Making Tax Digital

[etf]

The Budget included the surprise announcement that Making Tax Digital will be expanded to those with income over £20,000.

Is Rachel on a mission to make Kwasi look better?

We have a report confirming HMRC are shit and she decides to introduce more taxpayers to a new filing system that will clog up the system like someone who has eaten 500 boiled eggs.

Some comment on her idiotic decision:

By Rob Swan
30th Oct 2024 19:42
Well.... (made me laugh)

.... we'll see!

As deadlines approach I expect many in this professional field, and particularly within HMRC's 'IT Crowd', will suddenly find themselves doing a lot of **** shoveling... And when shoveling asterisks becomes too much.... more delays I shouldn't wonder


By richards1
30th Oct 2024 20:06
Can someone explain the difference to me as an individual filling in a self assessment versus MTD return


Replying to richards1:

By kevinringer
30th Oct 2024 20:27
Self Assessment: one Tax Return covering all sources of income and gains for the entire 12 month tax return which must be filed on paper with HMRC by 31 October, or filed digitally by 31 January. Taxpayers must keep records which can be in any format the taxpayer chooses. The one Tax Return covers multiple sources of income, for example, a self-employed taxpayer with one rental property files one Tax Return a year in the same way an employee with a capital gain files one Tax Return a year. One system handles everything.

MTD: one Tax Return per source of self-employment or property business every 3 months = 4 per year, so a self-employed taxpayer with one rental properties files eight Tax Returns a year. All financial transactions must be recorded digitally, and must digitally link with the Tax Return. In addition to this, the taxpayer must still file an annual Tax Return which includes the end of year adjustments, and declares income and gains that are not self-employment or rental.

[etf]

The two paragraphs below from Kevin Ringer coupled with the aliens from the 1970s SMASH advert would back the MTD4IT project into a corner from which it would never escape.

Self Assessment: one Tax Return covering all sources of income and gains for the entire 12 month tax return which must be filed on paper with HMRC by 31 October, or filed digitally by 31 January. Taxpayers must keep records which can be in any format the taxpayer chooses. The one Tax Return covers multiple sources of income, for example, a self-employed taxpayer with one rental property files one Tax Return a year in the same way an employee with a capital gain files one Tax Return a year. One system handles everything.

MTD: one Tax Return per source of self-employment or property business every 3 months = 4 per year, so a self-employed taxpayer with one rental properties files eight Tax Returns a year. All financial transactions must be recorded digitally, and must digitally link with the Tax Return. In addition to this, the taxpayer must still file an annual Tax Return which includes the end of year adjustments, and declares income and gains that are not self-employment or rental.

'They replaced one return with nine returns and eight of them are pointless'.....sound of rivets exploding as the aliens split their sides laughing at the spectacle.

If Labour want growth they need to cut through the mindless red tape introduced by people who have never performed one day of independent work.

'For mash get SMASH' replaced with 'Reeve we need a reprieve'

[etf]

HMRC answers MTD IT expansion questions
by Tom Herbert
AccountingWEB asked HMRC officials for clarification on the expansion of its Making Tax Digital for income tax programme to more taxpayers, what part digital links play in the process, and what success looks like for the project.



By kevinringer
14th Nov 2024 11:00
This seems to be the umpteenth 'HMRC Answer MTD Questions' type article I've read on AWeb since 2016. They all same the same: testing is going well, get your clients ready and take part in the pilot. If testing really was going so well, then why are we now in the 7th year of the pilot that can still only take taxpayers with such a restricted range of criteria that I don't think I have a single client that meets the criteria? See https://www.accountingweb.co.uk/tech/practice-software/mtd-pilot-offers-... for 2017 article about the pilot. It's déjà vu all over again.

[etf]

By ireallyshouldknowthisbut
14th Nov 2024 10:18
"Why do HMRC think forcing business to make quartelry reports will raise tax revenues?"

The central tennant of this is an unproven hypothesis.

Moreover "why does shoving low quality data into HMRC servers deliver any of the projects aims?"

"why are digital records created by those with low IT skills considered accruate?"

"Why do you think this project will work with zero industry buy in?"

[etf]

By kevinringer
14th Nov 2024 17:44
If the extra tax doesn't materialise, HMRC will say the goal of MTD was something else. HMRC originally claimed the cost of operating MTD would be cheaper for businesses than non-MTD, but HMRC have quietly dropped that argument.


By AndrewV12
14th Nov 2024 17:46
'It’s a little over 16 months to go until the biggest change to income tax in a generation, and in April 2026 a first tranche of approximately 700,000 taxpayers are due to enter the Making Tax Digital for income tax (MTD IT) programme.'

It will fly by ;(


Replying to AndrewV12:
Rob Swan
By Rob Swan
14th Nov 2024 19:17
Not sure MTD has any chance of 'flying' - ever!

[etf]

Is it any wonder the UK economy is growing so slowly....meaningless red tape brigade preventing people from undertaking productive work. For me posters on Accountingweb are showing a far greater understanding of the issues than the clueless individuals seeking to expand MTD4IT before an assessment of how the initial cohort have been affected.

By ireallyshouldknowthisbut
14th Nov 2024 14:10
Exam for HMRC.

You have 3 hours to complete this test.

"Expanding MTD will reduce the amount of common errors that are contributing to the UK’s tax gap"

(a) Can you explain, with 5 worked examples for each, which errors will be alleviated with:

(ai) Software in general

(aii) quarterly reporting

3 points for each, 30 marks in total.

(b) What evidence do we have from the VAT roll out that points to a reduction in tax gap? Please refer to independent published studies. How is this evidence applicable to landlords and other small traders?

10 marks

(c) What could be the potential downside to digitisation in terms of increased error? Provide 5 examples.

