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Where Taxpayers and Advisers Meet

Making Tax Digital

Joined:Mon Nov 02, 2009 5:25 pm
Re: Making Tax Digital

Postby etf » Wed Sep 21, 2022 1:26 pm

Thank you for your thoughts on MTD4IT. Hopefully Jim Harra will take note and make an announcement shortly.

I have once again copied below an appeal letter which was successful...the NRCGT penalties were cancelled. With your understanding of the subject matter, are you able to give me an insight into the magic ingredient in that letter (this evidence alone was sufficient for HMRC to make the decision)?

I have successfully appealed against a NRCGT penalty. The wording of my letter was as follows and it was accepted without question:

"Further to your email of 17 June 2016, we write to appeal against the penalty of £800 issued to our client for the late submission of the non-resident capital gains tax return.

The circumstances are as follows:-

Our client has been living in Australia since 2012, during which time he rented out his property. The income has been declared on my client’s income tax return each year.

Due to my client’s absence from the UK, he was unaware of the new rules that came into force on 6 April 2015, requiring the CGT return to be completed within 30 days of the date of sale of the property. Hence, no CGT return was completed when the property was sold in November 2015.

When it came to our attention, the non-resident CGT return was filed without delay. You will see from the return that there is no tax due and therefore there has been no loss to HMRC. Both we and our client apologise for the delay in filing the return but are confident that you will be able to see that it was not a deliberate action.

We trust that, in the circumstances, the penalty can be removed.

In the meantime, our client has paid the amount due and so, if our appeal is successful, we should be grateful if this amount could be refunded as soon as possible."

Joined:Mon Nov 02, 2009 5:25 pm

Re: Making Tax Digital

Postby etf » Wed Sep 21, 2022 1:57 pm

I looked up the noun used in the earlier reply which will now become part of my vocabulary going forward...thank you bd6759:

A chaotic situation where everything seems to go wrong. It is often caused by incompetence, ...

Joined:Mon Nov 02, 2009 5:25 pm

Re: Making Tax Digital

Postby etf » Fri Sep 23, 2022 4:01 pm

By Hugo Fair
23rd Sep 2022 14:09
That rather depends on what you (or at least HMRC) mean by the word 'work'.

Will it achieve the publicised objectives/benefits? Not a hope in hell.
Will there be open rebellion (mass refusal to comply)? Probably not.
Will it assist the move to an (unannounced) grander scheme? Possibly (v slowly).
Will it go ahead and will people be fined for non-compliance? Almost certainly.
Will it slowly fall into disrepute (as an administrative waste of time that is bit-by-bit circumvented by later & leaner solutions)? Hopefully.

The only certainties are that more millions (billions?) will be wasted in pursuit of the impossible & unnecessary - and that the decision-makers have invested their own careers and won't back down.

[I can assure you absolutely no-one has "all the necessary answers" right now!]

Meanwhile whilst Harra devotes his resources to this MTD4IT failing project, in the real world I telephoned HMRC last Thursday, was promised a call back within 3 working days, have received bloody frustrating .....another clusterthingy .

Joined:Mon Nov 02, 2009 5:25 pm

Re: Making Tax Digital

Postby etf » Thu Oct 13, 2022 2:29 pm

Everyone knows what will happen if MTD proceeds and Jim Harra does not back down. The effect will be like Kwasi (meltdown) on Ben Johnson steroids. Time to dust off the Jaws theme music.

By Nebs
12th Oct 2022 11:49
They further did not accept HMRC’s claim that, as it was her first online submission, she should have checked with HMRC that the return had been received.

Will HMRC be cancelling all leave in July 2024 in order to respond to all the MTD first-timers who they expect to check with HMRC that their return has been received?

I was told this week that technical call backs are now 10 working days and not 3 as previously stated. Doesn't explain why I'm still waiting a month on though.

Joined:Mon Nov 02, 2009 5:25 pm

Re: Making Tax Digital

Postby etf » Mon Nov 07, 2022 3:06 pm

MTD ITSA: OTS calls for landlord deferral
by Rebecca Cave
The Office of Tax Simplification recommends that residential landlords should not be mandated into the Making Tax Digital regime until some significant issues are resolved.

4th Nov 2022
In its property income review, released on 1 November, the Office of Tax Simplification (OTS) makes some strong recommendations to improve aspects of Making Tax Digital for income tax self assessment (MTD ITSA) that affect residential landlords.

The MTD ITSA regulations will require sole traders and individual landlords to start keeping digital records and file quarterly reports from 6 April 2024, subject to the £10,000 turnover threshold.

