ICAEW Asks HMRC To Drop Quarterly Reporting

 

In a letter addressed to HMRC’s Joanna Rowland and Jonathan Athow, ICAEW’s Frank Haskew said:

"In particular, we consider that the administrative burden associated with quarterly updates is disproportionate and needs a rethink. Even when a taxpayer is maintaining digital records on a regular basis, having to ensure that these records are complete and checked by specific quarterly deadlines adds extra compliance burdens, especially where a bookkeeper or agent is involved as we expect in the majority of cases. Quarterly updates provide HMRC with little or no assurance about the quality of the underlying digital records. One of the reasons why quarterly reports are getting all the attention is because they can lead to late submission penalties. 

Record keeping penalties are not being reformed despite that being the primary behaviour that needs to change. We suggest that HMRC starts by introducing the requirements to maintain digital records and to submit details of income from self-employment and property directly from software but that the current annual reporting cycle is maintained. Quarterly reporting could be considered in the future, once an annual system is established, if that does not lead a sufficient improvement in record keeping. We anticipate, however, that given the increased impetus towards digitalisation, that requiring the use of software and digital records should provide most of the benefits sought. More frequent MTD ITSA reporting could be considered for those VAT registered businesses that already report on a quarterly cycle. Quarterly updates could be optional."

Pound to a penny HMRC does not drop the requirement!

Tax does have to be taxing.

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HMRC's "Common Sense"

As part of what it terms a ‘common sense approach’, HMRC says all unincorporated businesses and landlords with annual incomes below £10,000 will be entirely exempted from the new obligations for quarterl reporting.

All very nice maybe. However, £10K is piss pathetically low.

Why on earth choose such a low threshold?

Tax does have to be taxing.

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ATT Calls For Postponement of Quarterly Digital Reporting

The  Association of Taxation Technicians has called upon HMRC to postpone the introduction of quarterly digital reporting by at least a year.

For why?

Apart from the fact it will quite clearly be a dog's dinner that costs companies a large amount of money and time when trying to comply with the State's demands for data, the five consultations planned for the project have been postponed because of the EU referendum.

As such the results of the consultations will all land on HMRC's desk all in one go.

What chance will HMRC have of digesting and acting on the results of the consultations?

That being said, does anyone think that HMRC has the slightest intention of listening to what taxpayers think about this?

Anyhoo, here is the text of the ATT press release:

Press release: HMRC urged to postpone quarterly digital reporting by at least a year

The Association of Taxation Technicians (ATT) is calling on HMRC to postpone the introduction of quarterly digital reporting by at least a year after the announcement of a delay to the consultation process because of the EU referendum.

The appeal by ATT is after the announcement this week that the five expected consultation documents on Making Tax Digital will now be postponed until after the EU referendum. The first of these consultations was initially expected in early April. The ATT has consistently raised concerns that the existing timetable is overly-ambitious.

This delay is likely to mean that all five consultations will be issued in one go with simultaneous deadlines, rather than in stages, in order to maintain HMRC’s ability to launch a public testing phase by April 2017. This will restrict the time that interested parties will have to fully respond to each one in as much detail as will be required for a project with such a fundamental impact on the tax system.

Yvette Nunn, Co-Chair of ATT’s Technical Steering Group, said:
“The Making Tax Digital Project represents the biggest change to the way taxpayers will engage with HMRC since the introduction of PAYE in 1945 and, according to a recently conducted survey, will require around 82 per cent of self-employed individuals to change the way they currently keep business records. 

Furthermore, with £1.3 billion of taxpayers’ money having been approved for spending on this project, it is imperative that it is handled correctly as the risk of embarrassment to both HMRC and the Government if this goes wrong is huge.

“If we assume that all consultation responses will need to be submitted by say, the end of September to keep to the timetable of an April 2017 public testing phase, then we believe that it will be impossible for HMRC to adequately consider the views and constructive points raised in each consultation in just this six month timeframe. This will have a detrimental impact on the eventual design of the digital system and will impact on HMRC’s ability to have the whole digital system ready to use, not to mention how it will have time to build the add-on systems needed for those who will need assistance to comply and those who are digitally excluded.

“Whilst we can understand the decision by Ministers to delay the issue of the consultations until after the EU referendum, we strongly believe that HMRC needs to recognize the impact of this delay by revising the timetable for implementation by at least one year. This would then allow the consultations to be released in phases, with staggered submission deadlines, to allow more consideration of all of the issues.

