Making tax digital
Discussion
Sidebar - I don't know if this has changed or if I have only just noticed, or if it was never the case, but on the MTD gov uk page they state that bridging software (eg from Excel) is one of the two valid options for implementing MTD - whereas I thought they had said previously that bridging software is only to be used as a temporary workaround and that the only option would be to have directly integrated from your digital accounts package.
48k said:
Sidebar - I don't know if this has changed or if I have only just noticed, or if it was never the case, but on the MTD gov uk page they state that bridging software (eg from Excel) is one of the two valid options for implementing MTD - whereas I thought they had said previously that bridging software is only to be used as a temporary workaround and that the only option would be to have directly integrated from your digital accounts package.
The original plan (2015!!!) absolutely decreed that Excel and other spreadsheet systems would NOT be allowed as they didn't consider spreadsheets to be "digital records".However, when they introduced MTD for VAT they relented on the Excel front - although you MUST use compatible "bridging" software to translate the Excel figures into a format that can be used to submit the VAT return figures.
I wasn't aware if they planned to make a similar concession regarding MTD for Income Tax.
The full letter is available here -
https://www.att.org.uk/sites/default/files/2023-11...
I'm an ATT member so not sure if the link will work for non-members.
https://www.att.org.uk/sites/default/files/2023-11...
I'm an ATT member so not sure if the link will work for non-members.
Eric Mc said:
48k said:
Sidebar - I don't know if this has changed or if I have only just noticed, or if it was never the case, but on the MTD gov uk page they state that bridging software (eg from Excel) is one of the two valid options for implementing MTD - whereas I thought they had said previously that bridging software is only to be used as a temporary workaround and that the only option would be to have directly integrated from your digital accounts package.
The original plan (2015!!!) absolutely decreed that Excel and other spreadsheet systems would NOT be allowed as they didn't consider spreadsheets to be "digital records".However, when they introduced MTD for VAT they relented on the Excel front - although you MUST use compatible "bridging" software to translate the Excel figures into a format that can be used to submit the VAT return figures.
Gov uk said:
You must now use compatible software to keep your VAT records and file your VAT Returns.
To do this, you’ll need either:
a compatible software package that allows you to keep digital records and submit VAT Returns
bridging software to connect non-compatible software (like spreadsheets) to HMRC systems
I was hoping to be able to persuade some clients to come out of the dark ages with their accounts software but it seems like "export to Excel, import to HMRC" is going to be the solution forevermore.To do this, you’ll need either:
a compatible software package that allows you to keep digital records and submit VAT Returns
bridging software to connect non-compatible software (like spreadsheets) to HMRC systems
Yes - that's the situation for VAT MTD. We don't know for sure whether they will allow spreadsheet data for Income Tax MTD.
The whole thrust of this (mad) project is to force virtually EVERY trader or landlord into using commercial software (which the individual will have to buy from a commercial supplier) - preferably something that operates on a double entry/control account system.
Us accountants love a bit of double entry (Oooh errr missus...) but it's not suitable for everybody running a business - especially a very small business.
One big concession that HMRC made back in December 2022 was that they said that, for the first year of IT MTD (i.e. 2026/27), traders with turnovers under £50,000 were exempted from having to comply. For 2027/28 the turnover threshold was being reduced to £30,000 and they would make a further announcement about what would happen to these thresholds later. So far, they have made no announcements on this matter.
Although introducing decent turnover thresholds looks like it should help, they didn't say what happened if a trader broke through the threshold part way through the tax year. Nor have they said what happens if they drop below the threshold. Nor have they said what types of submissions traders under the threshold have to make.
After all, the whole point of this project is to abolish the Self Assessment tax return. So, if the SA return vanishes, what do those outside of the quarterly reporting system need to do?
As you can see, almost nine years on from Chancellor George Osborne's big announcement in the 2015 Budget, there are still loads of areas that require clarification.
The whole thrust of this (mad) project is to force virtually EVERY trader or landlord into using commercial software (which the individual will have to buy from a commercial supplier) - preferably something that operates on a double entry/control account system.
Us accountants love a bit of double entry (Oooh errr missus...) but it's not suitable for everybody running a business - especially a very small business.
One big concession that HMRC made back in December 2022 was that they said that, for the first year of IT MTD (i.e. 2026/27), traders with turnovers under £50,000 were exempted from having to comply. For 2027/28 the turnover threshold was being reduced to £30,000 and they would make a further announcement about what would happen to these thresholds later. So far, they have made no announcements on this matter.
