Making Tax Digital

[Eric Mc]

After 20 years I'm still surprised to find people who aren't aware that the Payments on Account can be reduced.

[anonymous-user]

Eric Mc said:

After 20 years I'm still surprised to find people who aren't aware that the Payments on Account can be reduced.

Presumably you have to claim you're expecting a lower income though?

[Willhire89]

fblm said:

Eric Mc said:

After 20 years I'm still surprised to find people who aren't aware that the Payments on Account can be reduced.

Presumably you have to claim you're expecting a lower income though?

Not just expecting - it needs to be lower than the amount you request otherwise HMRC will want interest

[Eric Mc]

fblm said:

Eric Mc said:

After 20 years I'm still surprised to find people who aren't aware that the Payments on Account can be reduced.

Presumably you have to claim you're expecting a lower income though?

There has to be a valid reason as to why you think the payments should be reduced. Lower business profits is one of them. It could also be that you had ceased trading or the source of income (such as a buy to let) was no longer generating profit for you.

[plasticpig]

Digga said:

ur management accountant is in doing year end figures and he's of the opinion that the scheme, as HMRC currently want it is not only unworkable for many (if not even most) SMEs they deal with (not us) but that there is no way it will go ahead.

We still have largish firms that don't even have BACS or online banking FFS!

Slightly off topic but my company doesn't. The reason being is that we require two signatures on a cheque and our current bank do not offer a way of replicating this on their online business offerings. Last time I looked (which admittedly was a few years ago) no other bank did either.

It would be a major pain to move anyway as we have facilities with the current bank account that would require personal guarantees and or collateral for a new account.

[ninja-lewis]

plasticpig said:

Digga said:

ur management accountant is in doing year end figures and he's of the opinion that the scheme, as HMRC currently want it is not only unworkable for many (if not even most) SMEs they deal with (not us) but that there is no way it will go ahead.

We still have largish firms that don't even have BACS or online banking FFS!

Slightly off topic but my company doesn't. The reason being is that we require two signatures on a cheque and our current bank do not offer a way of replicating this on their online business offerings. Last time I looked (which admittedly was a few years ago) no other bank did either.

It would be a major pain to move anyway as we have facilities with the current bank account that would require personal guarantees and or collateral for a new account.

All the major banks have offered this for several years now on their standard online banking services.

https://www.lloydsbank.com/business/banking-online...
https://www.help.barclays.co.uk/faq/business/servi...
http://www.business.natwest.com/business/turnover-...
http://www.business.hsbc.uk/en-gb/bib-help-centre/...

[plasticpig]

ninja-lewis said:

All the major banks have offered this for several years now on their standard online banking services.

https://www.lloydsbank.com/business/banking-online...
https://www.help.barclays.co.uk/faq/business/servi...
http://www.business.natwest.com/business/turnover-...
http://www.business.hsbc.uk/en-gb/bib-help-centre/...

The problem was with our bank was that the user who was the account administrator could set up additional users who could authorize payments and this didn't require any additional authorization from another user. This renders the whole concept pointless as the administrator could simply set up an additional user with authorization privileges and login as that user to authorize the payment.

[markcoznottz]

Water cooler talk between two public school mandarins ' So Quentin, the treasury has sent an internal memo round to see if we can rustle up some more greenbacks, after all we have an NHS crisis, a care home crisis, and local authority shortfall in spending, can't we force through a new it tax system? After all if people suffer because of our incompetence it won't matter because we have jobs for life. Hey remember when self assessment was introduced all those fines we levied? There was a new revenue stream right there! Game of tennis at 5pm, ok see you there. '

[carl_w]

Eric Mc said:

The Payment on Account you will be making on 31 January 2017 is for tax year 2016/17, which, when you think about, we are 3/4 of the way through already. HMRC's thinking is that, if the Payment on Account is realistic, why not pay it in January as you should already have made 3/4 of your business profits for the year by then anyway.

What's nice is when you submit your SA return and then they offer to adjust your tax code so you don't have to make payments in the future. Then you've paid your 2015/16 bill, your 2016/17 payments on account and your tax code is being used to collect your 2017/18 estimated bill in advance. Luckily you can call them up and get them to change it back.

[Eric Mc]

Under self assessment, you have to instruct HMRC to collect underpaid tax through a tax code adjustment. If HMRC do this automatically, they are in the wrong.

[Digga]

plasticpig said:

ninja-lewis said:

All the major banks have offered this for several years now on their standard online banking services.

https://www.lloydsbank.com/business/banking-online...
https://www.help.barclays.co.uk/faq/business/servi...
http://www.business.natwest.com/business/turnover-...
http://www.business.hsbc.uk/en-gb/bib-help-centre/...

The problem was with our bank was that the user who was the account administrator could set up additional users who could authorize payments and this didn't require any additional authorization from another user. This renders the whole concept pointless as the administrator could simply set up an additional user with authorization privileges and login as that user to authorize the payment.

The theories and technicalities matter not; the practicalities, as Plasticpig points out are, many, many firms are not really on line with accounts or banking. That's it.

