Making Tax Digital

[etf]

I think the following is a polite way of stating Sir Jim talks out of his derriere:

By kevinringer
13th May 2024 10:57
Picking up on John's point about costs. A client has just been in touch. He's been using Sage (desktop) for 20+ years. He bought the original software for less than £100 and incurred no further cost until MTD VAT started when he felt compelled to upgrade Sage just to file his MTD VAT. At the time Sage were charging £15 a month. Sage's subscription charges have been steadily increasing and has just gone up to £84+VAT a month. So the client is now paying almost as much a month as it cost for the entire 20 years he was using the software before MTD VAT started. Sage has really milked MTD and increased my client's costs by £1,008 a year. It would have been cheaper for the client not to upgraded their Sage and instead kept the old version and got some bridging software instead. The client could switch software but it's a hassle and it's taken them literally decades to get their head around Sage and they haven't got the time to start learning new software. This is just the cost of the software, not the cost of the client's time and my time dealing with MTD which will make the cost to the client of complying with MTD even larger. And HMRC had tried to argue that the cost to businesses of complying with MTD will be lower than non-MTD. That just proves how far removed from the real world HMRC are.

[etf]

By FactChecker
13th Aug 2024 22:54
The first rule of any major software development project is to NEVER start specification on the basis of a straight like-for-like replacement of existing processes - as that guarantees you'll (a) bake in all the existing deficiencies and (b) fail to gain any improvements that had previously been unobtainable due to the constraints of the old system.

Well, HMRC have stuck rigidly to the first part of that - through woeful misunderstanding - by never starting any complete specification!

But it seems they've taken incompetence to a new level if they are now relying on Extra-Statutory Concessions, to belatedly tackle just one of the colander-sized holes in what they believe is a spec, in order to force MTD to 'fit' with SA105.
This is on a par with their sudden conversion to the 'necessity' for Period Basis reform ... which of course they denied was important or necessary for MTD - until it suddenly was both of those.

They've rowed back on what needs to be held digitally and then on what is necessary for QUs and then culled EoPS (without saying exactly what replaces it in every circumstance).
It patently won't 'help taxpayers plan their tax payments' (even more so after this announcement) ... so who is supposed to benefit from its introduction (even if it 'works' which it won't)?

The new government is keen to cancel 'white elephant' vanity projects and instead invest in greater efficiency across this country's business and social environments ... so killing MTD no longer looks like a mere mercy killing, but a sensible business decision.


Replying to FactChecker:
Rob Swan
By Rob Swan
14th Aug 2024 08:25
Great points FactChecker, BUT....

I detect a flaw in your reasonong ...

You start by pointing out HMRC's woeful ignorance of good practice and common sense. You conclude by perfectly demonstrating that by cancelling their 'Golden' project HMRC would be making a very sensible decision - which you have already demonstrated is exactly what they do NOT do.

I think maybe MTD still has a while to live :-/

[etf]

By Tornado
15th Aug 2024 10:04
norstar wrote:
You'd think that having already blown a 1bn over budget, they'd give up, but no.

I think if you do a bit of research, the cost of MTD so far is nearing £3000 million over the last 8 or 9 years and what do we have to show for this ?

(Actually I think I can answer this myself in that thousands of people have become very rich by keeping this dead duck alive).

[etf]

I think the following is a polite way of saying those in charge of HMRC are as trustworthy as a tax felon.


By kevinringer
04th Sep 2024 09:27
"How is HMRC’s testing going in 2024/25? How will HMRC judge whether this has been a success?"

The MTD ITSA pilot was launched April 2017 with the goal of 400,000 signing up: see https://www.accountingweb.co.uk/tech/practice-software/mtd-pilot-offers-.... Over 7 years later the pilot has not progressed and has never attracted the 400,000 volunteers that HMRC naïvely expected; indeed, at times it was down to single figures. The initial pilot was 12 months with mandation from 2018. If everything had gone as HMRC expected, we'd now be in our sixth year of mandation, but instead, we're still in a pilot, and a very restricted pilot at that. What is more, HMRC have had to put partnerships on the back burner. MTD is several times over budget, has been cut back (plans for MTD CT seem to have been abandoned completely), so it will be delivering far less, for far more expense, and a decade late (it was announced in 2015). It's been a complete failure. HMRC are flogging a dead horse. But how will HMRC judge the success? It's HMRC's baby and they will judge it a roaring success no matter how bad it is. HMRC should not be the ones who measure the success because they have a vested interest and are not impartial.

