Making Tax Digital
Discussion
JagLover said:
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.
As a result, a business may have to spend an inordinate amount of time rejigging what they have already submitted under the quarterly returns in order to reverse some claims they made automatically and now realise were not valid or would be wasteful. You can't make capital allowance or loss relief claims quarterly, for example. Indeed, you wouldn't want to because you need to review the situation at the end of the year to be sure what allowances you want to claim. You don't want to waste them in error.
As it stands, HMRC are NOT amending the underlying tax rules so many of these claims will still be based on annual submissions - so the REALLY important tax decisions will still have to be made annually.
And when it comes to simple traders engaging in complex situations - which happens all the time, especially if acquiring plant and machinery through finance deals, my hunch is that an awful lot of the quarterly data submitted in those circumstances will be hopelessly wrong.
And don't forget, although the whole concept was launched on the basis that the annual return would be abolished, we now know that is not the case. An annual return will still be required on top of the four (or eight etc - depending on the circumstances ) returns that the individual will already have made.
Frankly, I am at a real loss as to what meaningful data HMRC will get under this system over and above what they get already.
Following the submission of the Consultation Document returns to HMRC on 7 November, we were promised a statement by HMRC for December. That never happened.
They then said they would make a statement in early January. That never happened either.
They then said by the end of January. Well, we haven't had it yet and there are only two working days left in January. The fact that they have delayed so long in announcing their views on the consultation document submissions does lead me to believe something is afoot at the Treasury.
Hmm - this is getting interesting.
HMRC has just released this report - which was compiled and printed one year ago but has only now been released. This is NOT the report on Making Tax Digital I was talking about above. This is a separate report they commissioned into how the general public felt about interacting with HMRC using on line facilities.
On the whole, it states that the public were not confident in or convinced by HMRC's wishes to "go digital".
The question I have is, why did HMRC sit on this report for a whole year before publishing it?
https://www.gov.uk/government/uploads/system/uploa...
HMRC has just released this report - which was compiled and printed one year ago but has only now been released. This is NOT the report on Making Tax Digital I was talking about above. This is a separate report they commissioned into how the general public felt about interacting with HMRC using on line facilities.
On the whole, it states that the public were not confident in or convinced by HMRC's wishes to "go digital".
The question I have is, why did HMRC sit on this report for a whole year before publishing it?
https://www.gov.uk/government/uploads/system/uploa...
Eric Mc said:
My main concern for more sophisticated businesses is that the claims and allowances that are based on the annual accounts and tax review will still need to be made annually.
As a result, a business may have to spend an inordinate amount of time rejigging what they have already submitted under the quarterly returns in order to reverse some claims they made automatically and now realise were not valid or would be wasteful. You can't make capital allowance or loss relief claims quarterly, for example. Indeed, you wouldn't want to because you need to review the situation at the end of the year to be sure what allowances you want to claim. You don't want to waste them in error.
As it stands, HMRC are NOT amending the underlying tax rules so many of these claims will still be based on annual submissions - so the REALLY important tax decisions will still have to be made annually.
And when it comes to simple traders engaging in complex situations - which happens all the time, especially if acquiring plant and machinery through finance deals, my hunch is that an awful lot of the quarterly data submitted in those circumstances will be hopelessly wrong.
And don't forget, although the whole concept was launched on the basis that the annual return would be abolished, we now know that is not the case. An annual return will still be required on top of the four (or eight etc - depending on the circumstances ) returns that the individual will already have made.
Frankly, I am at a real loss as to what meaningful data HMRC will get under this system over and above what they get already.
It's Big Data.As a result, a business may have to spend an inordinate amount of time rejigging what they have already submitted under the quarterly returns in order to reverse some claims they made automatically and now realise were not valid or would be wasteful. You can't make capital allowance or loss relief claims quarterly, for example. Indeed, you wouldn't want to because you need to review the situation at the end of the year to be sure what allowances you want to claim. You don't want to waste them in error.
As it stands, HMRC are NOT amending the underlying tax rules so many of these claims will still be based on annual submissions - so the REALLY important tax decisions will still have to be made annually.
And when it comes to simple traders engaging in complex situations - which happens all the time, especially if acquiring plant and machinery through finance deals, my hunch is that an awful lot of the quarterly data submitted in those circumstances will be hopelessly wrong.
And don't forget, although the whole concept was launched on the basis that the annual return would be abolished, we now know that is not the case. An annual return will still be required on top of the four (or eight etc - depending on the circumstances ) returns that the individual will already have made.
Frankly, I am at a real loss as to what meaningful data HMRC will get under this system over and above what they get already.
Take those millions of returns and HMRC could:
- identify patterns between the quarterly and final tax returns for different sectors, taxes and transactions.
- compare with other data on Connect for inconsistencies
- generate real-time fiscal forecasts for receipts and warning signs for the wider health of the economy
- identify new avoidance strategies at early stages
It's a fundamental shift from inspecting individual tax returns to analysing trends and patterns using machine learning. The same sort of analysis that Tesco or Google can perform on their customer base. It is ambitious and probably a little too rushed (based on public information so far) but a Digital approach like this is going to happen sooner rather than later.
