Making Tax Digital

[Eric Mc]

Nothing is clear yet. The PAYE RTI system is the inspiration for HMRC's progression to "!real time" submitting for other taxes. The problem is that other taxes, based on figures gleaned from accounting and book-keeping principles are always going to be more complex than submitting salary and employment information.

[Eric Mc]

plasticpig said:

Eric Mc said:

HMRC stated last week that there will be no fee software for the initial VAT version of MTD. Free software was always intended for the tiny traders only - those with turnovers of £10,000 or less. The accounting profession and other interested parties fought hard to have MTD restricted to those over the VAT threshold. This bastardised version of MTD for VAT is partly in response to this pressure.

Well HMRC are wrong then. They may not provide one but I know of at least one cloud based accounting solution will be offering MTD for free. It's size limited by total ledger size but that should cover quite a few of the tiny traders.

Taking data from an Excel template and submitting it to HMRC is not a massive development exercise.

Do you work in the world of software?

[Eric Mc]

plasticpig said:

Eric Mc said:

Do you work in the world of software?

Yes. I am responsible for making my companies software MTD compliant

I thought so.

When you say "companies", do you mean you are dealing with many limited comapnies (plural) or are you referring to one business only and really meant to say "company's".

And is your "company" a firm of accountants or do you work in industry?

Just trying to get a feel for your background.

People who are restricted to one organisation which may be computer savvy don't always have a good or realistic view of the real world where there are hundreds of thousands of people out there who are, in reality, quite scared of IT.

Edited by Eric Mc on Sunday 17th September 15:12

[Eric Mc]

plasticpig said:

bga said:

The actual MTD submission is trivial. The work going into validating inputs, providing meaningful error messages etc is less so. Offering a tool, however basic, for non-accountancy professionals to use is harder than one where the audience knows what they are talkin about.

That's where the revenue stream is for free software though. When the user gets an error message and the it won't submit they have to ring the premium rate support line.

Not a business model I have ever tried but I have looked at it before now.

I don't think governments should be tasked with reviving an economy by creating more bureaucracy for ordinary businesses to deal with. It's a bit like asking the crew to put more deckchairs out on the promenade deck of the Titanic whilst it's sinking.

[Eric Mc]

Rovinghawk said:

PurpleMoonlight said:

I suspect their main purpose is to collect more tax.

I'd say it's more about power & control.

Correct.

Effectively, MTD gives HMRC as a matter of course, the power and insight into a business' activities that they could only obtain by launching formal legal proceedings under current tax law.

It is a big brother" approach to taxation.

[Eric Mc]

HMRC is under the misapprehension that businesses always err on the side of underpaying their taxes. They think that this new system will ensure they DO pay more taxes. There is no guarantee that this will be the result for HMRC. All it will do of course is ensure that businesses become bogged down in filing and reporting procedures to satisfy government insatiable appetite for data.

[Eric Mc]

plasticpig said:

Many ltd companies. Smallest we deal is about 1 million turnover. My company develops ERP software. So has SOP, POP, Inventory, Manufacturing, General \ Nominal ledger, Fixed Asset modules. We don't do payroll though.

So the SMALLEST is £1 million turnover. That would represent my BIGGEST.

I would expect a business turning over £1 million to be fairly up to speed with IT and accounting matters. However, there are hundreds of thousands of smaller businesses which struggle to keep up to date with the latest and best of everything. Having a government ramming IT down their throats is a bit much.

I have some clients who openly admit that they are not comfortable with e-mails.

[Eric Mc]

I'm convinced that civilisations come to an end when they get bogged down in paperwork (or the modern equivalent).

[Eric Mc]

plasticpig said:

Eric Mc said:

So the SMALLEST is £1 million turnover. That would represent my BIGGEST.

I would expect a business turning over £1 million to be fairly up to speed with IT and accounting matters. However, there are hundreds of thousands of smaller businesses which struggle to keep up to date with the latest and best of everything. Having a government ramming IT down their throats is a bit much.

I have some clients who openly admit that they are not comfortable with e-mails.

You would be in for a shock then. I have found myself explaining how VAT triangulation works to a fully qualified accountant (CIMA IIRC).

What has VAT Triangulation got to do with forcing Making Tax Digital on smaller, non IT savvy, businesses?

Edited by Eric Mc on Sunday 17th September 17:05

[Eric Mc]

Rovinghawk said:

Eric- I think I've disagreed with you on other topics but I'm 100% in agreement with you on this.

It's not compulsory that somebody has to disagrees with a particular somebody else all the time.

Over my 40 plus years in accountancy I have watched regulation just grow and grow exponentially. It is becoming crushing.

[Eric Mc]

I think that far too many of you have been suckered into becoming lackies for HMRC.

The purpose of business is not to supply data to government bodies OR to pay tax - it's to be successful in the business they do.

The level of success desirable should be up to the person running the business or their shareholders - not a government department.
If you think governments are bringing this stuff in to help businesses, you are naive in the extreme.

All I can say is God help us - so many of you have been duped in this way. I never thought that people would sleepwalk in such a manner into allowing government so much access to their affairs.

[Eric Mc]

What is obvious is that MTD has turned out to be a far tougher proposition than the politicians realised. We've already seen significant row back on some aspects of it and we have seen a complete reassessment of the time scales for implementing - something the realists (i.e. businesses and professional bodies) had been telling the government was needed from the moment the details began to emerge of the requirements HMRC was intending to place on all but the tiniest of businesses and landlords.

We shall see how this all pans out in the end. I fully expect something like MTD will eventually emerge from the ongoing car crash that the current version h(although fundamental aspects of the current proposals keeps changing all the time). I just don't think most small businesses or landlords are ready for it yet. A more realistic target would be having a timetable that was -

a) voluntary

b) compatible with what happens now

c) didn't really kick in for another ten years (I'll be safely retired by then - hee..hee...)

