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  • FIRST POST
    • WEEN_NASTY
    • By WEEN_NASTY 11th Oct 16, 10:26 AM
    • 47Posts
    • 15Thanks
    WEEN_NASTY
    Making Tax Digital
    • #1
    • 11th Oct 16, 10:26 AM
    Making Tax Digital 11th Oct 16 at 10:26 AM
    Just wondered how many of you out there are aware of HMRC's Making Tax Digital plans?
    From 2018 to 2020 all businesses, including self employed, rental and companies will be required to use accounting software and make 4 quarterly submissions and one final submission annually instead of the current one return.
    The government have driven the plan to reduce the £6.4b tax gap which they say is primarily caused by non agent using taxpayer errors. They believe the new system will reduce errors although errors work both ways and errors one way would suggest evasion.
    Many small businesses and accountants are horrified at the proposals. Government legislation has brought in a raft of red tape recently including payroll RTI and workplace pensions. Many people lack the digital skills and time to use digital tools. They are busy trying to survive in volatile times.
    The government are stubbornly progressing with their plans despite warnings by The Treasury Select Committee, ABAB, Ex HMRC Management and heads of taxation at CIOT and ACCA.
    The big problem is that no one appears to have heard of this. It is the biggest change in the tax system since 1945 and has the potential to cause distress and cost (new IT, software subs and accountants fees) to £5.3 million businesses.
    Small businesses account for 60% of private sector employment and turnover of combined £1.8 trillion. Why is our government trying to disrupt them?
    Make your voice heard HMRC consultation docs https://www.surveymonkey.co.uk/r/5VCKXLP
    Petition
    https://petition.parliament.uk/petitions/167738


    Other reading
    https://www.parliament.uk/business/committees/committees-a-z/commons-select/treasury-committee/news-parliament-2015/making-tax-digital-publication-chairs-statement-16-17/


    http://www.accountingweb.co.uk/tax/hmrc-policy/mtd-faces-growing-delay-demand


    http://www.accountingweb.co.uk/tax/hmrc-policy/making-tax-digital-the-legal-hurdles


    Thanks for reading.
Page 2
    • CLAPTON
    • By CLAPTON 12th Oct 16, 11:06 PM
    • 40,869 Posts
    • 29,612 Thanks
    CLAPTON
    Perhaps, but there is not a lot wrong with the current HMRC software, so why force people to use third-party software at all? The current joint filing to Companies House and HMRC is a welcome simplification for smaller entities.
    Originally posted by Apodemus
    that may well be a valid point : I don't know the detail but only commenting upon the 3 monthly submissions
    • WEEN_NASTY
    • By WEEN_NASTY 13th Oct 16, 6:51 AM
    • 47 Posts
    • 15 Thanks
    WEEN_NASTY
    I have signed up here, it is new and seems pretty cool and super cheap. What do people think?

    https://taxodapp.com/
    Originally posted by strongboes
    The two issues here are will that software interface with HMRC's new system? The software companies currently at the trough appear to be the ones.
    Secondly, HMRC has requested free software to be made available but it cannot demand it. Free software will only be available to a point. When you hit a certain point, certain turnover or amount of invoices, you get to pay too.

