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Post by pinkie on Aug 17, 2016 15:43:19 GMT
This has been discussed on other forums - but generally focussing on the narrower issue of quarterly tax returns for business. It is much more than that, and the biggest change to the UK tax system, at least since the introduction of self assessment. For those not aware of it yet Making Tax Easier (as was it then described) was first announced in the March Budget 2015 with more details being announced at Autumn Statement 2015 and at a stakeholder event shortly afterwards. The detailed consultation documents on Making Tax Digital (MTD) were expected shortly after Budget 2016, but were delayed until 15 August 2016 (because of the BREXIT purdah). By a huge distance my biggest concern is that this is due to be implemented by April 2018 - and the first consultations have just been issued. There is expected to be no HMRC software (for the taxpayer to file). If it launches on schedule the first quarterly return (with a deadline for filing of 4 weeks after the quarter end) will be 30 June 2018 with a filing deadline of 30 July 2018, how does this affect the 2017/18 return (year to 6 April 2018) - normal filing deadline 31 January 2019? Is it going to be possible to file the June 2018 return without first finalising the April 18 return? How will accountants cope with a need for all their clients to be on the same quarters (Dec, Mar, June, Sept) - VAT is staggered, so some business file Jan, April, July, Oct etc? The tax year ends on 6 April. PAYE months end on the 6th. Will the first period in fact be to 6 July due by 6 August 2018? Anybody looking forward to this innovation, designed to make tax administration more efficient for taxpayers? My institute ( ICAEW)are taking the line that we welcome initiatives to make tax administration more efficient through the use of modern technology, subject to appropriate safeguards, but it should be on a voluntary adoption basis, driven by the business case for obtaining the benefits and efficiencies of the new digital opportunities, and not mandatory coercion. Have we got it right? Anybody interested in lots of detail can read Making Tax Digital |
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Post by MikeMusic on Aug 18, 2016 19:54:35 GMT
Sounds like a cockup waiting to happen.
Lots of money to be made if you are one of the usual big contracting suspects
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Post by pinkie on Jan 24, 2018 13:48:43 GMT
My regular January rant. Rather than start a new thread
The background
There are 2 types of NI paid by self-employed people. Class 4 NI is 9% of profits between about 8000 and 32000 and is a disguised tax - you get no benefits for it
Class 2 NI "stamp" is about £2.50 a week, and earns entitlement to state benefits - primarily basic state pension. It used to be collected (most recently) by direct debit once a quarter or once a month
Class 2 NI is due to be abolished and merged into Class 4NI in 2019. In preparation for this, HMRC stopped collecting it separately, and collect it now with the income tax and class 4 NI on a self assessment tax return.
When I submit a tax computation for a self employed person, it includes class 2 NI. Like most accountants, I am getting some rejected (HMRC said "hundreds of thousands" because when the individual originally registered for self assessment they didnt register as self employed. So although they pay income tax on income they declare to be from self employment, and class 4 NI on the same income, HMRC's self employed Class 2 NI department doesnt recognise them as self employed
So - I eventually get passed the "I speak your weight" machine to the right department, and start clearing security questions for the 3rd time. "What is your agent office address"? I gave it, and it didn't agree. So we worked out they had my old office (moved 7 years ago) and I googled that, because I had forgotten it, and passed security and was asked how they could help
"First - please update your records for my correct office address"
"We can only do that if you send in a new 64-8"
64-8 is the old fashioned paper client authorisation form that all of the rest of HMRC are discouraging use of in favour of their new online authorisation method. HMRC have my correct address on their records for PAYE, Self Assessment, VAT, Corporation Tax etc - but not class 2 NI
"Are you saying I have to send a new 64-8 for EVERY client for you to update my address records?" (said in a Basil Fawlty voice of incredulity) "What - even if I have 20000 clients, if I move office, the only way for you to update your records is by sending 20000 64-8's?"
Yes - I'm afraid that's right.
Hopeless shower
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Post by MikeMusic on Jan 24, 2018 15:12:44 GMT
Sounds fun
I'd go for a second opinion. But where ?