Although introducing decent turnover thresholds looks like it should help, they didn't say what happened if a trader broke through the threshold part way through the tax year. Nor have they said what happens if they drop below the threshold. Nor have they said what types of submissions traders under the threshold have to make.
After all, the whole point of this project is to abolish the Self Assessment tax return. So, if the SA return vanishes, what do those outside of the quarterly reporting system need to do?
As you can see, almost nine years on from Chancellor George Osborne's big announcement in the 2015 Budget, there are still loads of areas that require clarification.
Eric Mc said:
when they introduced MTD for VAT they relented on the Excel front - although you MUST use compatible "bridging" software to translate the Excel figures into a format that can be used to submit the VAT return figures.
Yes, it's completely absurd, everybody having to buy additional software just to connect Excel to HMRC. One of the many aspects of HMRC's current shambles that drives me nuts.Here's another. CGT allowance dropping to £3,000 p.a. so in theory there will be many, many more people required to file a CGT return. The vast majority of those people won't be in self assessment and HMRC keeps doing its best to push people out of self assessment simply to reduce their workload. How on earth is that going to work? Will there be a simple way of reporting "CGT only"?
And don't forget those who will be earning interest exceeding £1,000 per year? There will be lots more of these now as interest rates are no longer on the floor. And the banks stopped deducting basic rate tax on interest years ago.
So anybody who receives interest exceeding £1,000 may have to complete a Self Assessment tax return just so they can pay the tax on the excess over £1,000.
And the same goes for dividends exceeding £1,000.
So anybody who receives interest exceeding £1,000 may have to complete a Self Assessment tax return just so they can pay the tax on the excess over £1,000.
And the same goes for dividends exceeding £1,000.
I’m baffled why Excel/spreadsheet data isn’t ‘digital data’
If you set the cell format as a number it’s as good a digital number as anything isn’t it?
Writing a simple parser, or just having a spread sheet in a database pulling in the key entries required for a return really doesn’t seem like it shouldn’t be a ‘thing’ or an option.
Surely MTD needs to be as open/flexible as possible to provide the benefits it’s advertising?
I just don’t get it. Why need a special piece of software to input values to a database?
This is, ultimately, a web-page with a login screen. They could make that front-end with your UID to their database themselves.
How, after about £1bn quid, can’t someone even be arsed to write a web front-end to the database entries it requires?
Utter shambles. Seemingly made needlessly complex as someone’s pipe dream by having fancy flashy apps/software making someone money when a free tool like libre calc can do more.
Finally, I still don’t get the benefits. Tax year end or in real-time, the total you’ll pay will be the same.
The revenue stream will just be 12mo ahead. A one-hit boost.
After that where is the advantage? It’ll clearly cost users and HMRC more to use MTD so will actually be a drag on the economy?
Unless the HMRC want to sack loads of employees at some point?
If you set the cell format as a number it’s as good a digital number as anything isn’t it?
Writing a simple parser, or just having a spread sheet in a database pulling in the key entries required for a return really doesn’t seem like it shouldn’t be a ‘thing’ or an option.
Surely MTD needs to be as open/flexible as possible to provide the benefits it’s advertising?
I just don’t get it. Why need a special piece of software to input values to a database?
This is, ultimately, a web-page with a login screen. They could make that front-end with your UID to their database themselves.
How, after about £1bn quid, can’t someone even be arsed to write a web front-end to the database entries it requires?
Utter shambles. Seemingly made needlessly complex as someone’s pipe dream by having fancy flashy apps/software making someone money when a free tool like libre calc can do more.
Finally, I still don’t get the benefits. Tax year end or in real-time, the total you’ll pay will be the same.
The revenue stream will just be 12mo ahead. A one-hit boost.
After that where is the advantage? It’ll clearly cost users and HMRC more to use MTD so will actually be a drag on the economy?
Unless the HMRC want to sack loads of employees at some point?
I don't get this "abolish self-assessment" thing at all.
Surely doing your own tax accounts on your own software on your own computer every week/month/quarter/year is exactly the same as keeping a biscuit tin full of paperwork and banging the numbers into the HMRC website once a year?
Same numbers, same amount of tax paid, same scope for mistakes/massaging of figures.
Surely doing your own tax accounts on your own software on your own computer every week/month/quarter/year is exactly the same as keeping a biscuit tin full of paperwork and banging the numbers into the HMRC website once a year?