    All a bit grim.
    • Pennywise
    • By Pennywise 13th Oct 16, 7:51 AM
    • 8,144 Posts
    • 14,191 Thanks
    Pennywise
    Perhaps, but there is not a lot wrong with the current HMRC software, so why force people to use third-party software at all? The current joint filing to Companies House and HMRC is a welcome simplification for smaller entities.
    Originally posted by Apodemus
    Unfortunately, the initial soundings from HMRC are that their software is to be withdrawn and third party software will be the only way to submit. In particular, at the moment, you can calculate your VAT return figures any way you want (paper, spreadsheet, software, back of fag packet) and just put the figures onto the HMRC input screen on their website. With MTD HMRC have already said that the existing VAT return system will be scrapped and submission directly via software will be the ONLY option! That's going backwards! Similar with payroll RTI submissions - currently HMRC provide a simple online calculation/submission tool for payroll - again, plans are that it's to be scrapped and every employer will have to use third party software. People just don't realise what's about to hit them!
    • WEEN_NASTY
    • By WEEN_NASTY 13th Oct 16, 11:15 AM
    • 47 Posts
    • 15 Thanks
    WEEN_NASTY
    Every self employed person I've spoken to to date did not know anything about MTD. It's shocking that HMRC have settled with Press releases on their site and YouTube videos to promote the plan. I'm sure the outcry to MP's and Treasury Select Committee would be greater if they knew. Like the 16/17 dividends tax, people will only make a noise when it hits. Big shock coming.
    • badmemory
    • By badmemory 13th Oct 16, 11:24 AM
    • 215 Posts
    • 191 Thanks
    badmemory
    I do the books for a friend (just to keep my hand in!) and I can forsee this being an absolute nightmare. Bank transactions would be fine but his cash transactions can take me WEEKS to sort out. Along the lines of 'well he paid me the £50 a week due last week but the 2 weeks before that he didn't pay'. When he found out about RTI he cut down on the work he did and sacked his 2 employees. I used to do the wages for him a couple of weeks in advance and then a couple of weeks in arrears - not acceptable via RTI.

    My guess is that if this comes in the cash transactions will just "stop" and I will only be told about the bank ones. Either that or he will finally retire and if he does I don't expect he will last 2 years & HMRC will have lost at least £10k a year.

    The software companies will also realise that they have you over a barrel and their charges will escalate.
    • Castle
    • By Castle 13th Oct 16, 11:39 AM
    • 1,060 Posts
    • 1,310 Thanks
    Castle
    Here's a previous thread about making tax digital:-
    http://forums.moneysavingexpert.com/showthread.php?t=5511828
    • WEEN_NASTY
    • By WEEN_NASTY 13th Oct 16, 4:05 PM
    • 47 Posts
    • 15 Thanks
    WEEN_NASTY
    Here's a previous thread about making tax digital:-
    http://forums.moneysavingexpert.com/showthread.php?t=5511828
    Originally posted by Castle


    Thanks for the link.


    Incredible that there is only one page of discussion.


    The comments suggesting that self employed should pay tax on a real time system should also remember that business owners do not get paid holidays or sickness, no pensions or benefits. They also have to find business, deal with staff, produce bookkeeping etc. As mentioned in my initial post, small business is an important part of the economy and it is in the best interests of everybody to ensure that they flourish. They certainly shouldn't burdened with administration in this flawed digital crusade.
    • DebbieR
    • By DebbieR 13th Oct 16, 9:04 PM
    • 318 Posts
    • 490 Thanks
    DebbieR
    I don't know why everyone is so worried. This HMRC video shows how simple it's going to be...free app for your smart phone, scan your receipts, hey presto no more bookkeeping. Even "John the plumber" can use it. They obviously haven't met my husband who's idea of filing receipts involves keeping them in his work trousers and me putting them through the wash!

    Seriously though, we have to do VAT returns every quarter so keeping up with the paperwork isn't going to be a problem, it's when the accountant asks us for extra money for the three extra submissions he'll have to do.

    https://www.youtube.com/watch?v=So1U0RzUGcs
    • strongboes
    • By strongboes 13th Oct 16, 10:08 PM
    • 69 Posts
    • 47 Thanks
    strongboes
    The two issues here are will that software interface with HMRC's new system? The software companies currently at the trough appear to be the ones.
    Secondly, HMRC has requested free software to be made available but it cannot demand it. Free software will only be available to a point. When you hit a certain point, certain turnover or amount of invoices, you get to pay too.