I don't know why it's so hard for HMRC or the government or any one else to understand this. If you live in the real world and have access to, dealings with and knowledge of ordinary SMEs (and some of these are really not that small) then you would know this and realise the scheme is a train wreck waiting to happen - yet another administrative hurdle that, as ever, impacts the smallest and most vulnerable firms hardest whilst larger firms breeze through, undaunted (and therefore, largely, uncomplaining).

Already, for 2017, we have the joke of a (yes, yet a fkingnother) pension scheme enrollment. I am sure this will not be fully complied with. When are the government going to stop loading up SMEs with overheads and bureaucracy? It's utter madness. Even for businesses like my own, where we were well ahead and on top of pension provision in any case, the actual process is less than easy - for one example, there's a fair bit that you cannot do in advance to set it up, which is plain daft - and it will weigh heavy on very small businesses, or those not really accustomed to working online.

Part of the reason the Greek economy is so truly screwed is the labyrinthine complexity of doing business there. It is no surprise it is one of the things the blinkered Troika utterly failed to spot or address when they devised their measures for the country. It seems the UK is, in its own way, slightly guilty of this idiocy and that people in government really don't understand what makes large swathes of the economy tick. Interesting in the paper at the weekend to see the bosses of the big housebuilders all chime in to criticise the present length of the planning process, all of them pointing out the fact that it hits smaller developers hardest and that without it there would be more diversity, competition and volume in UK housebuilding.

When will the governments and political parties learn?

[LeighW]

Digga said:

I don't know why it's so hard for HMRC or the government or any one else to understand this.

Digga said:

If you live in the real world...

You answered your own question right there!

[Ken Figenus]

markcoznottz said:

Doesn't matter comrade, HMRC like all public sector departments is riddled through with common purpose drones who oppose western democracy, and almost certainly hate sole traders and definitely don't mix with any.

At first I though that you were being a bit silly...then I thought of a couple of HMRC people I know (through friends and as partners of mates) but who don't really click with me... They take - I give! But still they dont like noisy entrepreneurial types with noisy cars! Its just like the 'higher taxes - give me" mob - take take rather than work work.

[Eric Mc]

Just a heads up.

On Wednesday 2 February, BBC Radio 4's Money Box Live will cover the topic of Making Tax Digital.

It will be broadcast at 3.00 pm and will be on the iPlayer afterwards.

Money Box today (Saturday 28 January) also devoted about ten minutes to it. This should be on the iPlayer as well within an hour or so if anybody wants to hear what was said.

[K12beano]

Money Box - always good for raising my blood pressure .

But thanks for the heads up, Eric!

[PurpleMoonlight]

Is there a trigger amount to instigate the on account payments in Jan/July?

This January I had to pay £800 for 2015-16 but HMRC haven't demanded anything on account of 2016-17.

Next year, with the Dividend tax, I will have about £2000 to pay in Jan 2018.

[ninja-lewis]

PurpleMoonlight said:

Is there a trigger amount to instigate the on account payments in Jan/July?

This January I had to pay £800 for 2015-16 but HMRC haven't demanded anything on account of 2016-17.

Next year, with the Dividend tax, I will have about £2000 to pay in Jan 2018.

You have to make 2 payments on account every year unless:

• your last Self Assessment tax bill was less than £1,000
• you’ve already paid more than 80% of all the tax you owe, for example through your tax code or because your bank has already deducted interest on your savings

[PurpleMoonlight]

ninja-lewis said:

You have to make 2 payments on account every year unless:

• your last Self Assessment tax bill was less than £1,000
• you’ve already paid more than 80% of all the tax you owe, for example through your tax code or because your bank has already deducted interest on your savings

Ta.

I guess I had better budget for £3000 next January then.

[JagLover]

anonymous said:

[redacted]

This is a very fair point and will help those very worried about this to keep a sense of proportion.

The majority of my clients use sage and, as long as the invoices have been input correctly and bank movements likewise, to produce an accurate VAT return will indeed be a click of the button and to produce any additional information required may also be as similarly straightforward particularly if these quarterly returns are on a cash basis.

Let us not forget that Companies have a legal requirement to maintain adequate accounting records. Many older methods of maintaining accounts, including manual cashbooks, may indeed meet that requirement but are not particularly efficient. The switch may be painful but a few years down the line total time will be just the same or less and you will then be using accounting software fit for the 21st century.

[Eric Mc]

PurpleMoonlight said:

ninja-lewis said:

You have to make 2 payments on account every year unless:

• your last Self Assessment tax bill was less than £1,000
• you’ve already paid more than 80% of all the tax you owe, for example through your tax code or because your bank has already deducted interest on your savings

Ta.

I guess I had better budget for £3000 next January then.

There have been significant tax rule changes starting on 6 April 2016.

Banks no longer deduct tax on interest.

Dividends now attract tax at 7.5% once your dividend income exceeds £5,000.

For that reason, the Payments on Account created by your 2015/16 tax liability will not be a good indicator of the 2016/17 liability - even if your income for 2015/16 and 2016/17 are identical.

Just be aware that some people will have a fairly high bill to pay on 31 January 2018 as a result.