Same numbers, same amount of tax paid, same scope for mistakes/massaging of figures.
The theory in HMRC's mind was that smart IT based accounting software would force people to be accurate and make fewer mistakes. There is some logic to this in that software can have built in warnings and prompts which, in theory, could prevent people - especially those with a very rudimentary or no knowledge of basic book-keeping and accounting principles - entering information incorrectly.
When reviewing simple manual records kept by proprietors, I have come across countless errors of principle in their record keeping. Examples would be treating the purchase of a fixed asset as an expense (analysing the purchase of a vehicle under "Motor Expenses", for instance) - or not knowing how to record Hire Purchase repayments.
Smart software MIGHT pick up on these types of postings and MIGHT alert the person making the entry that they are going to do something stupid.
However, in reality, software, even now, doesn't do this, so the same types of posting and analysis errors will still be seen. And, in many ways, trying to correct posting errors made in a computerised book-keeping system is more difficult and time consuming than re-analysing a few entries in a manual analysis book - or an Excel spreadsheet.
So, HMRC's basic assumptions about software bringing about improvements to book-keeping and accounting accuracy are fundamentally in error.
When reviewing simple manual records kept by proprietors, I have come across countless errors of principle in their record keeping. Examples would be treating the purchase of a fixed asset as an expense (analysing the purchase of a vehicle under "Motor Expenses", for instance) - or not knowing how to record Hire Purchase repayments.
Smart software MIGHT pick up on these types of postings and MIGHT alert the person making the entry that they are going to do something stupid.
However, in reality, software, even now, doesn't do this, so the same types of posting and analysis errors will still be seen. And, in many ways, trying to correct posting errors made in a computerised book-keeping system is more difficult and time consuming than re-analysing a few entries in a manual analysis book - or an Excel spreadsheet.
So, HMRC's basic assumptions about software bringing about improvements to book-keeping and accounting accuracy are fundamentally in error.
Eric Mc said:
The theory in HMRC's mind was that smart IT based accounting software would force people to be accurate and make fewer mistakes. There is some logic to this in that software can have built in warnings and prompts which, in theory, could prevent people - especially those with a very rudimentary or no knowledge of basic book-keeping and accounting principles - entering information incorrectly.
When reviewing simple manual records kept by proprietors, I have come across countless errors of principle in their record keeping. Examples would be treating the purchase of a fixed asset as an expense (analysing the purchase of a vehicle under "Motor Expenses", for instance) - or not knowing how to record Hire Purchase repayments.
Smart software MIGHT pick up on these types of postings and MIGHT alert the person making the entry that they are going to do something stupid.
However, in reality, software, even now, doesn't do this, so the same types of posting and analysis errors will still be seen. And, in many ways, trying to correct posting errors made in a computerised book-keeping system is more difficult and time consuming than re-analysing a few entries in a manual analysis book - or an Excel spreadsheet.
So, HMRC's basic assumptions about software bringing about improvements to book-keeping and accounting accuracy are fundamentally in error.
completely agree - despite the advertised 'cleverness' of software which claims to scan your bank statement and sort it all out for you, there is no short cut to avoid the expert knowledge of a good accountant...When reviewing simple manual records kept by proprietors, I have come across countless errors of principle in their record keeping. Examples would be treating the purchase of a fixed asset as an expense (analysing the purchase of a vehicle under "Motor Expenses", for instance) - or not knowing how to record Hire Purchase repayments.
Smart software MIGHT pick up on these types of postings and MIGHT alert the person making the entry that they are going to do something stupid.
However, in reality, software, even now, doesn't do this, so the same types of posting and analysis errors will still be seen. And, in many ways, trying to correct posting errors made in a computerised book-keeping system is more difficult and time consuming than re-analysing a few entries in a manual analysis book - or an Excel spreadsheet.
So, HMRC's basic assumptions about software bringing about improvements to book-keeping and accounting accuracy are fundamentally in error.
I am writing an extension to our in-house project management system to produce draft accounts (to save time for our accountant), and sat down with him to understand how he builds the accounts from our system - ultimately, (even with our system being able to pre-classify most expenses based on previous classifications) there is a human decision continually being required as to how / where you allocate figures - that knowledge of tax / finance law is why you have an accountant and no software currently will get around that...
