Making Tax Digital
Discussion
Ken Figenus said:
Just brushed through it quickly! It seems to me that they should supply more than a 'basic' cr@ppy level of free software if they insist people use software and that they look to gain TWO BILLION in year one of extra taxes!
It also seems to sideline my accountant - will they be charging less as they certainly will have to do far less in my case. I loved the fact that they managed all this for me and I got to just work on my businesses...
Unfortunately, accountants will probably end up having to do MORE rather than less. There is still the matter of the end of year reconciliation and submission - which will entail the normal annual accounts but will also now involve picking through the data previously submitted and any howlers made by the tax payer explained and corrected.It also seems to sideline my accountant - will they be charging less as they certainly will have to do far less in my case. I loved the fact that they managed all this for me and I got to just work on my businesses...
It will be at this time that the normal annual relief claims etc will be made.
Interesting point here -
"Therefore, the government has revisited the proposed design of the end of year activity and can confirm that the deadline for providing the associated data will no longer be nine months. Instead the government will introduce legislation which will require that the end of year activity has to be provided by the sooner of 10 months after the last day of the period of account or 31 January of the year of assessment in which the profits for that period of account are chargeable to income tax (the existing Self Assessment deadline)"
So, if your business year end is (say) 31 July, you annual submission deadline date is going to be the following 31 May.
"Therefore, the government has revisited the proposed design of the end of year activity and can confirm that the deadline for providing the associated data will no longer be nine months. Instead the government will introduce legislation which will require that the end of year activity has to be provided by the sooner of 10 months after the last day of the period of account or 31 January of the year of assessment in which the profits for that period of account are chargeable to income tax (the existing Self Assessment deadline)"
So, if your business year end is (say) 31 July, you annual submission deadline date is going to be the following 31 May.
No, the concept of tax years is not being done away with.
Payments will still be based on a 31 January payment date.
What happens now will be fragmented reporting. Here's a typical scenario -
Sole trader has a business with a year end date of 31 July.
He also has some rental property.
In August 2018/19 he sold one of his properties and made a gain.
This is what he will be expected to do in tax year 2018/19.
i) submit quarterly figures for his business covering 3 months ended 30 June 2018, 30 September 2018, 31 December 2018 and 31 March 2019.
ii) submit separate quarterly figures for his rental income covering the same time periods
iii) he made a Capital Gain in August 2018. He has 30 days to update his Digital Tax Account to reflect the gain and PAY THE CAPITAL GAINS TAX arising.
iv) monitor his digital tax account for any other changes or inputs that need to be made over and above the business and rental income
v) he needs to submit the annual update for his business figures covering the business year end 31 July 2018 no later than 10 months after the year end date i.e. - 31 May 2019.
vi) he needs to submit a SEPARATE annual update for his rental income no later than ten months after the end of the tax year 2018/19 i.e. 31 January 2019.
Payments will still be based on a 31 January payment date.
What happens now will be fragmented reporting. Here's a typical scenario -
Sole trader has a business with a year end date of 31 July.
He also has some rental property.
In August 2018/19 he sold one of his properties and made a gain.
This is what he will be expected to do in tax year 2018/19.
i) submit quarterly figures for his business covering 3 months ended 30 June 2018, 30 September 2018, 31 December 2018 and 31 March 2019.
ii) submit separate quarterly figures for his rental income covering the same time periods
iii) he made a Capital Gain in August 2018. He has 30 days to update his Digital Tax Account to reflect the gain and PAY THE CAPITAL GAINS TAX arising.
iv) monitor his digital tax account for any other changes or inputs that need to be made over and above the business and rental income
v) he needs to submit the annual update for his business figures covering the business year end 31 July 2018 no later than 10 months after the year end date i.e. - 31 May 2019.
vi) he needs to submit a SEPARATE annual update for his rental income no later than ten months after the end of the tax year 2018/19 i.e. 31 January 2019.
One already set up -
https://petition.parliament.uk/petitions/167738
My fear is that this is getting such poor coverage from mainstream media that the people who will be most affected by this don't even know it's happening.
I've never been so depressed about anything as much as this. I beginning to wonder what type of country I'm living in.
https://petition.parliament.uk/petitions/167738
My fear is that this is getting such poor coverage from mainstream media that the people who will be most affected by this don't even know it's happening.
I've never been so depressed about anything as much as this. I beginning to wonder what type of country I'm living in.
The mystery is what use they will put the information to. I can guarantee that most of it will be meaningless and of no practical use to HMRC. It certainly will not be able to give them a clue of the true taxable profit of an activity. That will still require the "annual reconciliation". So - if they need annual totals to arrive at a taxable profit loss, what use are dubious quarterly figures?
HMRC has not explained truthfully what they plan to do with the information.
I am predicting that this is going to be a catastrophe for most smaller businesses. and will result in a melt down at HMRC - if it goes ahead in its current form.
HMRC has not explained truthfully what they plan to do with the information.
I am predicting that this is going to be a catastrophe for most smaller businesses. and will result in a melt down at HMRC - if it goes ahead in its current form.