    All a bit grim.
    Originally posted by WEEN_NASTY
    I emailed them to ask, they said yes it will, they have the api or something for it and have made filings already.
    • xnoxxnox
    • By xnoxxnox 15th Oct 16, 9:49 PM
    • 61 Posts
    • 13 Thanks
    xnoxxnox
    It can be worse.... In Latvia VAT submission every month, by 15th of next month. If you can't do a quarter, chances are your end-of-year books have patchy receipts for the first quarter and possibly overpaying VAT. Every receipt for business expenses that is "put through the wash" is lost money.
    • Majestic12
    • By Majestic12 18th Oct 16, 9:06 PM
    • 109 Posts
    • 49 Thanks
    Majestic12
    I can see this being a nightmare with so many people playing DIY bookkeeper/accountant
    • Apodemus
    • By Apodemus 19th Oct 16, 6:43 AM
    • 296 Posts
    • 210 Thanks
    Apodemus
    I can see this being a nightmare with so many people playing DIY bookkeeper/accountant
    Originally posted by Majestic12
    But why shouldn't people be able to? As they say "tax shouldn't be taxing"!

    During one discussion I had with HMRC about self-assessment, they said that they found that individuals were much more inclined to file truthful returns than accountants...
    • Pennywise
    • By Pennywise 19th Oct 16, 7:56 AM
    • 8,144 Posts
    • 14,191 Thanks
    Pennywise
    I can see this being a nightmare with so many people playing DIY bookkeeper/accountant
    Originally posted by Majestic12
    Absolutely. As a book-keeper/accountant, you really wouldn't believe the kind of stuff that some clients put through their books - hairdressing, trainers, physiotherapy for bad back, gym membership, home Sky subscription, holidays, training for new skills, buying a business - these aren't mistakes of using the wrong card or cheque book - they genuinely think they're allowable expenses. Not to mention sales "forgotten" to be put through the books. Very few get "cars" right - some try to claim the 45p per mile on top of the purchase and running costs - others claim nothing except the 18p per mile petrol figure.

    A small proportion will bother to spend a few hours on HMRCs website to teach themselves how to do it properly. Most won't. Unless they simplify it, it will be a nightmare for HMRC and all those who suddenly think they can DIY will have a rude awakening when the penalty notices start to fly!
    • chrismac1
    • By chrismac1 20th Oct 16, 9:39 AM
    • 2,296 Posts
    • 1,319 Thanks
    chrismac1
    Under Making Tax Digital a massive change in self-assessment is planned from April 2018:

    1. 5 tax returns per year instead of 1.
    2. If the system had been in place for 2015-16 then the first return would have been due by 31 July 2015 not 31 January 2017.
    3. All filing - even for just one rental property - to be done by "software". Software not yet defined by HMRC.
    4. However HMRC have defined that "software" does not include keying data in to the HMRC database, and it also does not include spreadsheets.

    This is a massive change with under 18 months left before it supposedly starts. As an accountant with over 140 clients I personally expect to be £10k to £15k better off each year if MTD is implemented.

    But it will be a nightmare for lots of small business owners, hence the higher fees I'll end up charging to do it for them. So I am fighting this with everything I have.

    I have written to my MP, the Treasury Select Committee and the Chancellor to get it scrapped. If you do a self-assessment tax return I commend you to do what you can to fight this drivel.

    It is Making Tax Diabolical!
    Hideous Muddles from Right Charlies
    • Pennywise
    • By Pennywise 3rd Nov 16, 8:24 PM
    • 8,144 Posts
    • 14,191 Thanks
    Pennywise
    HMRC are asking for responses to their MTD consultation but the deadline is 7 Nov, so not much time left. It's every small business owners' opportunity to tell HMRC what we think of their plans and is a fairly simple online survey.

    https://www.gov.uk/government/collections/making-tax-digital-consultations
    • WEEN_NASTY
    • By WEEN_NASTY 3rd Nov 16, 10:15 PM
    • 47 Posts
    • 15 Thanks
    WEEN_NASTY
    A couple of interesting reads if anyone is interested. This guy is well qualified to comment.

    https://www.icas.com/technical-resources/making-tax-digital-why-did-the-titanic-sink

    https://www.icas.com/technical-resources/making-tax-digital-lets-hope-hmrc-will-listen
    • chrismac1
    • By chrismac1 4th Nov 16, 8:32 AM
    • 2,296 Posts
    • 1,319 Thanks
    chrismac1
    Excellent articles which I heartily commend to all HMRC staff, and indeed all software companies thinking only of the wonderful fees MTD can bring them and not the risks.

