Making Tax Digital

[Eric Mc]

I think the whole concept is disgraceful and undemocratic. The media should really be shouting about this from the rooftops. Can we get some national newspaper involved - even the Daily Mail if needs be?

[Smiler.]

Eric Mc said:

I think the whole concept is disgraceful and undemocratic. The media should really be shouting about this from the rooftops. Can we get some national newspaper involved - even the Daily Mail if needs be?

I missed it so need to find a time to catch up.

Perhaps someone could start a petition to the government, I'm sure lots of people will only be too happy to sign something relating to a serious issue that actually affects them

[Eric Mc]

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.

[loafer123]

What kind of country requires that information on income and costs is submitted electronically and regularly? A modern one.

[Eric Mc]

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.

[loafer123]

Aren't the quarterly submissions going to be used to charge tax closer to the point at which the profit is achieved rather than substantially afterwards?

[Eric Mc]

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.

[loafer123]

I presume that is the ultimate aim, though?

Perhaps they will make it simple submissions quarterly, apply capital allowances etc at the end of the tax year, so companies effectibvely lend them money?

[Smiler.]

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.

So I now need to see my accountant 5 times a year. How is that progress for me? How is that easier? Can guarantee it won't be one fifth of the current cost for each interaction.

I wonder what the real motive from HMRC is in this? My money is on the gong ambitions of civil servants. Which sadly means it will be railroaded through, just in time for the inevitable "told you so" from all of us in the real world.

Listening to that Moneybox episode, it seems the usual chaos we've come to expect from a government operation. Happy days.

[Eric Mc]

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.

There's a huge difference between making four quarterly payments on account each quarter and submitting accounting and bookkeeping data every quarter.

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.

[LeighW]

ash73 said:

I still don't see the problem, it's progress.

I'm guessing that you're not an accountant in practice. Unless there is massive, and I mean massive simplification of the existing taxation rules, then the average self employed person hasn't a hope in hell of sending in figures quarterly that are anything like accurate or meaningful. If it has to be reconciled annually to tally everything up, like you do on the existing annual tax return, and if the tax payment dates aren't changing, then what exactly is the point of all this?

Not everyone who is self employed is computer savvy, not by a long way, especially older people, and it's very unfair to try and force them to be.

Eric isn't being melodramatic at all.

[Eric Mc]

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.

[Smiler.]

LeighW said:

ash73 said:

I still don't see the problem, it's progress.

I'm guessing that you're not an accountant in practice. Unless there is massive, and I mean massive simplification of the existing taxation rules, then the average self employed person hasn't a hope in hell of sending in figures quarterly that are anything like accurate or meaningful. If it has to be reconciled annually to tally everything up, like you do on the existing annual tax return, and if the tax payment dates aren't changing, then what exactly is the point of all this?

Not everyone who is self employed is computer savvy, not by a long way, especially older people, and it's very unfair to try and force them to be.

Eric isn't being melodramatic at all.

Well said.

I am computer savvy but my accountant classes everything accounts related I produce as "a work of fiction".

I don't mean to, but accounting is not my area of expertise & the rules change almost by the minute.

[Eric Mc]

As someone already commented on another forum I was reading - will the NHS be now expecting patients to be performing their own appendectomies or brain surgery with the surgeon just checking over the work when it's finished?

[Eric Mc]

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.

[Smiler.]

anonymous said:

[redacted]

What's your actual point here?

Are you defending the proposal or not, or are you dismissing the concerns because something you consider more onerous didn't attract as much concern on PH - I can't quite tell.


From what I gained about the process so far, it's all a bit Vogon planning.

Yes, HMRC consulted a small group of professionals for a short period of time before ignoring much of the concern (including those of the select committee) & decided to fast track the roll-out anyway. But don't worry folks, we haven't actually decided what that will be yet. No worries, you'll all know about it by the time we do.

[Eric Mc]

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.

[Eric Mc]

Event if these proposals will directly affect 45 million people?

You seem to be of the "Oh well, it could be worse" camp.

[Smiler.]

anonymous said:

[redacted]

They do & they don't.

The immediate impact of the Snoopers Charter on the public will not be the same as that of the HMRC car crash, but I see your point & it has validity. I'd wager most people will not see any impact on their lives resulting from surveillance as their activity will be below any threshold to warrant attention. I appreciate that the "threshold" is at present arbitrary & may change quite quickly at any time. Because of this, the legislation is off most of the public's radar.

This is not too dissimilar to the sleepwalking into the problems of EU membership & other social issues in the last few decades. The EU dream could have been so much more, but I consider it ruined by the very same bureaucratic & political attitudes.

[LeighW]

MTD being discussed in the House of Lords this afternoon.

https://www.cchdaily.co.uk/lords-call-tax-experts-...