VAT is simple in comparison to accounts - there is a pre-defined amount of VAT relevant to any transaction and those figures build to give the simply 9 figure submission - the idea of MTD for VAT was to avoid manual input, the concept being that it would flow digitally the whole way through avoiding opportunity for people to mess with the figures - but using excel as an option simply means that people can put whatever they want in a source spreadsheet and then suck that into submission software and suddenly it is all digital (apparently!) We were one of the only small companies who signed up for the original API and for a number of quarters we used the API to submit directly to HMRC - fully digital, but their approach to writing an API is poorly documented, poorly implemented and over-complex - considering that all you have to do is submit a VAT number / reference code and 9 numbers (a couple of which aren't needed as they derive from the others) it should be one of the simplest APIs out there:
- authorise
- confirm quarter / VAT number / etc.
- send 9 figures
- receive confirmation
We therefore stopped using it and our system which calculates the VAT gives us figures which we then manually put into an excel spreadsheet and suck that into third party software which costs us £20 p/a to submit it - more complex and more expensive and no more secure or accurate than when we simply entered those 9 numbers into the HMRC website!
MTD is already proving to be a white elephant of huge and expensive proportions - it is totally un-necessary, unweildly, won't deliver what is required and will cause huge headaches and overheads for small businesses.
akirk said:
the idea of MTD for VAT was to avoid manual input, the concept being that it would flow digitally the whole way through avoiding opportunity for people to mess with the figures - but using excel simply means people can put whatever they want in a source spreadsheet and then suck that into submission software and suddenly it's all digital!)
Yup, that's exactly my experience and seems to render the whole thing completely pointless. When you consider VAT is one of the government's biggest sources of tax revenue it rams home just how daft the whole thing is.Mind you, I find the on-line self assessment maze similarly bizarre, albeit a completely different flavour of madness. The truth of Income Tax and NICs seems to be that 99.9% of the workload falls on PAYE employers and HMRC just makes things as unwieldy as possible for everybody else.
MPs criticise MTD for making tax ‘difficult’
Report from the Public Accounts Committee (PAC)
https://committees.parliament.uk/publications/4223...
Report by ICAEW
https://www.icaew.com/insights/tax-news/2023/nov-2...
Other article highlights:
Report from the Public Accounts Committee (PAC)
https://committees.parliament.uk/publications/4223...
Report by ICAEW
https://www.icaew.com/insights/tax-news/2023/nov-2...
Other article highlights:
article said:
In a report on MTD, the Public Accounts Committee (PAC) warned that HMRC is increasing the burdens imposed on some taxpayers with MTD rather than simplifying the tax system, describing the system as ‘making tax difficult’.
‘Without a rigorous focus on what will make the tax system easier for everyone there is a risk that the planned changes will add further complications rather than simplify it,’ the PAC report stressed.
HMRC has not yet started the data migration for self assessment, but it is planning to move 1.6 million taxpayer records, which covers the first two cohorts for self assessment, before those taxpayers start enrolling on the Making Tax Digital programme.
So far, the MTD system has cost HMRC £640m to develop and has faced numerous delays.
HMRC’s revised costing estimated that the total cost of the introduction of MTD for VAT and self assessment would be £1.3bn, a 400% increase in real terms compared to its original estimate of £222m in 2016 for all three taxes in the programme.
The PAC said it had ‘little confidence that HMRC will deliver the income tax reporting side of MTD on time due to HMRC’s poor track record of repeated delays to MTD, and its lack of conviction in its latest timetable’.
HMRC completely underestimated the scale of the challenge of digitalising the tax system and its poor delivery of the programme has resulted in repeated delays and spiralling costs, the report said. The programme is now running at least eight years late for self assessment with the government’s most recent announcement in December 2022, pushing it back to 2026 for landlords and sole traders.
The self assessment part of the programme was always going to be a more complicated task than for VAT, the PAC noted.
‘Despite this HMRC announced a fast timetable without anticipating the additional complexity and its subsequent work to design and test the system has been far too limited. Its pilot test had just 137 participants by 2023
, falling far short of HMRC’s aim to pilot the programme with 15,500 people.’
Dame Meg Hillier MP, chair of the Public Accounts Committee, said: ‘When reporting on proposals for digitalising the tax system, our Committee should not have to be recommending that HMRC start with what taxpayers need – in an ideal world, one would hope this would simply go without saying.
‘But seven years and £640m into the Making Tax Digital programme, we are concerned HMRC is also succeeding in making tax difficult.'
