Most people who have to do them find doing one tax return a year quite onerous. I know. I have helped many hundreds (maybe more) people do them over the past 35 or so years. So this is deeply troubling from HMRC yesterday:
Making tax digital
The government will invest £1.3 billion to transform HM Revenue and Customs (HMRC) into one of the most digitally advanced tax administrations in the world. Most businesses, self-employed people and landlords will be required to keep track of their tax affairs digitally and update HMRC at least quarterly via their digital tax account, reducing errors through record keeping.
HMRC will ensure the availability of free apps and software that link securely to HMRC systems and provide support to those who need help using digital technology. This will not apply to individuals in employment, or pensioners, unless they have secondary incomes of more than £10,000 per year.
I am almost dumbstruck by this suggestion for six reasons.
First, I thought tax simplification was meant to be on the agenda. This is far removed from that.
Second, I thought that this was a government committed to reducing the burdens on business. It looks like 5 million (at least) will be seeing substantially increased obligations.
Third, if this reporting is anything like VAT reporting then it is very likely that large, mandatory fines for late submission of data will apply. The risk of very large numbers of small businesses being severely penalised as a result is high.
Fourth, there is no hint in here how those without internet access are to comply with the law. Digital should not be an obligation in a tax system.
Fifth, for many the cost of compliance with this obligation will be very high indeed: many small businesses have no clue what their accounting is until aided by an accountant at the end of their year. Are they to now pay four times over?
And sixth, if the data reported is to be simplified, such as sales alone, the risk that over or under taxation might result is high.
The costs of HMRC are supposedly going to be cut by 18% over the next few years. The additional costs of achieving that for society look to be very high indeed. I am all for tax compliance, but this is a step in the wrong direction.
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Wow. Helped hundreds of people with their tax returns over 35 years. Hundreds.
Some of them for 35 years in a row
How many people do you think a partner can manage in a mixed practice?
I’m about to submit mine to my accountant, who only does tax. I’ll ask him this year how many he does. He lives off it 🙂
“How many people do you think a partner can manage in a mixed practice?”
It depends a bit on the mix, but I’d say around 300 individuals plus at least 50 companies, assuming they have staff to do the donkey work.
A pure personal tax manager should be able to deal with 300 personal tax returns easily, assuming a mix of simple and complex tax affairs and leaving enough time to deal with transactional work and enquiries.
OK
And I always worked part time
And did a lot of consultancy too
Plus audit supervision
Good point, I forgot to mention that I was assuming that in a mixed practice the partners would be mixed, and so would be looking after accounts, audit, and the whole business advisory thing as well as tax.
We were general practitioners, although each with a bias towards an issue in which we had more expertise
Yes, I thought so. 300 individual tax returns and 50-odd companies feels about right for a GP accountant – but a few less for someone with a particular concentration on another area, as you say.
If you are submitting quarterly returns, then you have to do your books four times a year. Its a bit of a pain but the total amount of work involved does not really increase. Each quarter has roughly a quarter of the years transactions to account for. The increased accounting burden is fairly trivial.
“Digital should not be an obligation” Oh yes it should! We want our tax systems run efficiently thank you very much.
Just not true Steve
Getting books right takes a lot of finishing work
It’s not the book-keeping that takes the time
Digital = Efficient.
Interesting position.
Argument and supporting evidence?
I don’t know where the digital crept in to this because it is not obvious that there is an analogue alternative but in this context i.e. the one outlined in the text above, the case is stated in terms of error reduction. If you really don’t think that managing information electronically is intrinsically more efficient might I suggest that you are yet to awaken from the slumber into which you entered around about the end of WW2.
Well you get 5/10 for content Steve but you need to do more work on context.
Digital does not exist in a vacuum or a separate universe from its context. It’s a sub system which operates within a wider system involving organisations and people.
To cite one example of the hype associated with those who continue to see digital outside of any context let’s consider the claim that part of the efficiency digital was going to bring us is the paperless office. Anyone whose ever worked in an office will know what I’m talking about here.
In the context of increasing tax returns from one to four times a year the questions have to be asked, efficient for who? What is the criteria which determines efficiency achievement? The vast majority involved will be the self employed and only a minority proportion own a business employing people because the larger proportion are one man bands, many of them recently shifted off the official employment stats. As self employed making £11k a year or less.
Why would they waste productive survival time, not to mention subsidising the system by having to purchase their own hardware and software. It’s not going to happen.
Cconsider the behaviour in similar circumstances of one group of people I once worked alongside, Pole Tappers. Working outside in all weather’s in a specially equipped vehicle with paper plans and lists they could actually see and read properly, moved onto digital terminals so small they can barely see the screen due to the varying light levels they work in with keys so close together they constantly make input errors when updating records and details of poles tested. Forced now into going around the back door to obtain paper records to enable them to work efficiently and effectively around the system in the way they did before they were digitalised.
It’s a bit of a bugger that context thing.
🙂
HMRC will ensure the availability of free apps and software
I call bullsh*t. The moment you get anything remotely complicated, their software will not work and you’ll need to buy third-party software. This is how it has always worked, and how it always will.
(It costs my wife £12/year to declare UK income of about £1300 – no missing zeros – pa)
Which just goes to show that “efficiency” is in the eye of the beholder.
Any half wit can appear “efficient” by externalising costs onto others, as is the case with this example.
Effectiveness is the more durable real world criteria.
Not to worry, I’m sure anyone struggling with their tax returns online can simply pick up the phone and rely on HMRC’s contact centres for advice…
I know, sarcasm is the lowest form if wit.
You need a form now to practice the art of wit?
In triplicate? Or is it a paperless digital form?