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Post by Slinger on Jan 24, 2018 16:42:54 GMT
I think you'll find that this is the correct digital response.  |
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Post by pinkie on Jan 24, 2018 17:09:25 GMT
If only I could  |
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Post by Deleted on Jan 24, 2018 17:45:26 GMT
Hi Richard. It's some years since I worked for HMRC but the advice given to you is bollocks unless your company actually changed, rather than just an address change. I'm pretty sure all you'd need to do is write to CAAT in Newcastle. It's a big site so I am not sure of room number but this address should suffice
Central Agent Authorisation Team
Benton Park View
Longbenton
Newcastle
NE98 1ZZ
Looks like training hasn't improved in the intervening years.
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Post by pinkie on Jan 25, 2018 9:34:52 GMT
Andrew
Thanks for that. I know the Longbenton address. But I had to change my details separately for each of my main authorisations (although not each client)
When HMRC launched their new agent services (for which I have not yet signed up) they planned to require reauthorisation of each client to the new agent service code for each tax. They have now created a mechanism to migrate existing authorisations, but its evidence of the half-cock approach to systems development (as agent I can't access all client data - although it is improving)
So I don't think I have a separate authorisation for class 2 NI matters. The old 64-8 was a multiple tax registration document. The new online authorisations are individual to a tax (so I have to get authorised for CT, VAT and PAYE for a new client - each with a separate code)
Class 2 NI is an anachronism that is due to die in 2019 when it is merged (if it finally is merged) with class 4 NI. There are details still to be resolved, like voluntary contributions for low profits (to maintain pension entitlement) . I have never needed an agent authorisation for class 2 NI before (and can manage without now, and can clear security by giving them my old address. Some security!) It appears a lot of taxpayers, including a handful of my clients, registered for self assessment but not as self employed. And HMRC lack common sense. So every year a tax return is submitted declaring schedule D I or II income (or at least income on the trade or profession, or partnership profits page of an SA100), they are taxed and pay class 4 NI on that income, and the woman I was speaking to could see that, but then states they are not self employed for class 2 NI because they didn't register. How hard is it to design a system to check something as basic as that?
When I recently registered a client company for VAT and PAYE using the agent portal (which is the old HMRC interface - half the HMRC pages have migrated to the new GOV.UK style) my client gets an email confirming their registration has been successful and asking them to access their correspondence via the log-in details they used to create the application. Only they didn't use and don't have their own login details. They don't understand this stuff and pay a professional to deal with it for them. When I got through to HMRC the registrations department could only offer to send a paper document to the registered address, and confirmed there was no way for me as agent to access the application I had created on behalf of a client. Obviously once we have the registration certificate I can register as agent and deal with matters after that, but...
Enough - I have tax returns still to file - fortunately none of them with income which HMRC's calculation engine can't process, and which therefore rejects and requires paper returns, for which they would issue a penalty for late filing even though the fault is theirs.
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Post by Deleted on Jan 25, 2018 15:22:14 GMT
I worked for and with a few Government Departments, initially as a people manager and then a product/process design manager. None were as disjointed as HMRC. It was so hard to get even basic changes implemented because alll Heads of Business had evolved in isolation and none of the systems were readily compatible. Their management culture was also far too unquestioning for my tastes. You could very quickly find yourself isolated if you raised any concerns about issues which would affect leadership plans. All too often, this meant that significant technical issues would only materialise after implementation because no-one spoke up for fear of damaging their career.
My heart went out to the admin staff because they made such great efforts to get good ideas progressed. Sadly institutional limitations, internal politics and resourcing limitations so often stymied them. HMRC really begged for some clean-slate thinking and investment, it came in the form of their digital "revolution". They hired many experts from external sources and tried to build a new model from the ground up. Unfortunately, the last time I was involved. I could already see that there was a gulf forming between existing services and new the vision being progressed. Issues of transition were always going to arise. I was also concerned how huge the challenge was in transforming their business model from one of responding/detecting to one of enabling/prompting/managing in real time.
