Making Tax Digital

[Eric Mc]

LeighW said:

Lords call for delay in Making Tax Digital for VAT until 2020

But will HMRC listen?

Déja vu all over again.

[Eric Mc]

I may have to do that too - but it adds a huge amount of extra work on to my shoulders as well as substantially changing my letters of engagement for those cases - not to mention imposition on available time.

In other words, how much checking and verifying should I do before I submit VAT returns on my clients' behalf. In HMRC's eyes, I will be equally responsible for incorrect VAT returns as the client.

[Eric Mc]

So said:

Eric Mc said:

In HMRC's eyes, I will be equally responsible for incorrect VAT returns as the client.

Personally I think you should be entirely responsible for accurate submissions, if your client has given you accurate input data.

That's the big "if". Normally, it would be expected that an accountant would check the data they have been sent by the client before onward submission to any third party. If an accountant has to take on loads of additional VAT return work simply so that his client can submit his VAT return (something he was happilly doing himself previously), then that will require a lot more time and effort from the accountant.

[Eric Mc]

So said:

Fine, but if an accountant is given accurate data and is tasked with submission of a VAT return it should be incumbent upon the accountant to ensure that the return is correct.

You don't need to tell me what accountants should do. I've been doing all those things for over 40 years. Of course it's incumbent on the accountant to ensure that any return they are submitting on behalf of a client is correct. I know all that.

The problem with VAT MTD is that many clients who currently submit their own returns will now be asking their accountants to submit them on their behalf. If that is what transpires, the accountants will HAVE to spend quite a bit of time checking the accuracy of the book-keeping data they have been given before they can make the submission. This will be a NEW service being provided by the accountant and they will have to charge for it. It's ascertaining if the data given by the client is accurate that is time consuming - and expensive for the client. The accountant should not assume that what they have been given is accurate.

In my situation, I only currently submit a very small number of VAT returns for clients. It's something I would prefer not to do. The vast bulk of them do their own returns - and I would prefer if it stayed that way.

[Eric Mc]

So said:

Someone qualified will, I am sure, comment. But as far as I recall it used to be the case that YOU were responsible for figures prepared on YOUR BEHALF by an accountant. Certainly that seemed to be the main thrust of HMRC's line with us.

Up until very recently, the tax payer and/or directors of limited companies always had prime responsibility for the accuracy (or otherwise) of the data returned to HMRC. In the past couple of years, accountants and other tax agents are now equally liable for what is submitted.

[Eric Mc]

That's why HMRC never wanted to allow spreadsheets. The fact that they are allowing them now is a massive concession - and kind of destroys the logic of why they wanted MTD in the first place.

That is one of the House of Lords' major issues with the whole lunatic scheme.

[Eric Mc]

Yep - clear as mud as to what the REAL legal requirements are. It's a disaster in the making.

[Eric Mc]

PurpleMoonlight said:

Yeah, right, not seen one of those on 20 years.

Yep - that's a good approach. Be sloppy careless and inaccurate in your record keeping on the assumption that the powers that be will never notice.

Sadly, you are correct and that is the precise reason why HMRC are keen to see MTD (eventually) cover ALL taxes - not just VAT.

[Eric Mc]

Don't worry, they plan to reduce the registration threshold drastically in the near future (April 2020) so you may very will find yourself reacquainted with the joys of VAT, MTD or otherwise, before too long.

[Eric Mc]

Yes, you will be required to complete an MTD VAT return for whatever your first full VAT return period is after 1 April 2019.

So, if you have a VAT quarter ended 30 April 2019, the first MTD return is the quarter May/June/July 2019.

Because HMRC has no way of knowing whether a businesses' 12 month rolling turnover exceeds £85,000 on a quarter by quarter basis, there will be many small businesses who will be able to continue to submit old style VAT returns even if their 12 months turnover will break the £85,000 barrier.

Following on from the House of Lords' call for a delay in the implementation of VAT MTD, the accounting and tax bodies have now asked for the same -

https://www.accountancyage.com/2018/11/23/should-m...

[Eric Mc]

They've shut their systems down for a few days - including the prototype test version of MTD.

[Eric Mc]

troika said:

Stick with the old system, I submitted a VAT return today, no problem!

No choice for many.

[Eric Mc]

MTD has moved on a lot since my original post in January 2017 - two years ago.

The original plan was abandoned by HMRC and a modified version relating to VAT is the current version.

[Eric Mc]

dvs_dave said:

Nothing special about it. It’s been digital in the US for years. Loads of good apps out there that work well, Intuit TurboTax being the leaders. If your tax affairs are fairly straightforward, you can even just take pics of your tax documents and it fills out and submits the forms for you. Easy peasy.