[Eric Mc]

I have asked for clarification regarding the below the threshold VAT registered businesses. If they are exempted from MTD, that does mean that HMRC will have to keep their current Gateway system open in order to allow those businesses to continue to file VAT returns the old fashioned way. One of the key reasons they have stated that they wanted MTD was that they could close the Gateway system down.

So - we will end up with two separate filing systems for VAT returns, depending on whether the business trades above or below the VAT registration threshold.

There is of course, no detail as to what happens to a business that is at or near the threshold and wanders above or below it from time to time.

And of course, the VAT threshold usually increases each year.

And all this needs to be fully set up and ready to go in less than a year and a half.

[Eric Mc]

PF62 said:

From the same document -

"The MTD requirements for VAT will apply to any VAT registered business with a taxable turnover over the VAT registration threshold.

This requirement will remain, even if they fall below the threshold at a later date. The requirement will cease upon deregistration."

Edited by PF62 on Wednesday 20th September 21:32

So, this "above the threshold" threshold is not really meaningful then? Even if you fall below the threshold you have to stay on MTD for VAT unless you deregister completely.

And if your re-register later below the threshold you are straight onto MTD?


And have you found out about new businesses that decide to register for VAT even though they aren't over the compulsory threshold. Will they be obliged to go onto MTD VAT immediately, even though they fall below the threshold..

That still leaves the below the threshold VAT registered businesses bumbling along using the old system.

Nice and simple, isn't it.

This will be a massive incentive for businesses artificially suppressing sales to keep out of VAT. This happens already and will now only get worse.

I think HMRC seems on a mission to DESTROY business in the UK, not encourage it.

[Eric Mc]

I've often thought that the VAT registration threshold in the UK was way too high. However, every year the government raises the threshold so reducing the threshold doesn't seem to be on their agenda.

[Eric Mc]

It seems, for the moment, that you will be able to keep submitting VAT returns the current way, even after April 2019. However, if you go over the magic threshold you will have to switch to MTD. Also, it seems, if you de-register and then re-register at a later date, you will have to go onto MTD even if your turnover is below whatever the threshold is at that time.

Keeping two separate VAT systems open at HMRC is nuts, as far as I'm concerned.

[Eric Mc]

I'm sure aspects of the VAT return will have to change after Brexit - although it may not be for quite a while. The EC Sales and Purchases data became necessary with the arrival of the Single Market in 1993 and it became the only way to record "Exports" and "Imports" to and from other EU countries as these transactions would no longer appear on normal import and export documentation.

It depends on what arrangements are made after Brexit as to whether sales and purchases between the EU and the UK will be part of normal sales and purchases between the UK and all foreign countries or whether a separate system will be in place covering sales and purchases between the UK and the EU.

We just don't know at the moment.

I have a funny feeling that the current VAT return layout will remain essentially unchanged for many years.

[Eric Mc]

JagLover said:

Eric Mc said:

AT the moment 90% of VAT returns are filed using the Government Gateway boxes only - i.e. the underlying data is not sourced directly from any software the trader might be using. The boxes are completed manually by either the trader or his/her agent This will mean that all traders must acquire new software to comply.

It might be 90% that are submitted in this fashion, but that doesn't mean that a very significant proportion of those returns couldn't be easily submitted under the new system.

All of the VAT returns in this office are submitted using the agent portal but only a very small minority are prepared on excel.

I have known clients who prepare their own returns to make such errors as claim VAT on rates payments or treat IPT as if it were VAT. I imagine a data mining exercise on the detailed VAT report might turn up some interesting errors for the Revenue and with the "administrative burden" of simply requiring everyone to use proper accounting software and then have the facility to submit the VAT return using that software.

That's why they used to send VAT Inspectors out to businesses. They stopped most of that about 10 to 15 years ago.

That's why they invented Flat Rate VAT for small traders (it eliminated virtually all Input VAT errors) Flat Rate VAT has now been effectively abandoned.

Effectively, HMRC wants 100% access to 100% of business records 100% of the time.

Under the current law they don't have that right.

Once MTD goes through, they will.

[Eric Mc]

JagLover said:

Personally I think it is a rather old fashioned view that HM Revenue and Customs should be required to employ thousands of people to check accounting records when simple data analysis by computer can do so using modern technology.

There will still be a need for both VAT inspections and tax investigations but if basic errors can be detected with the minimum of Revenue staff time it should be celebrated.

The problem is that in order for HMRC to perform this "simple data analysis" they need to be given enormous powers and rights that they currently don't have.

Maybe you are happy with the state having full access to everything you do from a financial point of view coupled with much personal data. It doesn't fill me with joy or confidence that they will use this data effectively or that they can retain it securely.

[Eric Mc]

plasticpig said:

Eric Mc said:

That's why they used to send VAT Inspectors out to businesses. They stopped most of that about 10 to 15 years ago.

That's why they invented Flat Rate VAT for small traders (it eliminated virtually all Input VAT errors) Flat Rate VAT has now been effectively abandoned.

Effectively, HMRC wants 100% access to 100% of business records 100% of the time.

Under the current law they don't have that right.

Once MTD goes through, they will.

They pretty much do have that right. They have the power of entry and can demand to see any records concerning the business and also search the business premises. What they can't do without a court order is seize documents.

Which I presume you think is a fairly trivial matter as the ultimate goal of MTD is to get the underlying documents as part of normal filing.

Why is everyone so keen to support the government on this? On PH we can normally rely on people to be against HM Gov obtaining massive data on our affairs. On this topic everybody seems to think it's all OK and they will only do "good and correct" things with this data - and they won't lose it or allow it to be stolen or fall into the wrong hands.