Making Tax Digital

[Eric Mc]

13m said:

I've just had an email from our tax advisors saying that they are busy making their systems compliant with MTD. They presumably feel confident that it is happening.

I would ask them what are they making their system compliant with - since HMRC has not released any technical information on their system.



That's the single biggest peroblem. HMRC are not being clear at all about the technical and legal aspects of this whole mess.

[Eric Mc]

More representations and questions on the topic before the House of Lords Committee.

NOT ONE of the six people who made representations today and at the previous session have been enthusiastic about this whole MTD process.

http://parliamentlive.tv/Event/Index/3f6020cd-d08d...

[Eric Mc]

Further update from HMRC. It's extremely light on detail but does show some of the COMPULSORY requirements that will be incorporated in the legislation (which they are still in the middle of drafting) with 11 months to go before implementation -


https://www.gov.uk/government/publications/bringin...

[Eric Mc]

It won't benefit the economy one jot.

As for accountants' fees - many accountants are struggling to see how they can play any meaningful role in this system. I know a few who are contemplating retiring.

Fees WILL go up because there will be fewer accountancy firms engaging with clients and most that are will be larger firms with the resources to cope with the never ending submissions that will be required. And larger forms tend to charge quite a bit more than smaller ones

At the moment, HMRC has still not clarified whether accountants will be able to submit on behalf of their clients anyway. Before Christmas, the general assumption based on what information they had given up to then was that accountants (and other agents) were barred from making the actual submissions.

They have not clarified if this is still their preferred option.

[Eric Mc]

Of course, with an election coming up, it is now absolutely certain that the work on MTD will slow down if not stop altogether. It was held up by the 2015 election and by the 2016 referendum.

The whole thing is on the skids, in my opinion.

[Eric Mc]

I'd like to think that this will be what happens. However, we've already had numerous representations made by interested parties to both parliamentary and House of Lords committees - all more or less saying the same thing over and over. i.e good idea in theory but -

a) not like this

b) not right now

HMRC still want to keep going on as everybody is happy and 100% behind it.

[Eric Mc]

I'm not surprised.

NOBODY, apart from HMRC, can see any advantage in getting involved in this madcap endeavour. With so much reluctance and disinterest, I cannot see it working.

Even if HMRC insists on it, the scheme will end up collecting vast quantities of junk data which will be totally meaningless.

[Eric Mc]

So said:

ninja-lewis said:

From a broader business perspective, more regular record keeping using modern accounting software would have wider benefits to the economy. Too many small businesses lack even basic information about their performance during the year. They under-charge for their products and services; they persist with throwing good money after bad for too long; and/or they grow faster than their cashflow allows. All too often, these mistakes are recognised too late or not at all. Even a basic business has need for regular P&L monitoring.

So you're saying that MTD will provide management accounts? If so, how will the data be interpreted by the small business owner?

HMRC have already rowed back on some of the detail they were originally requesting. The way things are going, the quarterly returns will contain much the same data as a VAT return. If that's the case, there will be virtually no management data of any use to a business - or accounting data useful to HMRC either.

It's interesting that Ninja says that HMRC are now allowing agents to actually submit the quarterly submissions on behalf of their clients. That is the polar opposite of what TWO ACCA lecturers said in December.

40 plus years ago most accountants were delighted with the invention of VAT as they all thought that having to do quarterly submissions would improve book keeping and accounting across the board.
Well, it obviously didn't. And neither will this. Anyone who thinks so is living in cloud cuckoo land.

Edited by Eric Mc on Thursday 20th April 08:03

[Eric Mc]

I've never come across a business that carried on like that.

A VAT return, on the whole, is a fairly simple thing to do. It's WAY short of what is required for accounts. If MTD ends up requiring the equivalent of VAT return type data, then it won't be too onerous.

BUT, it won't provide HMRC with anything of any use to them.

They will still be utterly reliant on the annual submission (which Osborne initially said would no longer be required).

MTD has already moved quite a way from its original concept. Indeed, if it moves any more, it will be completely pointless.

[Eric Mc]

HMRC are trying to force businesses to keep records to THEIR requirements.

That is just an over the top situation. Keeping records should be to the requirements that suit the business - not the tax authorities.

As long as the accounts produce profits/losses etc that are in line with what the tax legislation requires, that is all that should be needed. HMRC should not be proscribing the detail of HOW those records should be maintained.

They obviously have decided that they do not trust businesses to follow the rules.

The great mistake they are making is that, despite the over the top requirements they are specifying - there is no guarantee that the information they get will be any better than what they had before. In fact, I expect it will be much worse.

So - what will have been achieved - apart from driving many businesses OUT of businesses - or into the black economy?

Why is Ninja so supportive of all this?
Has he been fooled into thinking that this is going to somehow make things better for

a) businesses
b) HMRC

The extent of Ninjas latest post indicates to me that he does not have a clue how smaller businesses operate.

Is he trying to flog software by any chance?

Edited by Eric Mc on Saturday 22 April 22:20

[Eric Mc]

The smaller businesses you refer to which are going to bear the brunt of this lunatic legislation will not have any choice about offshore operations.