It’d be dead easy to implement the same platform for HMRC purposes, and it’s kind of odd that it’s hasnt been yet.

They don't have VAT in the US. What have they been doing digital for years?

[Eric Mc]

dvs_dave said:

Eric Mc said:

They don't have VAT in the US. What have they been doing digital for years?

Annual tax returns/self assessments, both on the federal and state level. Everyone has to do one, it’s the law.

We've had electronic filing of income tax returns for 24 years.

[Eric Mc]

Welshbeef said:

Eric Mc said:

We've had electronic filing of income tax returns for 24 years.

But people generally only do one if they are informed they must

Indeed, the UK tax system has been automated for decades and many people have no need to file returns as their income is taxed at source or they don't need to pay tax. By all accounts, the US system is dreadfully clunky and complex (partly due to the complicated interactions between the federal and state tax systems).

The UK system actually puts the onus on the taxpayer to notify HMRC when they must submit a return. HMRC are not clairvoyant although they do have means of finding out that taxpayer may have had unreported taxable income such as an undeclared rental property.

[Eric Mc]

Nothing can be done about integrating software with HMRC systems without HMRC authorising such integration. HMRC sets the integration criteria.

[Eric Mc]

Although the plans to replace Self Assessment with a Making Tax Digital submissions were postponed, it is still likely to happen in the not to distant future. HMRC are still working towards setting up their systems for the multiple and separate submissions that will replace the current single Self Assessment Tax Return. My software provider (Iris) is getting their act together to be ready for when the change happens. Here is what is going to be required for sole traders and landlords -

IRIS now caters for a full end to end MTD submission

EOPS – End of period Statement (HMRC live - Oct 2018): With the addition of the EOPS submission it is now possible to complete an end to end submission for Self-employment (Sole trades) and UK Property for MTD.

An EOPS is an end of year declaration which is required to be submitted for each source of business income.

End OF Year Submission EOYS (HMRC live – Oct 2018): A new area added to the digital tax hub which allows you to crystallise a client’s end of year position (replacement to submitting a Tax Return).

Crystallisation is the process that allows you to finalise a client’s end of year position, this will involve submitting other income and reliefs and finalising the client’s final tax calculation.

Other income and reliefs (HMRC live – Dec 2018): It is now possible to submit an individual’s savings, dividends and charitable giving data from the digital tax hub (Within the ‘End of year submission’ section).

Note that a separate EOPS is required for each sole trader and rental activity. So, a sole trader with two separate businesses needs to complete two EOPS. A sole trader with two separate businesses and rental income needs to complete three EOPS.

You will have to get used to the terms EOPS and EOYS as the next important acronyms when it comes to handling your tax affairs.

[Eric Mc]

At heart, what they are doing is bringing back the way things used to be done before Self Assessment was introduced in 1995.

Before SA, sole traders submitted their trading accounts separately to submitting the actual tax return. SA was supposed to be a streamlined "one stop shop" approach to notifying HMRC of your profit(s) loss(es) situation for the tax year. 25 year on HMRC has decided that SA was a failure and they are reverting to the old methods - the difference being that the submissions are more frequent and carried out digitally rather than on paper.

Round in circles we go.

[Eric Mc]

Amidst all the furore about Brexit yesterday, the Chancellor's Spring Statement did not get much coverage. Buried within the speech, were some interesting points about Making Tax Digital -


Perhaps one of the most significant announcements in today’s statement was the reference that the government will not mandate MTD for any new taxes in 2020

George Bull, senior tax partner at RSM, said: “Previously, we were expecting MTD to be extended to income taxes and corporation taxes from 2020, but this now appears to have been deferred to an as yet unknown later date. It’s likely that HMRC will want to fully assess how MTD for VAT, which comes into force in 2019-20, is working in practice before committing to an extension.

“This is a far cry from the ‘end of the tax return’ we were promised back in Budget 2015.”

As for MTD for VAT, of which the deadline is less than a month away, Adrian Rudd, Chair of CIOT/ATT, said: “While some of the requirements of MTD apply from 1 April 2019, this is not the deadline for enrolling into MTD. For many businesses the deadline for signing up may be nearer the beginning of August 2019.

“Businesses need to enrol into MTD for VAT at the right time, and only when they are confident that they can submit their next VAT return using MTD-compatible software, otherwise significant problems can arise. We have produced a guide to the sign up ‘windows’, to help businesses transition into MTD as smoothly as possible.”