Making Tax Digital

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So

26,271 posts

221 months

Thursday 20th April 2017
quotequote all
Rovinghawk 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.

For accountants and agents, MTD should be seen as an opportunity to upskill and move away from basic data entry, bookkeeping and compliance. It's happening in every part of the business and there is no good reason why accounting should be an exception.
If it's that good for businesses then I'm sure they'd do it by choice rather than coercion.
I know I would. I just cannot help but feel it isn't being done for my benefit. Call me cynical.

Eric Mc

Original Poster:

121,775 posts

264 months

Thursday 20th April 2017
quotequote all
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

carl_w

9,154 posts

257 months

Thursday 20th April 2017
quotequote all
Eric Mc said:
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.
Presumably this is, at least in part, because you can correct errors of up to £2k in your next VAT return without notifying HMRC. So once a small biz has a feel for the amount of VAT it owes each quarter it can just make a payment of around that amount and sort out the difference at the end of the year?

Eric Mc

Original Poster:

121,775 posts

264 months

Thursday 20th April 2017
quotequote all
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.

ninja-lewis

4,226 posts

189 months

Saturday 22nd April 2017
quotequote all
Eric Mc said:
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
Management accounts won't come from MTDfB itself but as a by-product of how they chose to comply with the new digital record keeping requirement.

You need to distinguish between the quarterly submission to HMRC and the record keeping requirement. For some taxpayers, they might simply maintain their records in spreadsheets using the cash basis and upload three line accounts every quarter. Heck, done competently (whether by the taxpayer or through an agent), they'll even add up at the end of the year and all that has to be be done on the End of Year Activity is make a declaration that their digital tax account is correct and crystalise their income tax liability for the period.

Many businesses though are expected to use an accounting package - whether desktop, website, mobile app or all three - especially when they encounter some of the features of latest generation of software that could streamline administration.

For example, customer invoicing,currently a business might

1. manually draft the invoice sometime when they eventuallly sit down to , perhaps forgetting to add VAT
2. post it out
3. belatedly realise the customer hasn't yet paid and spend time chasing them
4. deposit the eventual cheque at the bank
5. Manually do a bank rec (or not at all hence step 3)
6. Carry on as before.

What if instead they:

1. generate the invoice using an app on their phone as they leave the customer
2. The app emails the invoice to the customer with a link to pay online
3. It sends automatic payment reminders at set periods and flags
4. The customer pays online where a transaction reference is automatically included
5. The app identifies the reference in the bank feed as part of the automatic bank reconciliation and updates the relevant records.
6. The app updates the customer relationship record and makes recommendations for further sales opportunities based on previous purchase history/what similar customers have bought.

If you're the customer:
1. Maybe you'll enter the purchase invoice manually or perhaps outsource the process, scan it/photo it and let the OCR do it for you, request invoices by email or even direct to your accounting package.
2. The app analyses the invoice and suggests where it should be categorised. Over time it learns to recognise regular purchases/suppliers, reducing the need for manual interaction.
3. Payments can be scheduled based on other forecast receipts/payments to make the best use of working capital
4. 'Nudges' and prompts highlight common errors or potential tax allowances available.

Everything is backed up far more professionally than most businesses manage. Management accounts and estimates of tax balances are available at any time (most accounting adjustments can be estimated/rolled forward for a close enough estimate). Data can be shared with their accountant/agent who can use their own software to monitor clients during the year and provide timely advice instead of telling clients after the fact the fact that the client should have come to them sooner.

All of this is reality with the likes of Xero and Gbooks today. MTDfB is intended to drive up uptake of such tools. We're talking about one of the most radical cultural changes in business administration ever. VAT returns didn't change how businesses operated - this will.

A lot of the confusion around whether agents could make submissions on behalf of clients can probably be traced to efforts to discourage agents using client accounts rather than their own Agent account. Under the current system that happens because the Agents website doesn't provide all the information that clients see. Under MTD APIs will be in place to provide agents with the same information that clients see. The issue at present is simply that Agents Service is a couple of months behind the client - the Agents beta is just starting now but should be generally accessible by late Summer. Soon the days of having to phone HMRC to get information about a client will be replaced with direct feeds to your practice management software.

In the short term, HMRC want to see honest efforts to maintain current records.. They're not demanding accurate tax returns - it really is designed so that taxpayer simply needs to click a button to upload information from their software (whether a full blown accounting system or free software that imports data from their spreadsheet) to evidence that. Claims that agents' workload will increase x5 are only really true if the agent is still doing the bookkeeping for the clients in a traditional way. Teach a man to fish and all that.

