Why Making Tax Digital is so stupid

agrinnall

dori2o wrote: »

The idea was rejected because of costs, with a suggestion that it would cost in excess of £10k to change an existing box on the system which.is limited to 47 characters into a free text box with no limit to type or number of characters.

Had this service been developed in house, with government employed computer programmers (potentially employed across Government rather than for each department), with licences fully available, then costs would be limited only to the salary of those who make the necessary changes.

I'm afraid this shows up your lack of understanding of how computer systems are developed. It's not just the cost of a programmer's salary for making the change, you'd also have to include (at least) the following: a business analyst to specify the change, including consultation with those such as yourself who would be interested in the change; the person to do the coding; unit testing; system testing; user acceptance testing; documentation; implementation.

While in excess of £10K may sound like a lot to you, and almost certainly is higher when done by third party rather than in house, it's not out of the normal range of costs for such a change.

dori2o

agrinnall wrote: »

I'm afraid this shows up your lack of understanding of how computer systems are developed. It's not just the cost of a programmer's salary for making the change, you'd also have to include (at least) the following: a business analyst to specify the change, including consultation with those such as yourself who would be interested in the change; the person to do the coding; unit testing; system testing; user acceptance testing; documentation; implementation.

While in excess of £10K may sound like a lot to you, and almost certainly is higher when done by third party rather than in house, it's not out of the normal range of costs for such a change.

The point is that in house changes would still cost significantly less as the Government wouldn't be looking to make a profit from the work being done.

Whether my terminology/or understanding of the full process is complete or not, the fact is that when a 3rd party makes changes to a computer system, their charges include a significant profit margin for the work being done that wouldn't exist with in house developments.

As it is now these explanations cannot be included within the PAYE tax calculation document, This means that the officer then has to take additional time writing a seperate letter, which involves further costs such as time, printing costs, additional postage costs, and increases the potential of unnecessary contact as the calculation will be received without an accompanying explanation or vis a vis. Again this costs time with an adviser explaining again where they could be dealing with another taxpayer.

Pennywise

How much would it cost for the govt to have a small army of computer programmers, analysts, managers, support staff, etc., on "stand by" just waiting to do such changes? Not to mention the costs of housing them in an office, their pensions, their equipment & infrastructure, their sick and maternity pay, their training, etc. Actual wages is usually a small proportion of total costs. At least with external service providers, you can get rid of them at the end of their contract and don't have to pay redundancy costs etc. It's a very common mistake for people just to think about salary as the only cost - it's usually dwarfed by all the other "hidden" costs involved.

Pennywise

dori2o wrote: »

It isnt 6 tax returns per year, it's 6 submissions, one of which is simply a button press to confirm that the information held is correct and complete, giving people one final chance to review, and if necessary amend, what has already been submitted over the previous 4 accounting periods, and will be available to submit at the same time as submitting the final figures.

I think you are under-estimating what goes into preparing a set of accounts. Things like making adjustments for stock levels, accruals, prepayments, debtors & creditors, other provisions, etc. Those things are the reason why there is currently a period of several months allowed between the end of the accounting period and the tax return submission deadline.

The 6 submissions per year is probably just about do-able in 4 for the smallest/simplest businesses using the cash basis as they won't have to factor in those adjustments, so their final return will indeed usually be the same as the 5th and nothing more than a push of a button.

But, for the many businesses who either aren't eligible for the cash basis, or who need to prepare "proper" accounts for other reasons, such as for their bankers, investors, or because their business is complex with stock movements, work in progress, etc., "cash" basis is wholly inappropriate so it's a lot of extra work to either prepare cash accounts just to submit to HMRC during each year, or to prepare "proper" accounts every quarter.

And what exactly is the point of any of this? If HMRC are to be believed, it's not a method to get businesses to pay their taxes earlier. So if that's true, why are HMRC so keen on introducing it at all? If any business genuinely wants to know it's tax position sooner and more regularly (which is HMRC's reason for doing all this apparently!), it can make it's own decision to prepare quarterly management accounts and estimate it's taxes from those. In fact, many businesses already do exactly that. How will any of this help them when they are forced with an added burden of submitting information to HMRC?

HMRC need to just make the whole MTD thing purely voluntary. That way, if they are right, and businesses do want to do their submissions more frequently, they can do so. But it also means that businesses are free to carry on doing what they've been doing for the last 20+ years.

Pennywise

dori2o wrote: »

As an accountant you have a duty to advise on the facts

We don't know "the facts" - that's the problem. It's introduction is less than a year away, and "the facts" are still not finally confirmed. Now it's been removed from the Finance Act, we won't know "the facts" until the Autumn, just six months ahead of it's introduction. As it stands, HMRC have constantly moved the goalposts. First we were told it was submission of all transactions, then it became just category totals. First we were told that spreadsheets weren't suitable, now apparently some will be. We were told that HMRC weren't providing a portal and that third party software was needed (and that HMRC's VAT return submission portal and payroll portals would be withdrawn), now we're told they're staying and there will be a HMRC submission portal for those without software. Businesses, book-keepers and accountants just can't plan ahead for this because "the facts" aren't yet finally confirmed!!

dori2o wrote: »

By having to update their accounts quaterly it should mean an end to the 'shopping bag' accounting that many accountants fear come December/January.

