Making Tax Digital
Discussion
Although this could be looked on as a business, or a finance or even an employment matter, the implementation of Making Tax Digital in just over one year's time will affect EVERYBODY, not just those with complex or business related tax affairs.
Therefore, I think it should be discussed under the broader aspects of the "News" section rather than in one of the more specialised forums where people who need to be aware of it might not venture too often.
To kick start the discussion, I am providing a link to an article today in Accountancy Age (the world's most exciting newspaper
) which reports on the Treasury Select Committee's very grave concerns about this whole programme.
I would advise everyone (and I really do mean "everyone") should be aware of Making Tax Digital (MTD) and be fully aware as to how it will affect them.
Just to let you know, even though this is the most fundamental change to UK taxation since the introduction of Self Assessment 20 years ago, HMRC has stated that they will NOT be conducting a public awareness campaign. So it is up to each taxpayer to find out about these radical changes themselves.
https://www.accountancyage.com/2017/01/17/treasury...
Therefore, I think it should be discussed under the broader aspects of the "News" section rather than in one of the more specialised forums where people who need to be aware of it might not venture too often.
To kick start the discussion, I am providing a link to an article today in Accountancy Age (the world's most exciting newspaper
) which reports on the Treasury Select Committee's very grave concerns about this whole programme.I would advise everyone (and I really do mean "everyone") should be aware of Making Tax Digital (MTD) and be fully aware as to how it will affect them.
Just to let you know, even though this is the most fundamental change to UK taxation since the introduction of Self Assessment 20 years ago, HMRC has stated that they will NOT be conducting a public awareness campaign. So it is up to each taxpayer to find out about these radical changes themselves.
https://www.accountancyage.com/2017/01/17/treasury...
FredClogs said:
The good news it it'll essentially give the revenue the power and scope to monitor bank accounts and all you business transactions, so as long as your business is straight forward and not dodging anything you've nothing to worry about and life should be simpler, pay the bills when they come and inform the revenue of any mistakes they make, what could be easier.
How naive can you be.At the moment, if HMRC wants full details of a business's transactions, they must launch an enquiry under the Taxes Management Act - and they must notify the taxpayer of their rights under this procedure. In other words, a tax enquiry is the legal equivalent of the issue of an arrest or a search warrant.
Under these new rules, HMRC will effectively be automatically getting as a matter of course all the data they would normally have to open an enquiry to get. So, in effect, they automatically have the right to enquire into your affairs WITHOUT legal recourse first.
I have serious problems with that.
FredClogs said:
Eric Mc said:
FredClogs said:
The good news it it'll essentially give the revenue the power and scope to monitor bank accounts and all you business transactions, so as long as your business is straight forward and not dodging anything you've nothing to worry about and life should be simpler, pay the bills when they come and inform the revenue of any mistakes they make, what could be easier.
How naive can you be.At the moment, if HMRC wants full details of a business's transactions, they must launch an enquiry under the Taxes Management Act - and they must notify the taxpayer of their rights under this procedure. In other words, a tax enquiry is the legal equivalent of the issue of an arrest or a search warrant.
Under these new rules, HMRC will effectively be automatically getting as a matter of course all the data they would normally have to open an enquiry to get. So, in effect, they automatically have the right to enquire into your affairs WITHOUT legal recourse first.
I have serious problems with that.
The only doubt is perhaps the timing - although so far HMRC is not budging on its original timetable..
At this moment, everything is set for a 6 April 2018 implementation.
And, just to add a further little twist to the story, this is being implemented at the same time that 150 tax offices are being closed and being replaced by 15 call centres.
Do your VAT returns fall on calendar quarters?
If they don't, they won't align with the tax quarters which will be calendar quarters only.
HMRC's longer term plan is to abolish the VAT return and use the data from the accounting updates to review VAT submissions.
How they can align all this when VAT accounting and business accounting are actually very different is a bit of a mystery and they haven;t outlined how they intend to square that particular circle. For instance, tax and accounting rules rules generally require that capital expenditure be properly accounted for and differentiated from revenue costs whereas VAT is not concerned about such issues.