    To any software companies reading this, in my judgement the risks of MTD going down with all hands far outweigh the likely benefits to HMRC, taxpayers and others. And let me assure you, software companies, as someone with over 30 years' experience of dealing with the UK tax services I am 99.999% confident HMRC will ensure there are no lifeboats for you guys.

    BIG WRITE OFF is much more likely to feature in your reports to directors than massive profit windfall in my view.
    Last edited by chrismac1; 07-11-2016 at 6:04 AM.
    Hideous Muddles from Right Charlies
    • WEEN_NASTY
    • By WEEN_NASTY 4th Nov 16, 6:19 PM
    • 47 Posts
    • 15 Thanks
    WEEN_NASTY
    https://www.nuj.org.uk/documents/nuj-response-to-the-hmaking-tax-digital-hmrc-consultation/nuj-response-to-the-hmrc-consultation-making-tax-digital.pdf

    Journalists against it too
    • chrismac1
    • By chrismac1 8th Nov 16, 8:04 AM
    • 2,296 Posts
    • 1,319 Thanks
    chrismac1
    Breaking news! Someone has told Captain Smith (a.k.a. Jim Harra, director of customer strategy and tax design at HMRC) that there are icebergs ahead.

    In a very surprising reaction, the Captain appears to at least be considering calling down to the engine room and telling them to lay off the coal in the RMS Making Tax Digitial before it ploughs full steam into the icefield.

    Harra acknowledged that there will be ongoing costs for those businesses not already using accounting software, for those who are already using software MTD may reduce their costs in future. He said “we need to get the evidence about the ongoing costs to understand it thoroughly”, and reiterated that the consultation process was the way HMRC is seeking to gather this information.

    I am staggered anyone at a high level in HMRC even possesses this much commonsense. Note for the software companies my last post about the provision of lifeboats on this ship now has even more resonance.
    Hideous Muddles from Right Charlies
    • WHA
    • By WHA 8th Nov 16, 9:40 AM
    • 1,336 Posts
    • 1,016 Thanks
    WHA
    I was on a MTD course last week and the speaker (a well regarded tax specialist on various tax/accounting official/governmental committees etc) said HMRC seem to be back-tracking almost everywhere with MTD at the moment.

    Apparently it's been suggested that it may be so watered down to be voluntary for the first few years or that the thresholds will be very high meaning most smaller businesses won't have to do it.

    What has become clear, he told us, is that HMRC simply didn't understand the complexities of business accounts (Doh!) and that the MTD architects are really struggling with the proposed system now that they're becoming aware of all the different rules/options for business accounts/tax which have to be programmed in such as opening/closing years, basis periods, change of year end, different year end away from 5/4 etc.

    They're also back-tracking in other areas. At first, they said spreadsheets weren't acceptable, but now they're trying to find a fudge to accept them. They first said that ALL book-keeping, on a transactional level would be submitted, but now say it's just totals they want for a small number of analysis headings. They first said that software was the only submission method and that HMRC website for VAT submissions etc would be taken down, but now they're saying that HMRC website will continue to have data entry functions for the new reporting. They're also backtracking on accuracy saying that reasonable estimates will be acceptable each quarter rather than real figures.

    All this before the official consultation finished (yesterday) so there's a lot more expected.

    They're basically panicking that the new system starts in just 18 months time and they're nowhere near having even a blueprint plan to write the programs needed as the programmers havn't been given the rules of the system!
    Last edited by WHA; 08-11-2016 at 9:43 AM.
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