As for whether MTD will do away with completing annual tax returns? For individuals with employment/CIS income, dividends, pensions and other complications that currently require a SATR, they may simply have to log in to their personal tax account to confirm that the pre-populated data is correct. It already happens in Belgium, Denmark, Norway, Finland, Estonia and elsewhere. It's time the UK joined them.

For others, taxpayers and/or their agents should find it easier and quicker to finalise an accurate tax calculation at year end because all the information was safely recorded digital during the year. Partnerships will nominate a partner to complete the submissions on behalf of the partnership and each partner's tax account will be updated with their profit share, ready to be included in their unique calculation. No doubt there will be a market for software aimed at people with multiple trades and properties that will allow them to track everything centrally and click one button to upload their quarterly trading and property profits.

Rovinghawk

13,300 posts

157 months

Saturday 22nd April 2017
quotequote all
I have a little saying I use with the apprentices/students:

"Only change something when it's an improvement". I don't see this as an improvement for me.

Eric Mc

Original Poster:

121,775 posts

264 months

Saturday 22nd April 2017
quotequote all
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

Rovinghawk

13,300 posts

157 months

Saturday 22nd April 2017
quotequote all
I'm in business to do business, not to do paperwork to suit HMRC.

mickytruelove

420 posts

110 months

Saturday 22nd April 2017
quotequote all
I personally see monumental fk ups happening. It will be near impossible to implement a system that works for every type of business and i agree the small companies will feel the brunt of this.

All the time the big companies can afford a team of people to comply and shift profits off shore... It is the only thing jeremy corbyn is say that makes sense to me. Would it make companies just bugger off from the UK though.

Eric Mc

Original Poster:

121,775 posts

264 months

Sunday 23rd April 2017
quotequote all
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

98elise

26,372 posts

160 months

Sunday 23rd April 2017
quotequote all
Eric Mc said:
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
Agreed.

My account recently asked me to start using their web portal. It sounded great until I actually started putting information into it. I soon realised that it was far hader to get meaningful information back out. The simple spreadsheet (provided by them) does a far better job.

Under MTD I many have to do 9 tax returns a year. I already spend enough time getting my tax records and returns correct. If each tax return takes me a day to sort then thats 9 days unpaid overhead for me.

Thats time I can't bill for, so will possibly reduce the tax take.

Eric Mc

Original Poster:

121,775 posts

264 months

Sunday 23rd April 2017
quotequote all
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

Welshbeef

49,633 posts

197 months

Sunday 23rd April 2017
quotequote all
98elise said:
Agreed.

My account recently asked me to start using their web portal. It sounded great until I actually started putting information into it. I soon realised that it was far hader to get meaningful information back out. The simple spreadsheet (provided by them) does a far better job.

Under MTD I many have to do 9 tax returns a year. I already spend enough time getting my tax records and returns correct. If each tax return takes me a day to sort then thats 9 days unpaid overhead for me.

Thats time I can't bill for, so will possibly reduce the tax take.
Or increase the cost to joe Bloggs

Eric Mc

Original Poster:

121,775 posts

264 months

Wednesday 26th April 2017
quotequote all
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.

Smiler.

11,752 posts

229 months

Wednesday 26th April 2017
quotequote all
Eric Mc said:
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.
Good news.

I've recently been immersed in the corporate world (not unlike the murky depths of the civil service) & it's frightening how so many bad decisions are then compounded with further ones (not saying that "everything" in this world is ste).

I wonder if any heads will roll over this rapid reversing & the NIC one.

Eric Mc

Original Poster:

121,775 posts

264 months

Wednesday 26th April 2017
quotequote all
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.

PurpleMoonlight

22,362 posts

156 months

Wednesday 26th April 2017
quotequote all
Woah hang on.

Have they really dropped the reduction in the dividend tax allowance?

Eric Mc

Original Poster:

121,775 posts

264 months

Wednesday 26th April 2017
quotequote all
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.

So

26,271 posts

221 months

Wednesday 26th April 2017
quotequote all
Eric Mc said:
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.
"Power to tax capital gains made from UK land as income tax not CGT"

I didn't even know it was in there!


PurpleMoonlight

22,362 posts

156 months

Wednesday 26th April 2017
quotequote all
Eric Mc said:
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.
5 years with a huge majority and the Tories will be able to push through whatever they like.