If the business is eligible for VAT cash accounting it may still be preparing its accounts on an accruals basis i.e the correct method. That too would have to be reconciled between the two conflicting requirements
It also looks like HMRC are planning on forcing ALL sole traders to have a business year end that matches the tax year - even though that may not be appropriate to all businesses. They did play with this idea 20 plus years ago when throwing out feelers on Self Assessment but backed off when it was pointed out to them that businssess were set up not for the benefit of the tax authorities, but to provide a living to their proprietors and staff.
HMRC seem to have forgotten this in the intervening two decades.
If they don't, they won't align with the tax quarters which will be calendar quarters only.
HMRC's longer term plan is to abolish the VAT return and use the data from the accounting updates to review VAT submissions.
How they can align all this when VAT accounting and business accounting are actually very different is a bit of a mystery and they haven;t outlined how they intend to square that particular circle. For instance, tax and accounting rules rules generally require that capital expenditure be properly accounted for and differentiated from revenue costs whereas VAT is not concerned about such issues.
If the business is eligible for VAT cash accounting it may still be preparing its accounts on an accruals basis i.e the correct method. That too would have to be reconciled between the two conflicting requirements
It also looks like HMRC are planning on forcing ALL sole traders to have a business year end that matches the tax year - even though that may not be appropriate to all businesses. They did play with this idea 20 plus years ago when throwing out feelers on Self Assessment but backed off when it was pointed out to them that businssess were set up not for the benefit of the tax authorities, but to provide a living to their proprietors and staff.
HMRC seem to have forgotten this in the intervening two decades.
98elise said:
FredClogs said:
The good news it it'll essentially give the revenue the power and scope to monitor bank accounts and all you business transactions, so as long as your business is straight forward and not dodging anything you've nothing to worry about and life should be simpler, pay the bills when they come and inform the revenue of any mistakes they make, what could be easier.
I will have 9 tax returns to do a year....sounds much simpler.sole trader with small business
also owns a buy to let
has some investment income (interest and dividends)
Their reporting requirements will be -
four quarterly updates for the sole tradership
four SEPARATE quarterly returns for the buy to let
separate monitoring and updating of the digital tax account (this bit applies to everybody - not just those who currently need to make self assessment tax returns)
an ANNUAL final reconciliation submission tying all the above together and correcting (no doubt numerous) errors or omissions made when making the quarterly submissions.
That is at least NINE submissions a year COMPLETELY IGNORING any VAT submission requirements or PAYE submission requirements that the trader might already have to do.
Vixpy1 said:
so hang on , 3 companies - 12 returns
one is vat reg - 4 returns
investment property - 4 returns
and an annual self assesment for divdends etc - 1 .
So er 21 returns a year.
For the moment, limited companies won't be required to submit quarterly updates - although at some point they will. HMRC has to reconcile in its legislation how to make quarterly accounting compulsory whilst at the same time not breaking existing company law requiring ANNUAL limited company accounts and the internationally recognised accounting standards which are all based on the preparation of ANNUAL accounts and ANNUAL reports.one is vat reg - 4 returns
investment property - 4 returns
and an annual self assesment for divdends etc - 1 .
So er 21 returns a year.
Where did you get that particular piece of information from?
If you are a sole trader, a partner in a partnership, a partnership itself, a buy to let landlord or a holiday let operator, you will HAVE to submit quarterly updates to ether with the annual reconciliation.
From possibly 2020 or 2021, limited companies will also have to do the same.
I have not heard anything that contradicts that from anybody - and I've been reading up on this extensively as well as attending to lectures course specifically covering the details of Making Tax Digital and the Digital Tax Account.
If you are a sole trader, a partner in a partnership, a partnership itself, a buy to let landlord or a holiday let operator, you will HAVE to submit quarterly updates to ether with the annual reconciliation.
From possibly 2020 or 2021, limited companies will also have to do the same.
I have not heard anything that contradicts that from anybody - and I've been reading up on this extensively as well as attending to lectures course specifically covering the details of Making Tax Digital and the Digital Tax Account.
And that above post is exactly why this will be a disaster. The general public tolerates tax because they know it is necessary. But there is a fine line that has to be steered between encouraging the willing cooperation of the public and outright coercion of the public. Making Tax Digital is way too much like the latter rather than the former.
