Earlier this year I submitted evidence to the House of Lords on HMRC's Making Tax Digital programme, which they claim simplifies tax for the self employed, landlords and others with income not taxed at source. As I, and many others, pointed out, this stretched the idea of simplification to its limits because instead of having to submit a single tax return a year we then thought the self employed would have to submit five.
It turns out that was wrong because, as reported on AccountingWEB, the actual total is six. There will be four quarterly reports required. Then an adjusting statement to put the quarterly statements on a proper accounting basis will be necessary. And finally a 'final declaration' (the new name for the tax return, which has supposedly been abolished) will be required.
To be polite, this is HMRC parting with sanity whilst inducing massive taxpayer backlash. I suspect something akin to a poll tax revolt will eventually arise amongst the six or seven million people likely to be impacted. I also suggest not a penny more in tax will be paid. But GDP will fall because of the amount of additional time spent book-keeping which will directly reduce the contribution of this sector to national income.
But I suspect the friends of small business, otherwise called the Tory Party, will send it through the Commons unchallenged because far too few of them know about the real world which is rarely noted by those whose careers started as parliamentary advisers.
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I believe that the policy is based on the HMRC’s fixed conviction that the tax gap is largely due to failures in the small business sector, and that those failures are not willful, but follow from error. In this narrative more frequent reporting will help.
However I see no evidence that this is in fact the underlying problem. Once again, the policy makes some sort of sense if you accept the premise. A big if.
I’d put forward a different sort of narrative. HMRC have given up on chasing the big players (Apple etc) – it is all too hard & govs of any persuasion lack the will (or intellect) to do it – perhaps the intellect also applies to HMRC?. However, bullying of those with less resources is an easy option – hence the present path – easy ride for the corporates – give the lesser mortals (SMEs) a good kicking & let’s face it – most of the time they are too busy surviving to go complaining to the local MP – who, if Tory would not listen any way & if Labour would not understand.
[…] calling people customers when it is blatantly obvious that we are not to telling us that demanding six tax returns a year is simpler than submitting just one, it’s as if HMRC go out of their way to alienate taxpayers. Making it as hard as possible to […]
When the “customer” was introduced as preferred term at DWP and Social Work, I recall objecting since it was a lie with a purpose. And I recall being told that [i] I [/i]was making a simple name change political… :D.
Which, of course, it was
Yes. But it was their politicisation, not mine.
Agreed!
An for small companies, we have the complete mess that is Real Time Information (to harmonise with the unimplemented Universal Credit), where HMRC Statemenets of Liabilities are what-would-be-fraudulent-in-any-other-organisation, and where they still cannot handle payments (plus a long list of other problems).
A cynic might say that the actual point of the entire exercice is not to improve the tax take at all (which it won’t, as you correctly noted), but to cripple small accounting firms to the point where many just close up shop.
The big firms will then happily move in and occupy the space left empty.
Wouldn’t be particularly suprising considering the corporate shills we have currently at the Treasury.
Another move towards hegemony, then.
More like simple cronyism.
Chris, as a practicing accountant whose increasing age demands a reduction in workload, Making Tax Difficult isn’t the only fly that’ll get drowned in the ointment.
This is also the year in which auto-enrolment will reach a crescendo in terms of demands for help from clients.
And then there are new accounting principles that mandate potentially very time-consuming reworking of accounts for limited companies, LLPs and incorporated charities from which, I suspect, the majority of small entities in those categories will gain nothing but having to try to understand the “new” accounts, while the accounts filed on the public record will provide even less information than those they replace.
I recognised the imminent pressure from auto-enrolment a couple of years ago and sub-contracted all payroll related work , when part one of my “slowing down” plan involved transferring 50% of my clients to another practice.
I still want to offer my remaining clients what I’ve always tried to offer them, peace of mind. But, now that I’m a one-man band, I have to recognise the limits within which I both want and need to work and can reasonably expect to remain competent. My current conclusion is that I must transfer elsewhere all but the simplest examples of restated accounts, on the basis that MTD is by far the most potentially challenging area in which my retained clients will need support.
The point I want to make is that there are three simultaneous areas of concern for accountants and their clients this year of which MTD is undoubtedly the most ill-conceived, poorly implemented, viz HMRC’s mandated method for calculating individual tax liabilities is plain wrong but will not be changed, and, it seems to me self-evidently, doomed to fail. And, because the sort of clients I handle will never generate sufficient fees to be of interest to the big firms, those clients will end up without any professional support, a position HMRC currently promotes by suggesting that those clients can “save money” if they’ll only trust HMRC to calculate their tax liabilities correctly, something HMRC demonstrates on a regular basis they cannot.
I hope no-one would describe me as someone resistant to change. What I am resistant to is too much simultaneous change and consequential direction of effort towards administration and coping with costs imposed by government rather than added value at a time when added value/productivity is what we should be focusing on.
In my opinion, the current government has to be pretty incompetent if, in total:
1 it cannot, or chooses not to, recognise the utter chaos that it is facilitating by proposing the simultaneous implementation of three very major changes (of which auto-enrolment should have been chosen as the priority);
2 it supports accounting and reporting requirements that add, in my opinion, neither value to accounts for small businesses nor meaningful information on the public record;
3 it imposes dramatic changes without adequate discussion with either taxpayers or tax professionals or, worse still, explanation or advertisement to taxpayers.
This cynic would say that it seems highly unlikely that crippling small accounting firms would even occur to this government – that’s far too micro for them – but HMRC seem to have picked up the mantle (or, as Rio Ferdinand was once heard to say, the mantlepiece) for them through the lengths to which they appear to have gone to restrict access for agents.
Finally, and sadly, the organisation of which I have been a member for nearly 44 years, ICAEW, has also made its contribution to the current chaos by choosing early April to impose changes to the branding it wishes all its members to use. They’ve explained the reasons why and several of us have commented accordingly but maybe the timimg explains why they seem neither to have participated in any meaningful way in the MTD debate nor kept their members up to date (unlike AccountingWeb and others) on what they have discovered. Evidently, the addition of a red, stick-like object to replace the previous black stick-like object (an inverted dipstick?), was far more important than canvassing, much less speaking up, for its members’ concerns.
RICHARD: If this is too long or rambling, for which I feel bound to apologise if I’ve wasted your precious time, just delete it.
I’m delighted to post it
I am glad I am pretty much out of practice
The new FRS 102 seems to only subtract value to me
And in moist cases deals with issues that will be inconsequential
No wonder the ICAEW et al probably love it. Shovelling s**t, busily going nowhere
And MTD is worse
If you are self employed with property income it is eleven not six.
Yes
My accountant normally takes 2 to 3 months to send me his annual bill for my limited transactions. I’m sure his time will be wasted and my costs will be doubled.
To be fair, there was some guy called Murphy complaining that 400000-odd companies a year don’t submit tax returns; this way you might pick a few of them off…
However will there be anyone left at HMRC to check these declarations ? I heard Richard last night on BBC Radio 4 News at Ten deploring the staff cuts in HMRC in an item about the failure of HMRC to collect Customs duties and VAT on imports into the EU.
It was telling that despite being asked by the BBC to respond HMRC did not put anyone forward to reply to what Richard said.
I found that astonishing
I will put up a link in the morning
[…] of Brexit is dependent on HMRC getting its computer systems right and when HMRC is supposedly making tax digital they are so far behind in their work that a tax change signalled well over a year ago cannot as […]