I am still hopeful that the UK will end up with a better tax system which helps taxpayers avoid errors rather than aloow them to get it wrong and then penalise them. One of my pet hates was their SA penalties for minor offences. A very common error on SA returns was that the taxpayer would fail to record PAYE income. HMRC already had this info via their PAYE system, but the two pieces of software were not directly linked. This meant that taxpayer errors were not picked up until later compliance checks were applied, leaving taxpayers facing penalties and interest in many cases. For anyone dealing with HMRC I'd simply say that the staff are often trying just as hard as you are to get the right result.
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Post by John on Jan 25, 2018 15:58:56 GMT
I just done my rax return I have a few bits of Private work as well as mixture as PAYE and a standard income stream.
My PAYE was clearly shown along with my regular income. So was a relative simple process.
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Post by MikeMusic on Jan 25, 2018 16:01:22 GMT
I had great fun with a grim HMRC punter on the phone after a nice long circuitous phone route.
They insisted I had been paid a pension by Abbey Life. I hadn't but they would not believe me. Abbey Life less than helpful getting any paperwork.
HMRC droid insisted I prove I had *not* been paid the pension and would not accept 12 months bank statements.
The only way I could contact Abbey Life was by letter so I wrote to them.
Weeks later by sheer luck Abbey Life sent me a piece of paper and in one little corner of the payment advice it said.
"Held in holding account" or similar.
Rang HMRC again and they eventually believed me. Saved.
That was a couple of years ago.
Recently Abbey Life sent me a form saying they had paid me again....
This time there was a phone number listed and I was able to ring them.
Hopefully this has now been changed forever but I still dread the letter from HMRC saying they are going to fine me for undeclared pension payments - and prove I haven't been paid again.
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Post by pinkie on Jan 25, 2018 16:17:57 GMT
Good points Andrew, that I am not unaware of I try to make a point of telling any staff I express my frustration to that it is the system and not them I am frustrated with. And some things have improved. Telephone response times have been better, the dedicated agent hotline is a real help for SA PAYE (so WHY not provide one for CT and VAT???) And they appear to listen to some advice -particularly to build in agent access at inception (although they were stone deaf to thoughtful careful criticism of their MTD implementation, until Brexit stopped them in their tracks). Even now, they seem to think VAT will be simple, because businesses affected already file quarterly returns, forgetting issues like partial exemption, flat rate with major capital purchases, and a host of others requiring manual adjustment which don't just auto-fill from transactional systems. The auto-population of data should help when the system works. But , like the old joke about the Irish deciding to switch to driving on the right, but unsure if it would work, and so carrying out a 2 month pilot where only buses and lorries changed initially, and cars still drove on the left... HMRC have dripped in the PAYE side of the tax payers account. So I have a client who is self employed with income of about £40000pa , who is over 65 and has a state pension, and also has private pension plans which he hasn't yet drawn down. His private pension made an error transferring funds, and compensated him, and paid the tax on the compensation they paid. This resulted in them filing a PAYE return using a BR code, and this , together with his state pension "populated" that part of his taxpayer account. But the SA self employed part needs MTD, now not due to be implemented for him, to provide that part of his total income. So HMRC - because the system is supposed to be "Live" and "real time" send him an P800 telling him he has overpaid tax (although he has not yet filed an SA return for the year in question, which is not yet due.) They then automatically refund the "Overpaid" tax in 5 days from issuing the notice. But actually, when he files his SA return he is going to owe in excess of £6000. But when I break this news to him, he is adamant that he has overpaid tax for the year, because HMRC wrote and told him so. |
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Post by Deleted on Jan 25, 2018 16:52:58 GMT
What a mess, and perhaps another example of processes not being fully thought through or discussed with more technical staff before implementation.
It's also not helped by a decision taken some time ago to "adapt" lower level considerative work so that it could be done by admin grade staff. To put this in simpler language, things such as decidimg whether a taxpayer is at fault and setting/applying a penalty should be executive grade work. It was decided that by providing a decision tree for many processes, it would remove any element of judgement and enable the work to be done more cheaply by admin staff. It would also mean less training was needed because all supporting knowledge upon which to base decisions was now made redundant by the "trees"!