Small general partnerships are scheduled to join the MTD ITSA regime from 6 April 2025, but there is no joining date yet for limited liability partnerships (LLPs), large partnerships (over 20 partners) or mixed partnerships with corporate members. The OTS candidly notes that it has been told there may be no benefit in introducing MTD for such large businesses.

Raise the threshold
A landlord with gross rents just exceeding £10,000 per year will be drawn into MTD ITSA. At this level, the landlord is likely to keep paper records or a simple spreadsheet and have just one property. The OTS argues that the cost of complying with MTD ITSA will be disproportionate for the business needs.

The OTS has not put forward an alternative MTD entry threshold. Other tax advisers suggest that a turnover of £85,000 per year would be a reasonable level to start. HMRC has specified in the draft notices that level taxpayers with turnover up to £85,000 can report “three-line accounts”. This, as the OTS notes, seems to indicate limited value of the data to HMRC.

Once the MTD system is established for income tax the entry threshold could be reduced, as has been for MTD VAT.

Jointly held properties
HMRC data indicates 1.5m landlords own their let property jointly, which is nearly half of all individual landlords.

Each landlord will be required to keep their own digital records of their share of the income and expenses from the property. Where the joint owners are spouses, this record-keeping obligation may not cause many problems.

However, where the joint owners are not living together, this division of each cost and income figure into the fractions to be recorded and then reported by the joint owners will just create unnecessary duplication and increase the risk of errors being introduced.

When reporting under self-assessment a joint landlord can provide HMRC with the name and address of the record keeper for the property business. Where the taxpayer is not the record keeper, HMRC guidance (property income notes: box 3) indicates that the taxpayer does not have to report full details.

The OTS suggests that this structure should be retained for MTD, so there is a single set of underlying records. Also, the jointly owned property should be the filing entity as is envisaged for partnerships, which have been granted an extra year to prepare for MTD.

HMRC expects software developers to create products for joint owners of let properties, which will allow them to share the digital records and make MTD submissions for each owner. Currently six of the nine software products ready to file for MTD ITSA say they can file property updates, but it isn’t clear how many of those products cope with joint owners.

Multiple agents
Letting agents will be able to make the quarterly reports under MTD on behalf of their clients, but to do so the MTD system will have to allow a single taxpayer to have at least two agents to report on their behalf: the property agent and the tax agent.

The OTS notes that HMRC has been aware of the need to accommodate multiple agents for more than a decade, but nothing has happened to move towards that position. At present the agent services account (ASA) is built around the concept that the taxpayer has a single agent to deal with all the various HMRC services, including MTD ITSA.

The MTD ITSA rules could be tweaked to allow a new concept of filing agent and record-keeping agent. The OTS is in favour of this, but notes that clear guidance and specific agent standards will be needed to cover the responsibilities of each agent.

In-year decisions
All UK property income is reported together, with adjustments made on the end of period statement (EOPS) for furnished holiday letting deductions if necessary. Similarly, all overseas property income is reported together, not property by property.

However, the data requirements for furnished holiday lettings (FHL) are slightly different, as FHL owners can claim relief for interest payments and capital allowances. Where the taxpayer reports quarterly on the assumption that the property will meet the FHL letting conditions, but at the end of the year it hasn’t, there is no clarity on how or when the records would have to be corrected.

A similar problem exists with the cash basis, which can only be used if the total rental income for the year does not exceed £150,000. Where rents exceed that level the accruals basis must be used.

Other allowances
All income from land, including wayleaves, must be reported under MTD ITSA. Where the wayleaves are less than £1,000 per year that income would be covered by the property income allowance.

This allowance will need to be claimed in the EOPS, but exactly how that will work is not yet clear.

Non-resident landlords
Landlords who live outside of the UK face extreme problems when attempting to file online. If the landlord doesn’t have a UK national insurance number or other UK ID documents such as a passport, it is almost impossible to set up a government gateway account.

These landlords will have to either appoint an agent to deal with the whole MTD ITSA process, or claim an exemption on the basis that they are digitally excluded.

The OTS recommends that the government gateway process is made easier for non-UK residents to obtain the relevant ID and password and manage their affairs online.

Letting agents for non-resident landlords currently have to report the tax deducted quarterly under the non-resident landlord scheme (NRLS), and make an annual return (NRLY).

HMRC has not clarified how the NRLS reports will fit in with the quarterly and annual MTD reporting.

Lack of guidance
In early August 2022 HMRC confirmed that it planned to publish MTD ITSA guidance within three months. By the end of that month we had some guidance, but in my view it was not in line with the MTD regulations.