Coercion is always resented. Indeed, if you look at many revolutions, you will see that over bearing tax or an overbearing tax system is often a root cause.
Coercion is always resented. Indeed, if you look at many revolutions, you will see that over bearing tax or an overbearing tax system is often a root cause.
LeighW said:
Ziplobb said:
He is even suggesting that he will have to cut the number of clients he deals with in order to do this for the remaining ones simply because he does not want to expand his business by taking on more staff and can increase his income from the customers that remain.
I'm going to be facing the same dilemma. Our practice is very small - four of us in total at my office - and we have about 280 clients in total. We already struggle to take more than a week off at a time due to the constant reporting requirements of HMRC, so I'll either need more staff (where are all these trained accountants going to come from??), or bid some clients farewell. Of course, existing clients aren't going to want to pay larger fees to us either. 
One major issue I haven't stated yet is that accountants (and other tax agents) are not going to be allowed submit these quarterly updates from their office servers or computers. Only the taxpayer can make these submissions from their own devices which they will have registered directly with HMRC.
Not only that but the accountants and agents won't even be allowed access to the client's Digital Tax Account during the year - so they won't even be able to check during the tax year what the client has been forwarding to HMRC.
It's only when the final "annual" submission is being made that it is likely (although not yet confirmed) that the accountant/agent will get to see what has been going on.
What on earth are HMRC thinking?
garyhun said:
Is this purely for businesses or is personal self assessment also on the radar?
When I said "everybody" I meant "everybody" i.e. EVERY taxpayer in the UK.Now, the filing requirements will vary depending on your sources of income.
The important thing about this new system is the creation of the "Digital Tax Account" which EVERY tax payer will have. HMRC claims this will be like your on-line bank account in that you will be able to access it and carry out data updates and transactions at any time from any where in the world.
For those who are MAINLY under PAYE, like the current Self Assessment rules, they MAY not have to do anything at all. In such cases HMRC thinks that the data on the Digital Tax Account will automatically be correct and up to date based on information provided by third parties - such as employers, banks, solicitors etc. HOWEVER, the taxpayer will be required to monitor the information on the Digital Tax Account and will be required to amend or update this data if they believe it isn't correct. Failure to do so could result in penalties.
Examples of the type of changes a "normal" taxpayer might have to update in real time are -
change of job
change of company car
change of other type of taxable benefit
change of marital/civil partnership status
change of address
arrival of a child
death of a spouse
moving in or out of a partner
Particularly of significance would be a Capital Gain in the tax year. Under these new rules, a Capital Gain would need to be updated on the Digital Tax Account within 30 days of the gain being made. And the tax arising would also have to be paid within 30 days.
As you can see, none of this has anything to do with the quarterly submissions I mentioned above. The quarterly update regime is in addition to what I am describing here and is chiefly for sole traders and landlords.
The system isn't in place yet.
How do you REALLY know they are right?
How do you know when you speak to them that they are going to give you the best advice for YOUR business and your tax affairs. Their imperative is to raise money for the exchequer. I have no problem with that. The country needs to raise money in order to function.
However, they are NOT going to be looking after your best interest and they will not always know what is right for YOU, no matter how helpful they may appear to be.
This is a major calamity in the making and I think the tax shortfall arising as a result of this is going to be a national disaster and scandal of the highest order.
By the way, why are you operating through a partnership in this day and age?
How many partners are in the partnership?
If two, then under this new regime you will be submitting 13 quarterly and annual returns.
How do you REALLY know they are right?
How do you know when you speak to them that they are going to give you the best advice for YOUR business and your tax affairs. Their imperative is to raise money for the exchequer. I have no problem with that. The country needs to raise money in order to function.
However, they are NOT going to be looking after your best interest and they will not always know what is right for YOU, no matter how helpful they may appear to be.
This is a major calamity in the making and I think the tax shortfall arising as a result of this is going to be a national disaster and scandal of the highest order.
By the way, why are you operating through a partnership in this day and age?
How many partners are in the partnership?
If two, then under this new regime you will be submitting 13 quarterly and annual returns.
You do accountants a great disservice and are rather insulting to the professional qualification.