The problem then arises when you have anything a little complex which isn't represented by a branch on the decision tree. All the little niggles and anomalies that people didn't want to 'rock the boat' by raising, now come to the surface. to be handled as best they can by an (often inadequately supported or trained) admin grade employee on under £20k.
If it's any comfort, there are gifted and highly motivated people dedicated to ironing out the anomalies and flaws. It's just a pity there arere so many flaws and so many obstacles to overcome.
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Post by pinkie on Jan 29, 2018 9:28:43 GMT
I know its the end of January. HMRC's servers are grinding to a halt. Very large volumes mean submissions take minutes instead of seconds to be acknowledged. Because everyone leaves their bloody tax return to the last minute, even though you can reasonably submit any time from July (some even in April)
For me, as ever its bloody friends
2 musicians, one tennis partner, one sister, and 2 HiFi designers - one of whom sent me a very sexy CGI of a new product for release in May. If it happens (he has a poor track record, but I am impressed with his approach this time) I think it will be huge. The other had a new product due out in the first half of 2018 too, which I would like to get my grubby paws on. Could be an interesting 2018 in real HiFi
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Post by karatestu on Feb 9, 2018 11:03:31 GMT
Hello Pinkie, As a self employed fella I know all about self assessment  I had heard of digital tax and quarterly returns but the fact is I have had ZERO communication from HMRC about it. If they are not educating us about the changes and what to do then how the bloody hell are we supposed to go forward ? It will be a last minute thing I assume where we are supposed to get used to the new way in a very short time, They do bang on about paying your tax on time and returning accurate figures but I can see this farce is not going to aid delivering those. Oh, and what do you think about cash basis accounting ? Stu |
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Post by Deleted on Feb 9, 2018 12:38:46 GMT
What worries me more is that the front line staff may be no more clued up than you. I attended an HMRC conference in 2014 and the subject was "our digital future". The grand view was all,there, but absolutely no details existed. Every specific question asked was unable to be answered. They kept saying that this would all take time because it was a "revolution": To which I replied that the staff would likely turn up for work one day with no systems, no training, no plan and find out the "revolution" had taken place the night before! The worst of it is that when such catastrophic failures occur, no heads ever roll. Instead, those responsible will paint it as a qualified success and use it to further their careers.
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Post by pinkie on Feb 10, 2018 9:53:42 GMT
How exciting! away for a couple of days skiing and lots happened Andrew - the front line staff are probably aware of the intention, but nobody has properly sorted the detail yet. The bloody IT systems aren't yet developed Stu - If you have turnover under £85000pa, for the moment, thanks to Brexit, you have dodged a bullet - cos it isn't happening (yet) It is worth registering for your personal tax account which is part of this plan - and which your agent cannot currently access HMRC personal tax accountIf your turnover exceeds £85,000 then MTD starts in April 2019 for VAT and April 2020 for Self Assessment (or Corporation Tax if you are trading as a limited company). If you already use bookkeeping software like Quickbooks or Sage or FreeAgent then they will doubtless revise their software to enable the filing. Bear in mind that you probably don't want to change software part way through an accounting year, and so you may need to implement appropriate software ahead of April 2019. Your accountant will be tearing his hair out wondering how he is going to schedule any sort of review or check of your bookkeeping ahead of submission of numbers with a one month deadline 4 times a year. For my clients, I am encouraging them to use cloud based software. Among the issues will be special VAT schemes like flat rate and cash accounting - although, again good bookkeeping software should help there. What do I think of cash accounting? For self assessment? Frankly many small businesses nominally using accruals accounting don't do it properly and effectively use cash accounting anyway. The biggest issue I have is limited companies wanting to use cash basis for VAT to defer paying the VAT until their customer has paid them, and not appreciating that for Corporation Tax purposes (well FRS105 or FRS102 S1A accounts) they have to use Accruals accounting, and therefore needing effectively to keep 2 sets of books on 2 different bases. Again , the mainstream software packages should enable that, but amateur bookkeepers frequently create a complete birds nest of a buggers muddle. There is clearly an intention to lower the VAT registration threshold significantly, and the MTD threshold will probably stay pegged to it - so chances are its coming even for much smaller businesses. |
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Post by karatestu on Feb 10, 2018 10:15:35 GMT
Thanks Pinkie, a very informative post. I dont use any software. I do my own book keeping and use spreadsheets which i hand over to my agent along with sales and purchase invoices etc. My affairs are relatively straight forward, thankfully. Lowering the VAT threshold - oh bugger, how low will it go ? In effect another tax rise  Stu |
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Post by Deleted on Feb 10, 2018 11:40:48 GMT
I hadn't heard of any intention to lower the VAT registration threshold, but it gives rise to a number of thoughts right away:
1. Firstly it's entirely believable because thresholds are much lower elsewhere. Cyprus is approx 15000 Euros and it used to be even lower. The difference here is that nobody pays taxes, corruption rules and enforcement systems are either archaic or broken.