The OTS appears to be of the same view as it says: “The current guidance is limited and contains inconsistencies.” It recommends that HMRC should publish comprehensive detailed guidance on the practicalities of MTD for taxpayers and agents, in good time before the implementation deadline.

Defer for landlords
Taking into account all of the above, the OTS recommends that MTD ITSA should not apply to landlords until these major points have been dealt with by HMRC and by a range of software providers.

It warns: “Time will be needed to test new systems before adoption.”

Will it happen?
So will HMRC take on board these recommendations? The Autumn Statement on 17 Novemeber or around that date would provide the tax department with an opportunity if it was going to make an announcement regarding MTD ITSA.

Joined:Mon Nov 02, 2009 5:25 pm

Re: Making Tax Digital

Postby etf » Tue Nov 15, 2022 9:49 am

Another Taxationweb echo chamber....really?!!!!

CIOT pans HMRC poor service and 'unrealistic' MTD timeline
by Richard Hattersley
The government needs to prioritise HMRC's poor service levels and the ‘unrealistic’ timetable for Making tax Digital for income tax self assessment’s (MTD ITSA), says the Chartered Institute of Taxation.

By tedbuck
14th Nov 2022 12:45
It doesn't require a genius to note that HMRC used to work when we had local offices with staff in them who understood their jobs and that now we have centralisation and digitalisation and many fewer trained staff it no longer works. Light bulb moment! If it ain't broke - don't fix it!
But a bit late for that now. So Quo vadis? Surely the answer is to make the existing system work and consign MTD f ITSA long into the future.
The existing system did work ( albeit with a few faults here and there) and there were trained staff who could actually answer queries. So
1. Dump MTD f ITSA
2. Train staff so that when tax returns are altered they are altered correctly not incorrectly (2 of those in the last 12 months).
3. Get the staff back to the office or sack them. This isn't a job that can be done from home. It needs experience and the ability to talk with other staff. (Could offer the same advice to Iris support!)
4. Sort out RTI so that they stop sending wrong information to clients (This is digital so must be right but isn't.)
5. Tell the truth about what they are doing. (I know it's a government department so truth isn't its strong point but sometimes it is helpful and engenders sympathy.)
6. Sack the Chancellor as he is the last person to be appropriate for the job - could always appoint Liz Truss!
7. Shove more resources into enquiry work - it shouldn't be difficult to find targets - and look at the smaller cases. You know the taxpayer who lives in a £500,000 house and claims benefits because his income is so low because the cash falls out of his back pocket before it gets to his books and forms part of his £16,000 income. Very good managers those taxpayers and not all taxi drivers either.

Computers are not the answer to HMRC's problems - much more likely to be the cause of a lot of them as much easier to fiddle because everyone believes what they say - but of course someone has to enter the data in the first place which is where the problems arise. HMRC are just too dense to see this bit of the problem. If they sat in my seat and saw the numerous errors we correct for VAT returns etc. they might actually listen but I suppose that like Government their cloth ears just don't work.

Sorry to be so cynical but when you watch an organization crumble away bit by bit you get just a touch disillusioned - especially when you are having to pay for it.

By Moo
14th Nov 2022 17:17
MTD is just penalty farming by HMRC encouraged by the software suppliers who stand to make a killing from selling products that nobody needs.
Poor punter files late or not at all, then tax man jumps on him with late filing penalties even though the actual tax is probably paid on time based on the annual self assessment return.

By Twickers Call
14th Nov 2022 15:50
Would anyone tell me the purpose of this MTD exercise for income tax? As I understand from what i see so far is some kind of home work for the sole traders and for hand to mouth small landlords. How would HMRC benefit from:
Three line income expenditure and net profit statement. Do it every three months and final for the fifth time. Failing which pay fines. Make sure you don't fall ill or go on holiday. Only the members of the parliament allowed holidays and sick leave. Also employees get sick leave and annual holidays. Not small traders or landlords who invested a small amount for their old age pension.
Self-employed not entitled for holidays and pensions. Government is collecting substantial amount of taxes and class 4 National insurance which does not count towards your old age pension.
What is this class 4 National Insurance? Why can't you call it secondary tax on top of the basic rate 20%. These questions are not answered by politicians and policy makers because it is embarrassing for them. Wasting many millions instead for so called MTD not fit for purpose during economic decline.

By jasonholden
14th Nov 2022 11:37
HMRC is no longer fit for purpose that's for sure, they have lost anyone who knew anything about taxes, their new systems that are only part running and the old systems being run side by side makes it more difficult for agents, it's time they dropped the MTD deadlines until they sort their own house out.

Still waiting for clients to be registered for VAT after 3 months! There is no service level from HMRC anymore and that should worry everyone!