[etf]

Posting on Taxationweb recently is like using Aladdin's lamp....my 9 month wait for a 2022/23 tax return to be processed is over and more importantly my golf clubs have been located in Wednesbury (but still not delivered Yodel). Here is hoping by adding the below, Labour will scrap MTD4IT and save some money.


By petestar1969
04th Sep 2024 11:56
My question - When are they going to dump this daft idea?


Replying to petestar1969:

By kevinringer
04th Sep 2024 12:09
HMRC seem to have no intention of dumping MTD. MTD appears to have taken over the aspirations of HMRC to the extent that HMRC only exists to make MTD happen, and HMRC will make MTD happen no matter how expensive MTD is, no matter how pointless MTD is, no matter how burdensome MTD is for taxpayers, no matter how much tax has to be dumbed down so tax fits MTD. I think the only way of getting MTD cancelled is our PBs being able to convince the new Government that MTD is not value for money and is undeliverable without considerably more investment and the investment would not represent value for money, so there would be a net saving to the Government if it was scrapped now. MTD is a policy of the previous Government so there'd be no loss of face to the new Government if they scrapped it.

[etf]

By Ian McTernan CTA
04th Sep 2024 15:39
The questions we wanted asked is: when will they scrap the whole thing?

The other question we ask ourselves is why the professional bodies don't insist to HMRC loudly and publicly that it is a terrible idea and should be stopped: all it will do is create more work for us, taxpayers and HMRC haven't got a chance of being able to deal with the millions of queries every quarter.

[etf]

Crowd start chanting..... you don't know what you're doing!

By ireallyshouldknowthisbut
04th Sep 2024 15:09
NotAnAccountant2 wrote:
kevinringer wrote:

"As long as the data has been submitted to HMRC, the new software provider will have access to the latest information as it’s all stored in the same place internally within HMRC. "

Amy, please can you clarify. Does this mean the new software provider will have access to the actual original digital transactions (ie. each item of income and expense), or will the new software provider only have access to the quarterly totals received by HMRC? I ask because I thought HMRC only received the quarterly totals and not the underlying transactions, but the taxpayer will be required to retain the original transactions. Most software only transfers 2 years of transactions.

I'm not Amy, but unless it's 100% changed since I last looked at the API, the numbers HMRC have are the same as the numbers you'd get from an annual tax return (except possibly four times per year rather than once per year).

my understand is its jsut cummualtives, as they wised up about the whole quarters, adjustments to the quarters tosh, and went with cummualitives like PAYE. So in the end they get **JUST** the year end totals. Which for most sole traders would be, er, two numbers. Turnover and Total Costs. Well worth the 100 million or whatevr they are spending on it. To get, er the same two numbers as now. Its proper mental.

[etf]

By Just Stop MTD
05th Sep 2024 08:09
MTD Income Tax will be the next Horizon, and it has nothing to do with quarterly submissions (that is the easy part).

The current self assessment process for income tax works so well because all software for Income tax self assessment computes an income tax calculation based on the detailed calculation logic that HMRC provide in minute detail. This means that every income tax calculation created by software is consistent and HMRC benefit from an iterative process where software companies feedback any issues in the calculations. It is also backed up by a comprehensive testing system, so that software companies can test thousands of different scenarios.

Under MTD the tax calculation will no longer be performed by software. HMRC will tell you what you owe and they have confirmed that they will not be providing a detailed analysis of how that calculation works. Under MTD there is also no way to dispute the calculation (you can only accept it), and even if you could dispute it, how would you go about proving that HMRC's calculation was incorrect if there is no baseline specification of how the calculation should be working?