2. I'm sure it would make a nice payday for the exchequer. It would undoubtedly cost more to administer but on balance there would surely be a large hike in tax raised. With the new digital tools being rolled out, it may now be easier to administer than before.
3. Even with more support from HMRC's new systems, acceptable levels of VAT compliance may not be easy to achieve. I worked on revising processes for HMRCs Flat Rate Scheme (FRS). This appeared to simplify VAT for small businesses, yet rates of error were surprisingly high. Supporting people new to Self Assessment has proved very hard for HMRC. Doing the same for those newly captured by VAT registration would appear far more ambitious.
4. Going back many years to my Uni days, I recall that a proportion of all VAT collected (the first 1%?) went to the EU and its institutions. I assume that as part of any Brexit deal, we will be required to either continue to pay for some time or make some other form of compensatory.payment. At some point though, the U.K. Government will get to keep all VAT collected. Are they going to lower the rates of VAT when this happens? There were also restrictions on withdrawing the scope of VAT when in the EU, because any such decision affected their piece of the pie. Will we see some items VAT exempted after Brexit? Frankly I doubt it.
5. Drastic reductions in VAT thresholds would have many economic implications. There would be inflationary pressures from price rises, small business failures due to enforced price hikes/loss of competitiveness, and therefore rises in unemployment and benefits take-up. I guess they may try to mitigate these effects by gradually reducing thresholds until smaller and smaller fish are caught in the nets.
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Post by pinkie on Feb 10, 2018 12:15:10 GMT
The Office of Tax simplification has proposed a lowering of the threshold. £32000 and £26000 have both been mentioned. There is a concern that businesses artificially restrict growth to stay below the threshold. Again, before Brexit wiped out the governments ability to deal with anything else, it was expected in the budget, but it was considered too controversial with so much on their plate. I think the writing is on the wall though once the Brexit fiasco is behind us (which could be years yet)
VAT is massively the most complex of the taxes. It is completely unreasonable to expect the average punter to cope with its complexities. It may not be too tricky working out the basics and filling in the form, but
Jaffa cakes are but one example of the arcane nonsense that HMRC expects ordinary citizens to have mastered -utterly unreasonably.
If you are below £85000 turnover Stu then you are fine as you are, for now. If you are above £85,000 (and given your views on lowering the VAT threshold, I take it you are not) then you will have to use software. HMRC have allowed spreadsheets, but they will require special modifications that in practice make cloud based dedicated software a much better solution. Probably. So much is still not finalised, or even considered, that it is hard to make definitive statements about how it will work.
The issue is that the computer recording method that makes the quarterly submission to HMRC has to have the transactional details underlying the return. You can't record the details on a spreadsheet and post the totals to the HMRC site (which is effectively what you do now)
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I had heard of digital tax and quarterly returns but the fact is I have had ZERO communication from HMRC about it. If they are not educating us about the changes and what to do then how the bloody hell are we supposed to go forward ? It will be a last minute thing I assume where we are supposed to get used to the new way in a very short time, They do bang on about paying your tax on time and returning accurate figures but I can see this farce is not going to aid delivering those.