Emma Rawson, ATT technical officer, said: ‘The proposals as they stand are likely to lead to a further deterioration in HMRC’s already poor service levels, especially if MTD for Income Tax is launched as planned in 2026 before it is fit for purpose.
‘The current approach needs a rethink. That is why ATT and CIOT have written to the financial secretary to the Treasury encouraging him to launch a review of MTD, including detailed consultation on its future direction and delivery, with a full assessment of its impacts and benefits.
‘This should include - as the PAC recommends - HMRC undertaking and publishing a robust assessment of how much difference to tax revenue will be made by the two elements of MTD – more frequent submissions of taxpayer data and digital record-keeping.
‘While the Autumn Statement announced easements regarding some of the requirements, we are disappointed that the opportunity to re-evaluate the entire project was not taken.’
What a shambles. The whole idea needs binning.‘Without a rigorous focus on what will make the tax system easier for everyone there is a risk that the planned changes will add further complications rather than simplify it,’ the PAC report stressed.
HMRC has not yet started the data migration for self assessment, but it is planning to move 1.6 million taxpayer records, which covers the first two cohorts for self assessment, before those taxpayers start enrolling on the Making Tax Digital programme.
So far, the MTD system has cost HMRC £640m to develop and has faced numerous delays.
HMRC’s revised costing estimated that the total cost of the introduction of MTD for VAT and self assessment would be £1.3bn, a 400% increase in real terms compared to its original estimate of £222m in 2016 for all three taxes in the programme.
The PAC said it had ‘little confidence that HMRC will deliver the income tax reporting side of MTD on time due to HMRC’s poor track record of repeated delays to MTD, and its lack of conviction in its latest timetable’.
HMRC completely underestimated the scale of the challenge of digitalising the tax system and its poor delivery of the programme has resulted in repeated delays and spiralling costs, the report said. The programme is now running at least eight years late for self assessment with the government’s most recent announcement in December 2022, pushing it back to 2026 for landlords and sole traders.
The self assessment part of the programme was always going to be a more complicated task than for VAT, the PAC noted.
‘Despite this HMRC announced a fast timetable without anticipating the additional complexity and its subsequent work to design and test the system has been far too limited. Its pilot test had just 137 participants by 2023
, falling far short of HMRC’s aim to pilot the programme with 15,500 people.’Dame Meg Hillier MP, chair of the Public Accounts Committee, said: ‘When reporting on proposals for digitalising the tax system, our Committee should not have to be recommending that HMRC start with what taxpayers need – in an ideal world, one would hope this would simply go without saying.
‘But seven years and £640m into the Making Tax Digital programme, we are concerned HMRC is also succeeding in making tax difficult.'
Emma Rawson, ATT technical officer, said: ‘The proposals as they stand are likely to lead to a further deterioration in HMRC’s already poor service levels, especially if MTD for Income Tax is launched as planned in 2026 before it is fit for purpose.
‘The current approach needs a rethink. That is why ATT and CIOT have written to the financial secretary to the Treasury encouraging him to launch a review of MTD, including detailed consultation on its future direction and delivery, with a full assessment of its impacts and benefits.
‘This should include - as the PAC recommends - HMRC undertaking and publishing a robust assessment of how much difference to tax revenue will be made by the two elements of MTD – more frequent submissions of taxpayer data and digital record-keeping.
‘While the Autumn Statement announced easements regarding some of the requirements, we are disappointed that the opportunity to re-evaluate the entire project was not taken.’
It seems to me part of the problem is a belief in government that there are only three types of people in UK,
1. Non-tax payers.
2. Straightforward PAYE employees.
3. Wealthy people with professional accountants.
An ever increasing number of people are caught between categories 2 and 3 with enough going on in their lives for their taxes and allowances to be complicated but not sufficiently wealthy to spend £000s on an accountant.
1. Non-tax payers.
2. Straightforward PAYE employees.
3. Wealthy people with professional accountants.
An ever increasing number of people are caught between categories 2 and 3 with enough going on in their lives for their taxes and allowances to be complicated but not sufficiently wealthy to spend £000s on an accountant.
Eric Mc said:
Accountants don’t have to be that expensive??
Those who think accountants are expensive really miff me. They’re happy to pay solicitors £000s for pretty basic advice you could get off the legal journals on the internet but when you charge them for helping them save £000s in tax they begrudgingly pay your bill. Gassing Station | Business | Top of Page | What's New | My Stuff