group finance into 1 vat return.
I can't begin to imagine what a nightmare Mtd will be!
I am very confident that big business for once will help us shoot this down.
Before setting up my practice I worked for part of a big multinational. We used group vat accounting. Some parts were on sap, some sage, some small stand alone subsidiaries had their own setup. All brought together by group finance into 1 vat return.
I can't begin to imagine what a nightmare Mtd will be!
There you go - we all agree - it's a waste of time and effort and it won't work so why are they doing it?
Answer - it makes work for people to do - the Gordon Brown solution to unemployment - create 'make-work' jobs doing nothing that makes wealth but just takes people off the dole.
See also Health'n safety
GDPR
NHS administration
More complex tax laws
and so on.
And think of all the lovely fines that come out of it to swell the Goverment coffers so they can give it to the likes of Carillion.
I think it ought to be called the 'RipoffState'.
Did anyone notice that the UK's productivity has been going down? Not really difficult to see why is it?
Governments are now totally incompetent and seem to be run by Civil Servants who have never been in the real world and Politicians whose greatest achievement is a degree in politics and a researchers job for one of the current bunch of Socialist or Communist parties.
A complete and frightening lack of basic common sense.
Politicians whose greatest achievement is a degree in politics
That made me laugh. If it were the case things may be better. I suspect most politicians degrees are more in line with degrees in bakewell tarts.
HMRC believe our client's can correctly input all their data into accounting software but they don't trust us to be able to take 4 figures and manually key the figures into their website to complete a VAT return. Simple bixarre!
Can't wait to be sold the MTD 'add-on' by IRIS now that they have taken over TaxFiler..wonder how much IRIS will ramp the price up by?
Looks like I might have to look at FreeAgent..
Currently using QB Online which links with TaxFiler nicely, can't imagine that lasting now IRIS owns TaxFiler- and QB Online links back to the HMRC site for filing at the moment anyway...
Just all seems very pointless.
Big market for someone to develop the app that files returns just by entering (manually) the required totals.
Clients who don't use accounting software aren't going to magically switch- why should they?
I have a client who issues a couple of invoices a month from Word/Excel and then sends me his listed stack of receipts and bills, which I then enter onto my excel sheets. Then use my agents HMRC portal to file the VAT Return. Why would we change this? Who's going to pay for the additional software that we don't need or want?
I couldn't agree more with you. That describes most of my VAT registered clients. Actually, with some of them, I post the paperwork to VT+, which I had fondly imagined would take care of things, but you know how that is panning out.
I am still totally baffled as to what any company with bespoke systems is going to do; I only have one client in that boat. He is naturally completely in the dark about this, and I don't have the strength of mind to raise it yet. After all, it might not happen (with fingers tightly crossed)
So, it took a visit to a large company, to see 23 spreadsheets used to calculate partial exemption, for the clowns to realise that spreadsheets are fundamental to the VAT process, PRECISELY BECAUSE of the arbitrary computational elements of the VAT code which sit OUTSIDE THE SCOPE of a double-entry book-keeping ledger?
This proves that HMRC are functionally issue-illiterate.
Never mind the obscure matter of partial exemption, how do they expect the basic transaction of EU reverse charges to work?
Having read John’s article with interest as well as the comments made by readers, I wanted to update everyone on our progress here at Liquid in relation to MTD for VAT.
For the last 6 months we at Liquid Accounts have worked closely with the HMRC to develop the required Bridging Software for MTD. We are nearing the final stages and hope to release soon.
It is not an add-in widget that you bolt onto your spreadsheet – as you may know, HMRC require the numbers from your accounting software or spreadsheet to be unaltered in any way when filing takes place.
You simple carry on as normal with your spreadsheet and upload it to the Liquid app – it will prompt you for the sheet with the VAT return data. The app does the mapping for you in a couple of minutes and you do not rekey any data – the mapping is retained for future returns, so does not need setting up each time you use it.
As requested by HMRC the Liquid VAT filer will be free for 1 user 1 company - ideal for small businesses with no extra cost.
For agents/accountants, a multi company, multi user version will available at the time of release – currently estimated for September 2018, well in advance of the April 2019 deadline.
For more information email [email protected]
This is indeed good news. However (yes there had to be an however) I don't consider Sept 18 "well in advance of the deadline". Again you've got to get onto the pilot to see if it all works. What if HMRC or your software doesn't like the spreadsheet set up? What about if there is an error and you find it later or when the Accountant does the year end accounts? Have these sort of po-fahs been taken into consideration, cos I assume all the data on the spreadsheets will be uploaded not just the totals.
"You simple carry on as normal with your spreadsheet and upload it to the Liquid app – it will prompt you for the sheet with the VAT return data. The app does the mapping for you in a couple of minutes and you do not rekey any data – the mapping is retained for future returns, so does not need setting up each time you use it."
Three Queries -
1) What exactly is the process for 'uploading' to Liquid app? What exactly is uploaded to the app?
2) The implication is that HMRC only want relevant totals and not all transactions - is this correct?
3) Is this software suitable for companies of all sizes and and types?
If HMRC only wanted totals there would be no point. All they would be doing is exchanging one software for another doing the same job.