Making Tax Digital

Apodemus

Majestic12 wrote: »

I can see this being a nightmare with so many people playing DIY bookkeeper/accountant

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

Majestic12 wrote: »

I can see this being a nightmare with so many people playing DIY bookkeeper/accountant

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

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!

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

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

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.

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

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.

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!

chrismac1

This whole thing is a case study in why it is very poor Government to just give a department - in this case HMRC - a "pot of money" - in this case £1.3bn and then just let them come up with some ideas on how to spend it.

True this sort of thing has happened with some of my private sector employers down the years. But the discipline of the markets applies and if you do it often enough you are in liquidation. If ANY of my employers operated the way HMRC operate in ANY sector - even very high profit margin sectors - they would be busted years ago.