Making Tax Digital is just one part of the wider transformation that HMRC is undergoing.
Eric Mc said:
I have no doubt this is going to happen at some point in the future.
But having a system that can handle all the data accurately for 40 million taxpayers up and running and fully functioning on 1 April 2018 is overly optimistic
Remember Alex Salmond believed that within 18 months of a YESNP vote that every single UK institution would. E replicated set up and running without issue... hmmBut having a system that can handle all the data accurately for 40 million taxpayers up and running and fully functioning on 1 April 2018 is overly optimistic
Eric Mc said:
I have no doubt this is going to happen at some point in the future.
But having a system that can handle all the data accurately for 40 million taxpayers up and running and fully functioning on 1 April 2018 is overly optimistic
I thought it was just the self employed were having to do this.But having a system that can handle all the data accurately for 40 million taxpayers up and running and fully functioning on 1 April 2018 is overly optimistic
No - the ambition is every taxpayer having a "digital account"
Originally produced plan is still at:
https://www.gov.uk/government/uploads/system/uploa...
Originally produced plan is still at:
https://www.gov.uk/government/uploads/system/uploa...
Edited by K12beano on Sunday 29th January 05:59
PurpleMoonlight said:
Eric Mc said:
I have no doubt this is going to happen at some point in the future.
But having a system that can handle all the data accurately for 40 million taxpayers up and running and fully functioning on 1 April 2018 is overly optimistic
I thought it was just the self employed were having to do this.But having a system that can handle all the data accurately for 40 million taxpayers up and running and fully functioning on 1 April 2018 is overly optimistic
The additional burden of the quarterly updates falls on -
the self employed
partnerships
partners in partnerships
some charities
limited companies (eventually)
landlords of buy to lets
owners of holiday lets
For those who operate a number of these (which is not altogether uncommon) they will have to submit separate quarterly updates for each class. So a self employed landlord will have eight separate updates. If he also receives a share of partnership profits, that would be twelve submissions.
Within nine months of the end of the tax year, an annual reconciliation submission must also be made. HMRC has not clarified whether one annual submission covering all the quarterly updates is required ( i.e. effectively an annual Self Assessment tax return) or whether separate annual submissions will be required for each source of income.
If the latter, some people will be submitting upwards of 24 updates to HMRC each year (over and above Corporation Tax returns, VAT returns and PAYE subissions in some cases).
GT03ROB said:
Welshbeef said:
GT03ROB said:
Thank god I intend staying non-res for the foreseeable future. It's all going to end in tears.
Can I ask what effectivie marginal rate you pay to the UK govt being in that status?Is that fair?
Please don't let the thread descend into an argument on the pros and cons of paying tax. This thread is specifically about the new Making Tax Digital system.
There have been umpteen threads in the past on the general debate on the rights and wrongs of tax.Search for one of those and discuss that topic there.
I want to keep this thread focused on the specific provisions and impact of Making Tax Digital.
There have been umpteen threads in the past on the general debate on the rights and wrongs of tax.Search for one of those and discuss that topic there.
I want to keep this thread focused on the specific provisions and impact of Making Tax Digital.
Eric Mc said:
As Beano says, EVERY tax payer will have digital tax account - which they will have to monitor and ensure is fully up to date and correct at all times. There will be penalties for not doing so.
The additional burden of the quarterly updates falls on -
the self employed
partnerships
partners in partnerships
some charities
limited companies (eventually)
landlords of buy to lets
owners of holiday lets
For those who operate a number of these (which is not altogether uncommon) they will have to submit separate quarterly updates for each class. So a self employed landlord will have eight separate updates. If he also receives a share of partnership profits, that would be twelve submissions.
Within nine months of the end of the tax year, an annual reconciliation submission must also be made. HMRC has not clarified whether one annual submission covering all the quarterly updates is required ( i.e. effectively an annual Self Assessment tax return) or whether separate annual submissions will be required for each source of income.
If the latter, some people will be submitting upwards of 24 updates to HMRC each year (over and above Corporation Tax returns, VAT returns and PAYE subissions in some cases).
OMG - I tick many in your list Eric - its all small scale but the thought of not being able to do business as I'm too busy administrating the business for HMRC's slice is heartbreaking.The additional burden of the quarterly updates falls on -
the self employed
partnerships
partners in partnerships
some charities
limited companies (eventually)
landlords of buy to lets
owners of holiday lets
For those who operate a number of these (which is not altogether uncommon) they will have to submit separate quarterly updates for each class. So a self employed landlord will have eight separate updates. If he also receives a share of partnership profits, that would be twelve submissions.
Within nine months of the end of the tax year, an annual reconciliation submission must also be made. HMRC has not clarified whether one annual submission covering all the quarterly updates is required ( i.e. effectively an annual Self Assessment tax return) or whether separate annual submissions will be required for each source of income.
If the latter, some people will be submitting upwards of 24 updates to HMRC each year (over and above Corporation Tax returns, VAT returns and PAYE subissions in some cases).