Indeed, book-keepers and accountants will now have to deal with a one month "shopping bag" timescale/deadline every 3 months to do such work instead of a 9/10 month timescale every year. Please explain how that's better?? Not to mention the doubling up of work in the first year, when they've got the 17/18 return to prepare by Jan 19, but quarterly returns throughput 2018 also - that sounds like having to do twice the work in a single year to me!

chrismac1

In my view one motivator behind these changes is precisely to undermine accountants and in some way adjust the current position where the demand swamps the supply and most accountants earn excess salaries, myself included.

But the hamfisted way HMRC has chosen to go about this, as the previous post highlights, means that the demand / supply imbalance is set to get even more extreme, barring a wholsale change or total abandonment of MTD. In anticipation of the extra workload I am already flagging up higher fees and turning all marginal possible new clients away from the door.

This underlines just how clueless the top brass at HMRC are.

Pennywise

chrismac1 wrote: »

In anticipation of the extra workload I am already flagging up higher fees and turning all marginal possible new clients away from the door.

Likewise, I'm doing the same. I'm definitely "clearing the decks" for the extra workload. As an example, I've not taken on a single new client this year - I've basically shut my doors until I know what's happening next year. And yes, for the past couple of years, I've not signed up any clients to any fixed fees beyond April 2018 whereas I usually do a 3-5 year fixed fee renewal - all current client fixed fee agreements are set to end with the 17/18 tax year! Simply because I've no idea at all just how much extra time I'll have to spend on them, so they're all moving over to time-based variable fees until the dust settles. I expect 18/19 to be very lucrative for me due to MTD as I expect to be working longer days and weekends to get through the workload, so why on earth would I be so against MTD? It's because I can see it's just a car crash waiting to happen!

dori2o

Pennywise wrote: »

We don't know "the facts" - that's the problem. It's introduction is less than a year away, and "the facts" are still not finally confirmed. Now it's been removed from the Finance Act, we won't know "the facts" until the Autumn, just six months ahead of it's introduction. As it stands, HMRC have constantly moved the goalposts. First we were told it was submission of all transactions, then it became just category totals. First we were told that spreadsheets weren't suitable, now apparently some will be. We were told that HMRC weren't providing a portal and that third party software was needed (and that HMRC's VAT return submission portal and payroll portals would be withdrawn), now we're told they're staying and there will be a HMRC submission portal for those without software. Businesses, book-keepers and accountants just can't plan ahead for this because "the facts" aren't yet finally confirmed!!



Indeed, book-keepers and accountants will now have to deal with a one month "shopping bag" timescale/deadline every 3 months to do such work instead of a 9/10 month timescale every year. Please explain how that's better?? Not to mention the doubling up of work in the first year, when they've got the 17/18 return to prepare by Jan 19, but quarterly returns throughput 2018 also - that sounds like having to do twice the work in a single year to me!

The reason why changes have taken place is because of consultation.

They have listened to some concerns and made changes, which is what you and other accountants had said you wanted.

It seems nothing is ever good enough. You want a say on how the system works then moan when these changes are implemented.

You complain about the fact only 3rd party software can be used, then moan when HMRC offer their own online portal.

As for the issue about doing the work, you'll only have 1/4 of the work to do rather than rummaging through a shopping bag which contains 12 months plus of accounting data, much of which is likely tobe ofno use at all. And for many of your clients, I.e those in the CIS process, there'll be very little to do as this data will pre-populate.

Plus not everyone will have the same reporting period, so its not.like every one of your clients will need to be submitted at months 3, 6, 9 and 12.

As for the timetable for when it starts, that isnt set by HMRC, that is dictated by HMT and the wider Government.

Also the issue regarding the removal from the FA. Again this is a decision of HMT who control the legislation surrounding the FA.

Other businesses/individuals/accountants cope quite well with monthly accounting/submissions with VAT, at least MTD will only be once every 3 months.

This is an opportunity to educate your clients into keeping better records to enable you to deal with their details in a more organised manner.

If I was on the other side of the fence I simply wouldnt accept the shopping bag accounting way of doing things.

Keeping records is actually a very simple task. I watched my father do it every Friday for years. Took him about half an hour at most (usually at the kitchen table after having had his tea and whilst watching blockbusters) using nothing other than a pen, calculator and a hardback A5 notebook with each page seperated into columns, income, expenses etc etc.

He'd be easily able to calculate weekly turnover, expenses, net profits and year to date turnover, profits, and tax due at each week/year to date, meaning he always had an idea of what money he had to have saved up in the bank ready for submitting his return. Which again was easy as all the information was contained in his red A5 oxford ruled notebook.(if I remember right they're still up in the loft)

A simple document wallet contained receipts, neatly stacked and stapled together in weekly bundles. On the back of the flap on the wallet was other important information, I.e. loss (if any) carried forward, etc.

Its not exactly rocket science, it just takes a little commitment, a very small amount of time each week, the ability to use a calculator, and basic mathematics.

Nowadays these 3rd party applications actually do the maths for you, so its just a case of entering figures into the system.

chrismac1

Health and Safety Notice:

Do not board any large ocean liners heading over the North Atlantic in April if the captain is the previous poster!

Pennywise

I'm so glad that you know so much about small businesses and their book-keepers and accountants. Remind me again - how many years have you been an accountant - how many sets of accounts have you prepared for the self employed? After all, you are clearly an expert. I now realise that I've been so stupid for the last 35 years as it never occurred to me to show my clients how they could improve their book-keeping. All my clients will be sat there, eagerly awaiting me telling them about how they can easily write up their accounts and file their paperwork neatly in plastic folders in just half an hour every Friday night. What an idiot I must have been all these years!