House of Lords committee call for MTD delay

Pennywise

Good news maybe on the way for small businesses in that HMRC have been roundly condemned for their plans to start the compulsory making tax digital initiative next April. The HOL economic affairs committee have called for a delay of at least a year for VAT submissions and further delays for it being rolled out to other taxes, until at least 2022. We can only hope that HMRC finally listen to concerns raised and that they'll act to avoid the car crash that's waiting to happen in April 2019. HMRC have been watering down their MTD plans year by year because they're slowly realising they're unworkable. Next years' introduction was so watered down it was pointless anyway. Businesses who want to can already "file by internet" so why make it compulsory? Even moreso, why make quarterly reporting for other taxes compulsory when there is no benefit, just a lot of hassle and cost for small businesses? With any luck, they'll finally realise their stupidity and just facilitate better online reporting for those businesses who actually want to or who'd benefit.

https://www.accountingweb.co.uk/tax/hmrc-policy/lords-slam-making-tax-digital-rollout

00ec25

excellent, long live the spreadsheet :rotfl:

chrismac1

In my opinion, the VAT take in year 1 of MTD has an 80% chance of being significantly less than in the current year, from the small business sector.
I base this on me experience of dealing with small business owners over the past 10 years. Left to their own devices most of them will make some of the following assumptions:
1. 0% VAT applies to a lot more of their sales than the law states, for example on "disbursements" and sales of food.
2. VAT is not due on deposits received.
3. All business entertaining is tax-deductible.
4. If you and your spouse jointly run a buisness and you meet each week in the local pub or restaurant, that is a buiness meeting and the 20% VAT is claimable in full.
5. VAT on fuel, cars and other related motoring costs is claimable in full.
6. Insurance has VAT on it, so if you pay by monthly standing order there is 20% VAT to claim for.
Whilst I accept that the cloud software makes efforts to steer users away from these errors, in practice each of these errors has been made by at least 1 of my cloud clients who were doing DIY accounting before moving to me.
This is worse than just a car crash implementation, it is a car crash which will make the deficit worse.

Pennywise

chrismac1 wrote: »

Whilst I accept that the cloud software makes efforts to steer users away from these errors, in practice each of these errors has been made by at least 1 of my cloud clients who were doing DIY accounting before moving to me.
This is worse than just a car crash implementation, it is a car crash which will make the deficit worse.

Agree with that. But also to add that most software has a 20% vat default on either all expense codes or some make assumptions as to what is/isn't vatable - i.e. default assumption that accountancy is vatable so automatically claim 20% on payments. If the supplier isn't vatable, that's wrong but it takes the user to actively over-ride the VAT figure to zero. In my experience most people just accept what the system defaults to, which means overclaimed Vat. Even worse with automated bank imports where is the transaction was wrongly marked the first time, the system remembers it and subsequent entries will be wrong too!

Tax ISN'T simple, accounting ISN'T simple - HMRC and software firms telling small business owners that it is quick and simple using MTD compliant software is just going to mean far more mistakes and yes, probably lower tax take and a lot more work for HMRC staff trying to deal with errors etc. Anyone who thinks MTD will improve tax yield and reduce mistakes is completely deluded - garbage in, garbage out!

00ec25

Pennywise wrote: »

garbage in, garbage out!

quite so, and is why a fair % of our contractor clients refuse to leave FRS as the software expense defaults are then irrelevant and they don't have to learn what to do. They refuse to pay for bookkeeping, but their own time is certainly more cost effective spent on their contract work, not doing their own bookkeeping.

Upshot, HMRC collects more VAT than it might do under standard scheme, a position that is to the overall benefit of UK Plc

Pennywise

00ec25 wrote: »

quite so, and is why a fair % of our contractor clients refuse to leave FRS as the software expense defaults are then irrelevant and they don't have to learn what to do. They refuse to pay for bookkeeping, but their own time is certainly more cost effective spent on their contract work, not doing their own bookkeeping.

Upshot, HMRC collects more VAT than it might do under standard scheme, a position that is to the overall benefit of UK Plc

Exactly - the flat rate scheme was a simplification measure, not a revenue creating option. I too have many clients continuing to use it because they don't want the hassle/time of "proper" VAT accounting. Before MTD can work, we need a lot more simplification, get rid of the anomalies, get some proper/clear guidance etc.

chrismac1

It's worth pointing out that, to the best of my knowledge, still NONE of the Cloud software systems can produce flat rate scheme VAT returns automatically.


If HMRC was anything other than a third rate tax system, it would postpone this stupid software mess for at least one year - probably 2 - until all of this sort of stuff had been properly sorted out AND free software was available, which HMRC originally promised the House of Commons Treasury Select Committee back at the start of this farce but then backtracked on.


Captain Smith of HMRC, there is a massive iceberg ahead, full steam the engines is the wrong answer you numpty!

Pennywise

chrismac1 wrote: »

It's worth pointing out that, to the best of my knowledge, still NONE of the Cloud software systems can produce flat rate scheme VAT returns automatically.

Most of our clients use Freeagent which will do flat rate scheme returns. I'm pretty sure Kashflow and Quickbooks do too.

00ec25

chrismac1 wrote: »

It's worth pointing out that, to the best of my knowledge, still NONE of the Cloud software systems can produce flat rate scheme VAT returns automatically.

No
FreeAgent does FRS in its sleep, hence my earlier post

chrismac1

Thanks for that, good to know.

chrismac1

I know there are a few HMRC staff members who read these posts. I realise I am not your most popular poster on here, and that HMRC management create a pretty toxic culture where any form of what they see as dissent can be a bit career threatening.


But I urge you to do whatever you can to alert your chiefs that they are heading for a big disaster with this, which will damage our country's finances.


If you look back on my posting history since 2008 you'll see this is the first time I've ever posted anything like this.