I wonder if there will be a way of digitising the income/business expenditure side? Its all a bit prehistoric now, involving paper - at my level at least... To be able to assign income and expenditure in a form that is shared with my accountant would be useful. Maybe just a box to tick to assign as letting / business 1/ business 2 etc Maybe this even exists already?
On top of this is that they are effectively doing away with Flat Rate VAT for many small service businesses and will have to do full on VAT returns. More admin heaven. Entrepreneurs thrive on it
HMRC are putting 100% faith in the software industry to come up with software and apps which will allow small businesses and landlords to record and summarise their record keeping electronically. I have no problem with this. My main issue is that we aren't quite there yet. And we aren't suddenly going to be there by 1 April 2018.
ICAEW has stated that at the moment only 25% of small businesses use dedicated accounting software for their business record keeping and bookkeeping.
Quite a few more do use spreadsheets (which for many is more than adequate). However, HMRC has categorically stated that simple spreadsheets are not compliant with their new requirements.
As for landlords, if a landlord uses a spreadsheet they are quite computer savvy. Well over 50% of landlords do absolutely nothing in-year regarding recording their rental income. If they are using an agent to manage their property/properties, the percentage who record absolutely nothing is more like 80%.
Having to diligently record all your rental income and expenditure (and tax related claims) on an effectively daily basis is going to be a massive culture shock for many landlords.
ICAEW has stated that at the moment only 25% of small businesses use dedicated accounting software for their business record keeping and bookkeeping.
Quite a few more do use spreadsheets (which for many is more than adequate). However, HMRC has categorically stated that simple spreadsheets are not compliant with their new requirements.
As for landlords, if a landlord uses a spreadsheet they are quite computer savvy. Well over 50% of landlords do absolutely nothing in-year regarding recording their rental income. If they are using an agent to manage their property/properties, the percentage who record absolutely nothing is more like 80%.
Having to diligently record all your rental income and expenditure (and tax related claims) on an effectively daily basis is going to be a massive culture shock for many landlords.
Some promise there Eric? The trouble is that most of us are too busy running the business(s) as a primary function that we depend on the accountant to sort all financial admin - almost like a substitute staff member for small/micro companies. Many of us have ventures that have a separate bank accounts (basic good practice!) so very quickly know if there are any issues without waiting for end of year! If some software is developed that can port this in/out info through that will ultimately be progress and simplification? Or will we all now need official, big, slow accounts depts to make up stuff about why overdue invoices haven't yet been paid!!! 
HMRC have simplified accounting for small businesses by allowing "Cash Accounting" i.e. ignoring normal accounting rules and the entire accruals system of accounting (which is the bedrock of basic bookkeeping and accounting).
HMRC have decided that small businesses can keep misleading and inconsistent accounts for tax purposes and any other users of accounts can go hang.
HMRC have decided that small businesses can keep misleading and inconsistent accounts for tax purposes and any other users of accounts can go hang.
Another issue I think we might come across is software houses using this as an opportunity for up-selling and updating people using their products, especially desktop based systems such as Sage.
For example, I have a client who uses Sage for their wholesale business. They have stock management and 5 users. Currently, although they are on an older version, this is quite suitable for their needs and as it was bought outright they have no ongoing costs with it. Looking at Sage's website, if they want to upgrade then they need to move onto one of Sage's monthly payment plan (SaaS) and looking at what they need this would be £125 A MONTH!
I would be very surprised if Sage allow them to keep the old version and upgrade this to allow MTD uploads?
There are an awful lot of businesses out there using older versions of Sage! Also, there is no wonder the software houses seem to 100% behind the MTD policy? Even the likes of Xero, Clearbooks, Quickbooks etc etc must be rubbing their hands together at the thought of all these businesses who will need to get on board.
It is going to cost many small businesses a lot of money, in both accountancy fees and software costs. It also interesting that HMRC have no plans to have an advertising campaign to introduce MTD and will leave it to accountants and advisers to explain the situation; this seems especially cynical as they also seem to be trying to make it harder and harder for accountants to deal with them on a daily basis!
For example, I have a client who uses Sage for their wholesale business. They have stock management and 5 users. Currently, although they are on an older version, this is quite suitable for their needs and as it was bought outright they have no ongoing costs with it. Looking at Sage's website, if they want to upgrade then they need to move onto one of Sage's monthly payment plan (SaaS) and looking at what they need this would be £125 A MONTH!
I would be very surprised if Sage allow them to keep the old version and upgrade this to allow MTD uploads?
There are an awful lot of businesses out there using older versions of Sage! Also, there is no wonder the software houses seem to 100% behind the MTD policy? Even the likes of Xero, Clearbooks, Quickbooks etc etc must be rubbing their hands together at the thought of all these businesses who will need to get on board.
It is going to cost many small businesses a lot of money, in both accountancy fees and software costs. It also interesting that HMRC have no plans to have an advertising campaign to introduce MTD and will leave it to accountants and advisers to explain the situation; this seems especially cynical as they also seem to be trying to make it harder and harder for accountants to deal with them on a daily basis!
Edited by MEC on Sunday 29th January 13:31
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