“Rushing ahead with this project without allowing adequate time for the consultation and testing phases could put at risk the many potential benefits for taxpayers and HMRC which greater digital working can bring. That would be a tremendous mistake and in a worst case scenario could result in a system that was not fit for purpose.”

Tax does have to be taxing.

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Plans For Quarterly Tax Returns Rubbished

In a report published on 5 April, the Administrative Burdens Advisory Board (ABAB) has warned that the plans announced by George Osborne to introduce a new digital tax system for the self-employed (including mandatory quarterly updates) would create a significant added burden in terms of accounting records and costs for SMEs.

Quoted by the Guardian:

“Compulsory digital record-keeping and quarterly online updates is not an approach we can endorse.

We are concerned that the proposals for quarterly updates will be more burdensome than they currently are with increased record-keeping and compliance costs. This will have a big impact on the smallest of businesses.”

The Federation of Small Businesses doesn't think much of the idea either.

Mike Cherry, national chairman, said:

“Forcing small firms to pay for expensive digital accounting software so they must submit extra tax returns is not going to help anyone. It will simply add to the cost of doing business in the UK. When every independent body and expert is lining up to tell you to stop, slow down and think again, it might be time to take a breather and listen to their concerns.”

A spokesperson from HMRC said:

“We are focussed on creating a tax system that is more effective, more efficient and easier for taxpayers and we will work closely with stakeholders to address their concerns. 99% of businesses already file their corporation tax online and 98% of VAT returns are filed online. 

The new digital accounts, which are not being introduced until 2018, will simply integrate the different information businesses already provide to HMRC into a simpler, streamlined system. This will reduce the burden of updating HMRC for small businesses.”

Let's see how that works out in reality then!

Tax does have to be taxing.

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Quarterly Accounting Will Be So Easy!

Apparently businesses have nothing to fear from quarterly accounting, that is the message coming from the HMRC bunker.

In an interview Theresa Middleton, HMRC director of Business Customer and Strategy, told Accountancy the question of annual adjustments fitting into HMRC's proposals for quarterly digital accounting (eg quarterly stock takes) would be raised in several consultations which will be issued after the Budget.

HMRC says that it wants to take on board the views of businesses and individuals who would use the digital tax accounts.

"We’ve been clear all along that the quarterly update is not designed to be the equivalent of a quarterly tax return and that therefore we are not anticipating that businesses would need to do stock takes and make their capital allowances claims and other reliefs and adjustments at the quarter point."

Were that the case, wrt being "clear all along", people wouldn't have become so worried about it!

"Equally it might be that some businesses might want to be able to do that - we’re not saying that you couldn’t do that – this is very much in the area that we’re going to be consulting on."

LOL, businesses especially SME's have more than enough red tape etc to deal with, without the need to have quarterly stock takes.

"So we’re really keen to make sure that businesses are able to contribute to the shape of how we implement this. So, for example, the point about adjustments, which at the moment are made in the returns for the year, right at the end and sometimes after the end of the relevant period, we will be asking how we can simplify this, especially for the unincorporated.

At the moment, payment is not in scope but we will be consulting on what line items should be included in the quarterly update.

For those in the cash process, adjustments may not amount to much at the end of the year, and so they can simplify.

What we haven’t done is set out what some of these things might mean in practice, and so for example, in some cases [as with quarterly reporting] people have been filling in the gaps for themselves. In these [stakeholder] events we get attendance from a range of professional bodies – we will share this thinking after the budget."

It seems to me that HMRC don't have a clue how businesses actually work, and are only now realising that if not properly handled quarterly accounting will become a nightmare for both the taxpayers and HMRC.


Oh, and for those of you with partnerships HMRC hasn't got a clue how it will work. HMRC has so far not been able to produce any material on what digital tax reporting might mean for partnerships, which will affect a range of entities including accounting and legal partnerships and other professional services who arrange themselves in this way.

‘For partnerships, this is more complicated.’ said Middleton.

 Good luck everyone!

Tax does have to be taxing.

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Insurance to protect you against the cost of enquiry or dispute with HMRC is available from several sources including Solar Tax Investigation Insurance.

Ken Frost has negotiated a 10% discount on any polices that may suit your needs.

However, neither Ken Frost nor HMRCISSHITE either endorses or recommends their services.

What is Solar Tax Investigation Insurance?

Solar Tax Investigation Insurance is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.

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