Making Tax Digital – further musings…

Making Tax Digital – further musings…

With so much of the 2017 finance bill removed because of the general election, including Making Tax Digital stuff, I thought I should give a quick overview of where we are.

Is Making Tax Digital ever going to happen?

Well a big chunk of it is already with us and for those of you who have already accessed your personal tax account you will have seen details of current paye income, projections of total income and even projections of your state pension. So why would HMRC stop now. The contentious bit has always been the quarterly reporting and many businesses and their accountants are hoping that this would either be cancelled completely (ha ha that’s pure fantasy), delayed for a significant time perhaps for 2 or 3 years (nope, I think there will be another finance bill later on in June to get back on track for April 2018) or an increase in the exemption limit from £10,000 to a number so huge that the vast majority of small and micro businesses will not have to do it…. And yes it is likely that there will be a temporary increase but not for long.

Why are HMRC so insistent that this is going to happen?

No its not because HMRC want to be modern and trendy. No its not because the British public want to engage with HMRC in a digital format. It is 100% based upon the belief that of the £30 billion plus “tax gap” ( a completely made up and unsubstantiated number) half of it is due to SME’s making errors and carelessness because they are not doing their bookkeeping regularly enough. 

Sorry but I think this is nonsense for two reasons:

1.      HMRC launched the “Business Records Check” system 7 or 8 years ago with a big stick of imposing penalties on those who did not maintain adequate records. It was cancelled in 2015 with a reported 29,000 businesses contacted and no recorded penalties raised.

2.      The evidence from my client base is that by using cloud bookkeeping and in effect having “Real Time Accounts” have ensured that not only have all legitimate expenses been identified (previously lost invoices would not have been claimed for) but also we have time for tax planning during the financial year. All too often in the past clients have not told us that their profits have increased until after the year end and by then it’s too late to do anything about mitigating the tax.

My final thoughts are on the “Digitally Excluded”…

HMRC say there are two basic types:

1.      If you are a practising member of a religious society whose beliefs are incompatible with using digital communications.

2.      Simply UNABLE to prepare the reports due to disability, age, remoteness of location or “any other reason”. 

Number 2 will be interesting. What level of disability? How old do you need to be to be excluded? There are areas of Essex where the broadband is rubbish? Or “any other reason”??? I have a husband and wife business client in Essex, who have no computer, no broadband and use a traditional telephone…no smart phones. Their books are hand written. They are in their late fifties and early sixties. They will not be able to cope with Making Tax Digital but can they claim to be digitally excluded? I simply don’t know yet.

It is a truly exciting life being an accountant at the moment…

If you would like to know more about Making Tax Digital or Cloud Accounting please contact me on:

T:   01206 233170

E:   info@wood-disney.co.uk

W: www.wood-disney.co.uk

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