15 Marks

(d) What is the overall cost of the regulatory burden to small business? Please include software, time, training time, and ongoing submission costs, and compliance reviews.

10 Marks

(e) What resourcing challenges will be faced by HMRC in running this system? Provide 5 challenges and how they will be successfully met.

10 Marks

(f) How will non-compliance of digital records keeping be enforced? What resources will HMRC require? Use examples from VAT on real world compliance work by HMRC and its findings.

10 Marks

(g) On balance, will mandatory digital record keeping be good for UK business, or a regulatory burden? What is the net return for the UK tax payer of this investment? How big it the margin for error?

15 Marks.

[etf]

I recently suggested we needed a MTD4IT reprieve from Reeve. Now it looks as though it is Reeve who needs the reprieve.

You were working in the complaints department at the Halifax
When I met you
I picked you out, I shook up and turned you around
Turned you into someone new (Chancellor...yikes)
Just a few months ago, you had the world at your feet
Success on your CV had been so easy for you
But don't forget, completing nine tax returns takes much longer than one
And taxpayers will blame you for making life less fun.

[etf]

By NotAnAccountant2
18th Nov 2024 08:05
Tornado wrote:
It will fly by ;(

Probably not - it will have crashed into the sea and be sitting on the bottom by the time it should have reached us.

My biggest concern is that it will go live. It won't work but it will happen. That is the power of money.

Eventually there will be a horizon type scandal because HMRC will insist that their systems cannot be wrong and it must be the users (or their apps). Part of the reason for wanting to write my own app was so that I could keep logs of exactly what was submitted to HMRC (at the protocol level).

I'd also suspect that this is a big risk for accountants and bookkeepers. If large numbers of the submissions they do for their clients don't go through properly, they may require huge numbers of hours to sort out - each client may require separate communication with hmrc to sort out - and clients aren't going to think that they should be paying for this time (and nor will HMRC).

HMRC will blame the MTD software that is being used to do the submission, the software company will blame HMRC, the client will blame the accountant, the accountant won't know who is to blame but they'll know it's not them, and neither HMRC nor the software company will have any incentive to get to the bottom of it.


Replying to NotAnAccountant2:
Morph
By kevinringer
18th Nov 2024 09:00
When George Osborne announced MTD in 2015 us accountants said how complex MTD would be. HMRC thought we were speaking rubbish. In 2023 Jim Harra admitted that HMRC had underestimated the complexity of MTD. It took 8 years for HMRC to realise we'd been right all along. Why 8 years? Because the people who make the decisions are so far removed from the people that do the work, the decision makes haven't a clue what's involved. Basis Period Reform is an example of something launching that isn't ready: those who promoted it were so far removed they labelled it a simplification whereas I've spoken to several inspectors of taxes who all agree with me that it's a complication and badly introduced. Another example: 30 day CGT which started in April 2020 but wasn't ready. I fear that though MTD won't be ready in 2026, those who push the 'go' button understand MTD so little they'll make it live even though it's not ready. Just look at the pilot. HMRC aren't interested in the accuracy or completeness of data input into software, HMRC are only interested in testing the transmission of data between software and HMRC.


Replying to kevinringer:
Rob Swan
By Rob Swan
19th Nov 2024 04:43
kevinringer!! Top man!!

I think you've nailed it, right there. And it's hilarious!!

They'll press the button. Data will be received.....
... chaos will follow....

Probably with enough delay for those responsible to 'duck out' before the Public Inquiry.

[etf]

Paul Weller from the Jam wrote the following lyrics ('Going Underground' released in March 1980):

You choose your leaders and place your trust
As their lies wash you down and their promises rust

What the current mob say:

There was a great deal in the Budget documents, but one paragraph in the Red Book stuck out. Alongside a commitment to seek views on the policy making process and to have a single fiscal event, simplification made an appearance:

‘The government will announce a package of measures to simplify tax administration and improve the customer experience in spring 2025 with a focus on reducing burdens on small businesses. The government will meet stakeholders to understand the priorities for administration and simplification, ensuring that this work is driven by the views of taxpayers.’

What the current mob do:

Replace one annual tax return with up to nine returns

Captain Spock comment.....'Most Illogical'

Action plan for Rachel-read accountingweb and taxationweb threads and see what the experienced old dinosaurs really think of HMRC and how it operates.

[etf]

Exchequer Secretary commits to April 2026 MTD deadline
by Tom Herbert
Government minister James Murray tells AccountingWEB why he’s given his backing to the much-delayed Making Tax Digital for income tax programme, how e-invoicing will be good for business, and what’s behind his move to oversee HMRC as the tax authority’s chair.

By ireallyshouldknowthisbut
01st Dec 2024 17:18
Given out institutes dont seem to be making much of an impact in terms of understanding the 'grass roots' issues, is is time to start writing direct to the relevant minister?

When campaiging before, you have to get the angle they will understand.

Principally "this is going to lose you a load of votes, and its going to be really, really embara

ssing for Labour, and hand a politial victory to the Tories over small businesss red tape"

ie expain what everyone will hate it, and by extension the administration that bought it it, even if its a Tory idea, it will be a Labour stain on small business and spun as over zealous red tape burden for small business, and Labour are anti-small business and anti-enterprise.

Its the only language they understand.

By Crouchy
02nd Dec 2024 09:29
There is still no justitifcation or reason for quarterly reporting

what is the point of having to do this if its not going to be used by HMRC, its pointless admin for the sake of it, and will get in the way of clients actually doing some work and earning a living


By johnthegood
02nd Dec 2024 09:29
This new boy ain't got a clue has he - why on earth would any of my small sole trader clients who have been happily pootling along for 30 years paying me £3-400 a year look back and think "yeah they were right after all, paying my accountant £800 a year and having to send everything to him 4 times a year instead of once was a great idea after all