Joined:Mon Nov 02, 2009 5:25 pm

Re: Making Tax Digital

Postby etf » Thu Nov 24, 2022 1:24 pm

Earlier this week, I thought it was bad enough hanging on the phone for 23 minutes waiting for someone at HMRC to answer it and holding for another 20 minutes unscrambling the simple instructions that had been ignored on a P85 tax refund claim. It seems I got away lightly.....why is Jim Harra still in post when his Department are providing a service like that described below and he is diverting huge resources to a project that will just make the chaos so much worse and which are currently clearly required elsewhere? Another rhetorical question but it makes me feel better to record this mess for the history books.

By Jennifer Adams
23rd Nov 2022 17:15
One point that no one seems to have mentioned (it's been mentioned loads of times in comments to other similar articles) is that HMRC wont be ready.

Hands up all those who agree...

Example of incompetency (or do I mean complacency?) ...l have been hanging on the phone for 1.5 hours now being passed from one VAT dept to another trying to get a client re registered for VAT using the same reg number and yes.. I have written as I was instructed (twice - they lost the first letter even though sent recorded delivery or whatever they call it these days).

I've been trying for weeks to get through and every time they are either not answering the phone or you are put on hold for hours.

>>> I've just put the phone down to try again and their offices are closed.

Joined:Mon Nov 02, 2009 5:25 pm

Re: Making Tax Digital

Postby etf » Fri Dec 02, 2022 1:43 pm

Rebecca Benneyworth kicked off the two-day AccountingWEB Live Expo in Coventry by summarising the current situation of Making Tax Digital for income tax self assessment (MTD ITSA). But as Benneyworth pointed out, “It’s all gone very quiet over there” with HMRC. “I don’t know what’s happening.”

The tax lecturer quipped, “We’re on our fourth (financial secretary to the Treasury) minister of the year – the only one I haven’t been invited in to see yet and that might be because the last one I was invited to see survived about 21 hours after I went to see him and he was sacked. So I suspect they don’t want that woman anywhere near the [minister].”

She later reiterated, “I don’t know if we’re going to get a delay, but it’s all gone very quiet over there.”

Joined:Mon Nov 02, 2009 5:25 pm

Re: Making Tax Digital

Postby etf » Fri Dec 02, 2022 4:10 pm

The Administrative Burden Advisory Board DELAY SEEMS TO BE A COMMON THEME TODAY

We remain fully supportive of MTD’s core aim of improving the quality of business records. However, as we have said in previous reports, change must be implemented in the right way and at the right pace: tax is not and should never be the only driver for change.

We have five areas of particular concern:

1) The pilot programme is mission-critical.

MTD ITSA is a far more complex proposition than MTD for VAT and over four million self-employed individuals and landlords will be required to sign up for MTD ITSA in April 2024. There will be many different combinations of income and expense types in this population, and it is vital that as many real-life scenarios as possible are thoroughly tested through the pilot. The restriction of the pilot to businesses with a 5 April year end is hamstringing the programme. This restriction should be lifted as soon as possible.

2) Basis Period Reform has complicated the picture.

As we discuss further below, we can see the merit in this reform as an overall simplification, but 528,000 businesses will have to apportion two years’ accounts to arrive at their taxable profit. Of these, 278,000 businesses will have to estimate their second year’s profit for this calculation. This introduces more complexity for the affected businesses, and we question whether adequate support and necessary easements will be in place.

3) The decision to align the MTD ITSA quarterly reports with the tax year rather than the accounts year was unexpected and potentially adds further complexity.

4) Error correction.

While an error or omission in an MTD for VAT quarterly return must be corrected in the next return following discovery, we have recently learned that HMRC will require an error or omission in an MTD ITSA return to be corrected by resubmission of the return for the period in which the error or omission arose. This seems inconsistent and will increase still further the number of submissions MTD for ITSA.

5) Other issues.

The need to authorise multiple agents, how to deal with estimated profits for non-fiscal year-end businesses and the best way to deal with jointly let property all remain unresolved.

Given the issues mentioned here, all of which have arisen since our last report, the compliance costs and burdens associated with MTD ITSA need to be reassessed, especially insofar as they impact on the very smallest businesses. More importantly, we think the whole MTD ITSA project needs to be delayed by at least a year to allow these issues to be properly addressed and resolved before implementation commences.

Joined:Mon Nov 02, 2009 5:25 pm

Re: Making Tax Digital

Postby etf » Mon Dec 05, 2022 9:48 am

While TaxCalc’s Dean Shepherd predicted a two year delay on the Tax Talk Live panel, quipping that "HMRC is trying to take an oil tanker and turn it into an aeroplane".

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