The whole point of an accountant, especially one who deals with lots of smaller clients, is that no matter what "crap" (a word I would never use for my clients) they might receive, they can their professional skill and knowledge to work out how "wrong" the information they have received is and fill the gaps.
Part of my training (and a lot of my actual work over the years) has been dealing what what are often referred to as "incomplete records".
I am pretty sure an awful lot of data that traders may start submitting on this quarterly basis will be very incomplete - sometimes by design but a lot of the time by pure lack of knowledge. I am absolutely positive that the accounting system (that the taxpayers MUST buy - HMRC are not providing any software for this) will not be smart enough to take the place of an experienced professional.
The whole point of an accountant, especially one who deals with lots of smaller clients, is that no matter what "crap" (a word I would never use for my clients) they might receive, they can their professional skill and knowledge to work out how "wrong" the information they have received is and fill the gaps.
Part of my training (and a lot of my actual work over the years) has been dealing what what are often referred to as "incomplete records".
I am pretty sure an awful lot of data that traders may start submitting on this quarterly basis will be very incomplete - sometimes by design but a lot of the time by pure lack of knowledge. I am absolutely positive that the accounting system (that the taxpayers MUST buy - HMRC are not providing any software for this) will not be smart enough to take the place of an experienced professional.
skeggysteve said:
Eric Mc said:
When I said "everybody" I meant "everybody" i.e. EVERY taxpayer in the UK.
What about people that don't have a computer? My father doesn't have a computer and has no idea how to use one.No word at all about what large software giant is providing this massive software upgrade to HMRC. Osborne stated back in April 2015 that it would cost the Exchequer £1.7 billion.
The other aspect is the fact that HMRC are expecting the accounting software suppliers to provide compatible book-keeping and accounting software for taxpayers to use.
HMRC have stated categorically that they will NOT be providing a free on-line access to the Digital Tax Account for traders and landlords. They must buy commercial software.
In the past couple of months they have conceded that -
a) they may have to allow spreadsheet software at first - but they don't really want to do this
b) they would provide a one off £500 subsidy to all businesses and landlord who have to buy this software. The subsidy will be given a reduction in the tax liability (which means it is meaningless if you don't have a liability arising)
This is just for the first year. Ongoing upgrades and licences (which will be essential if this software is to keep abreast of accounting and tax changes - which happen every year without fail)will not be subsidised in any way and will have to be paid for by each and every trader and landlord every year.
The other aspect is the fact that HMRC are expecting the accounting software suppliers to provide compatible book-keeping and accounting software for taxpayers to use.
HMRC have stated categorically that they will NOT be providing a free on-line access to the Digital Tax Account for traders and landlords. They must buy commercial software.
In the past couple of months they have conceded that -
a) they may have to allow spreadsheet software at first - but they don't really want to do this
b) they would provide a one off £500 subsidy to all businesses and landlord who have to buy this software. The subsidy will be given a reduction in the tax liability (which means it is meaningless if you don't have a liability arising)
This is just for the first year. Ongoing upgrades and licences (which will be essential if this software is to keep abreast of accounting and tax changes - which happen every year without fail)will not be subsidised in any way and will have to be paid for by each and every trader and landlord every year.
Initially they are providing an option to pay monthly - which I think is a good thing.
Of course, they could provide this option right now with no wholesale and fundamental change to the current system. Paying tax frequently is not that hard to implement. They could do that now with NO cost of restructuring the whole system.
However, it is expected that the frequent payment option will eventually become compulsory.
Of course, they could provide this option right now with no wholesale and fundamental change to the current system. Paying tax frequently is not that hard to implement. They could do that now with NO cost of restructuring the whole system.
However, it is expected that the frequent payment option will eventually become compulsory.
Borroxs said:
Eric Mc said:
Can you explain how a small business or landlord can submit their quarterly updates without this technology then.
HMRC have stated that digital is the only way for this (hence why it's called Making Tax Digital). What are the non-digital options?
Forcing people into the 21st century....?HMRC have stated that digital is the only way for this (hence why it's called Making Tax Digital). What are the non-digital options?
In any case, forcing people isn't a good way of getting things done - especially when it is a government department doing the forcing.
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