My concern is that the main impact will be that many small operators will not want to bother so they will do some or a combination of the following-

give up
enter the black economy
return simplified and junk data

[Eric Mc]

I have no problem with digital accounting to HMRC for tax and other matters. It's the sheer audacity that HMRC has to make businesses jump to their tune AHEAD of the business' REAL needs.

They are basically saying, "f***k what you do regarding your bookkeeping and accounting at the moment. We don't care whether your system is good, bad or indifferent. From now on, you do it OUR way and no other".

Edited by Eric Mc on Sunday 23 April 08:58

[Eric Mc]

Latest Update -

All the proposed legislation regarding Making Tax Digital which was included in the March 2017 Budget has been removed - it was announced yesterday.

This does not mean that MTD has been dropped. What it does mean is that it cannot be enacted for tax year 2017/18 unless an emergency amendment to the budget is introduced and debated in Parliament after the election on 8 June. They decided that the legislation is far too complex and detailed to rush through Parliament before the election.

Whatever happens, it does seem to indicate that the politicians are beginning to wake up to the enormous ramifications of this huge change.

[Eric Mc]

In fact, a whole raft of proposed changes announced in the 2017 Budget have been stripped out of the upcoming Finance Bill debate (which is happening today). The Chartered Institute of Taxation has put together this useful summary.

What's been removed -


Digital reporting and record keeping (MTD) for income tax and VAT
Dividend tax rate for 2018/19 (the reduction from £5,000 to £2,000)
£1000 tax free allowances for property and sundry income
£500 tax free pensions advice
Changes to taxation of terminations payments
Reduction in money purchase annual allowance from £10,000 to £4000
Power to tax capital gains made from UK land as income tax not CGT
Deemed domicile for all taxes for non-doms
Changes to substantial shareholding exemption
Changes to EIS, SEIS, SITR and VCT schemes
Restrictions on corporation tax losses
Tax relief for cost of Museum exhibitions
VAT in relation to goods stored in UK warehouses

What’s in?

The following significant provisions remain in the draft Bill:

Income tax rates for 2017/18
Corporation tax rate for 2018
Air passenger duty rates for 2017
Insurance premium tax rates from June 2017
IR35 for the public sector
VED duty rates from April 2017
Alcohol and tobacco duty rates
Soft drinks levy
Changes to salary sacrifice schemes
Deduction of tax at source
Abolition of Employer Shareholder Scheme

Note the IR35 provisions for workers performing contracts in the public sector remains in the Bill, although it is a contentious and badly drafted piece of law.

[Eric Mc]

Yes.

But don't get your hopes up too high. There will almost definitely be an Emergency Budget soon after the General Election. Some of the 2017 Budget proposals may be re-introduced in that Emergency Budget.

And, of course, we don't know for sure what type of government we will have after June 8th.

I have never known a period in British politics and taxation where nobody seems to have a clue what they are doing - and it's making my job as an accountant almost completely impossible.

Have the politicians really lost the plot? I genuinely think they have.

[Eric Mc]

IRO?

[Eric Mc]

What makes you think that this overly complex and costly system will fix that problem?

HMRC has yet to demonstrate or explain in detail in what way they think making people submit at least FIVE returns every year (some will be submitting up to 20 - depending on their circumstances) will magically mean they will collect more tax.

[Eric Mc]

Pie in the sky nonsense I'm afraid.

I am only concerned with the "system" that HMRC has invented for NOW - not some utopian alternative "X" years in the future.

I am not at all impressed with any reasoning that HMRC has set out for this shambolic mess.

Changes are all well and good and would be accepted if -

a) they improved the business and help make it ruin more efficiently and profitably

b) the data collecting and submission requirements did not impinge on the business to the point where it had the opposite effect to a)

c) the data that HMRC obtained was of a higher quality than what they currently get

d) HMRC actually used this data to improve their efficiency in tax assessing and collecting


I can assure you that HMRC has failed utterly (so far) to put case forward to justify what they intend to force on small businesses and landlords

And why does HMRC think that these changes will suddenly generate more tax income to them?

[Eric Mc]

So said:

Rovinghawk said:

I was curious as to why you seem in favour of this crap.

I am not in the slightest bit in favour. I am merely pointing out that the Treasury perceives that SMEs are significantly under-paying tax and they will sooner or later address that problem. Given the moves they have made already and the ease with which collated data can be used to detect and enforce it is only a matter of time before a MTD type initiative is introduced.

Yet they haven't said that is what THIS MTD is about.

Are they LYING to us?

[Eric Mc]

ninja-lewis said:

Explanations published in March:

http://data.parliament.uk/writtenevidence/committe...

http://data.parliament.uk/writtenevidence/committe...

Plenty of information out there if you actually bother to look for it.

I'd already read most of that and NONE of it stands up to any scrutiny.

Why has EVERY SINGLE PARLIAMENTARY REVIEW of this intended system stated categorically that it is rushed, flawed, over complex and not costed correctly?

Why do YOU think it is so great when it patently is the largest disaster that will ever happen to the UK tax system?

This is not ME saying these things but EVERYBODY who isn't in the Treasury or HMRC.