Not according to HMRC. They have stated categorically that tax will still be payable on 31 January AFTER the preceding tax year - as it is right now.
They are providing an OPTION to pay more frequently if someone wants to.
The problem is that the correct tax position for those who earn income through sole trading, partnerships and rental income will still only be able to arrive at their true, correct and legally due tax liability after their ANNUAL situation has been calculated with annual claims, allowances, reliefs etc offset. HMRC have not been able to work out a method whereby they can amend the tax legislation to take into account quarterly claims for Capital Allowances or losses.
They are looking at it but they haven't arrived at a conclusion yet. It's obviously in their "too difficult" pile at the moment.
They are providing an OPTION to pay more frequently if someone wants to.
The problem is that the correct tax position for those who earn income through sole trading, partnerships and rental income will still only be able to arrive at their true, correct and legally due tax liability after their ANNUAL situation has been calculated with annual claims, allowances, reliefs etc offset. HMRC have not been able to work out a method whereby they can amend the tax legislation to take into account quarterly claims for Capital Allowances or losses.
They are looking at it but they haven't arrived at a conclusion yet. It's obviously in their "too difficult" pile at the moment.
ash73 said:
Eric Mc said:
The problem is that the correct tax position for those who earn income through sole trading, partnerships and rental income will still only be able to arrive at their true, correct and legally due tax liability after their ANNUAL situation has been calculated with annual claims, allowances, reliefs etc offset.
Quarterly actuals and payments on account for anything else with a reconciliation in the final quarter, not that different to the current biannual payments; if anything it's more flexible.I still don't see the problem, it's progress.
I have no problem with the former. It would be quite easy for a taxpayer to make (say) three round sum payments on account followed by a fourth "settling" figure to clear the remaining liability once the true liability is known.
Having to go through the rigmarole of quarterly submission of accounts data does not actually facilitate easier and simpler tax payments at all. Quarterly payments could be introduced as part of the current Self Assessment system anyway with no major changes to the current system.
And you mention quarterly "actuals". That's the point - they won't be "actuals" as far as arriving at true taxable profits are concerned.
They will be only be "provisional" taxable profit figures based on actual book-keeping data (although how actual depends on how good the underlying data is). It will still require the submission of annual accounts, tax computations, Capital Allowance claims etc. So, in other words, the current system of having to prepare annual accounts and tax computations AND their submission to HMRC will still have to be carried out.
Nothing is changing there.
The added complication is that the annual figures will now have to be reconciled with the quarterly submissions. How easy or hard that will be will depend on how good those quarterly submissions were. With the accountants barred from submitting the quarterly figures on behalf of their clients, it is highly likely that in many cases the quality of the quarterly data will be poor.
Sadly, the dream of tax simplification is just that, a dream.
The chairman of the Office of Tax Simplification, John Whiting, is stepping down after 10 years of trying. As I mentioned earlier, in the decade of the TSO's existence, the UK tax code has actually doubled in size.
My advice to clients will be not to sweat the details too hard each quarter. In other words, just send in any old junk that they have on their system. I know that at the end of the tax year, I'll be drafted in to sort out the mess and submit properly reconciled accounts and tax computations - as I always do.
The added bonus for me is that I will be at least doubling my fees.
What a total and abject farce this is all going to be.
The chairman of the Office of Tax Simplification, John Whiting, is stepping down after 10 years of trying. As I mentioned earlier, in the decade of the TSO's existence, the UK tax code has actually doubled in size.
My advice to clients will be not to sweat the details too hard each quarter. In other words, just send in any old junk that they have on their system. I know that at the end of the tax year, I'll be drafted in to sort out the mess and submit properly reconciled accounts and tax computations - as I always do.
The added bonus for me is that I will be at least doubling my fees.
What a total and abject farce this is all going to be.
Another important point - HMRC has stated that there will be no Parliamentary Act bringing in MTD. Instead, the legislation will be brought in piecemeal using "Statutory Instruments" - which are classed as "minor amendments to existing legislation". These types of legal changes tend to be sneaked through Parliament with little or no debate.
So, we are not going to get any sort of proper House of Commons or House of Lords debate on this important change to the tax system.
We are in an era of "Rule by Decree" - and we haven't even noticed.
So, we are not going to get any sort of proper House of Commons or House of Lords debate on this important change to the tax system.
We are in an era of "Rule by Decree" - and we haven't even noticed.
It's interesting that HMRC were obviously afraid to consult the people who will REALLY be affected by this - the 45 million taxpayers of the UK and the 5 million sole traders, partnerships and landlords.
They consulted with the professionals who they plan to exclude from much of the process.
It is lunatic thinking by HMRC and this system is going to royally screw up their ability to properly assess businesses for tax.
They consulted with the professionals who they plan to exclude from much of the process.
It is lunatic thinking by HMRC and this system is going to royally screw up their ability to properly assess businesses for tax.
Maybe not everyone's cup of tea but the proceedings of the Lords enquiries into MTD are quite interesting - especially the representation by Professor Richard Murphy.
http://www.parliamentlive.tv/Event/Index/4b2851b5-...
http://www.parliamentlive.tv/Event/Index/4b2851b5-...
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