The only people that benefit from MTD are the likes of Fujitsu and Cap Gemini that have built HMRC's infrastructure without a proper consideration of providing transparency of the calculation.

[etf]

By gillsoffice
06th Sep 2024 10:33
Our tax system is just too complicated for even the simplest business (or standard paye employee-HICB) to comply with, without help from an accountant or HMRC. HMRC (& the software houses) seem to think these hard working people really can't wait to sign up to, pay for, and learn to use, digital services. Surely, they think, they enjoy bookkeeping and filling in vat/paye/CIS/self assessment returns, all to a strict deadline of course!(as one software house advert suggests - wouldn't it be just great to be able to interrupt a lovely bike ride to submit your vat return?) HMRC think the taxpayer, who is paying their wages, can't wait to have the joy of trawling through the multiple HMRC website pages to find out how to claim capital allowances on a car they have just bought and use for business & get it right (this is a question we should ask all cabinet ministers - see if they can get to the right answer by use of the HMRC website only & how long it takes them !).
Almost all of my clients, young and old, have no interest in learning how to do digital bookkeeping and want the least contact with HMRC as possible. They definitely do NOT see it as a joy and it is of very little benefit to them (unlike online banking, which is). Funnily enough they don't have the time and are very busy with running their own businesses etc and, as the Govt says it wants, driving the economy.
MTD should be scrapped, it is of no benefit to the country and we, the taxpayer, should not have to be paying for it. They haven't even worked out how to include partnerships and companies yet- a never ending well paid job for some. I'd prefer to pay them to simplify the system & when that's done they can go out, join the rest of us, and work to contribute to the economy, rather than hold it back.

[etf]

So much sensible thought seemingly sadly lacking in HMRC's leadership team, Government and the regulators who allow this to proceed unchecked.


By FactChecker
05th Sep 2024 19:01
It's not just the iniquity of being forced to pay in order to remain compliant ... nor is it just a matter (as HMRC believe) of some people being 'digitally excluded' (a terribly patronising phrase obviously cooked up by their HR team as they hope it sounds 'DEI inclusive' whilst painting an image of 'the elderly & infirm').

The bit those in ivory towers (not you Rebecca) fail to understand/acknowledge is that many people actually prefer to talk to other people - especially if they're confused and stuck - and have learned the hard way that the software they're likely to encounter (especially if developed agilely) will be anything but intuitive!

And the further removed from a person's day-to-day experiences (let alone anything they enjoy), the bigger the gap when trying to use a digital 'solution' that doesn't even offer any form of immediate 'reward' to the user.

At least when you're trying to pay for parking it is clear what you need to achieve (if not how to do so) and you can eventually walk away from your car ... and the same applies to self-service tills in the supermarket (food wanted and obtained).

And yet both of these are at the vanguard of movements to replace them with human interactions ... see countless News articles on both aspects this year.
Basically because as you say "Where there is a cost, or greater hassle for using a digital service, some customers will avoid the transaction or look for an old-school option such as paying in cash" - an interesting option when paying Tax!

So, back to MTD ...
If it was (just about) acceptable for RTI and then VAT, that was because both had already reached a point where nearly everyone was using some sort of software to process a schedulable activity (or fully outsourcing it) - so there was relatively little extra direct cost (mostly one-off effort in new procedures).
But SA is different ... it affects a lot more people (despite HMRC's attempts to keep claiming that they want to reduce the volume, their latest email this week shows this is a lie) AND many of those are anything but blessed with excess income to spend just on paying tax or indeed steeped in the requisite knowledge (or possibly even the energy/focus to do this on a daily basis).

We're back to a system that costs extra / delivers no benefit to the taxpayer / will undoubtedly increase the volume of incorrect data (that will be treated as correct 'because it's digital innit') / and doesn't even give HMRC anything new.
If the cost of buying some software (for a sole trader) was instead spent on a local SME accountant agent then EVERYONE would be better off (except the software companies).


By richard thomas
06th Sep 2024 13:04
I was preparing a reasoned response, but having now had the opportunity to read the post by FactChecker LJ, I simply say I agree.