5 minute read
Hung, badly drawn and quartered
Before I start the old scare stories, let me be clear on where we stand with Making Tax Digital (MTD).
By April 2024, MTD will require selfemployed people earning above £10,000 a year to send HMRC quarterly updates.
There will then be a Final Declaration using MTDcompatible software. This replaces the current system, which requires self-employed people to submit an annual self-assessment using the HMRC portal, in most cases accessed for them by an accountant.
This, however, is the latest accountancy industry news, hot off the accountancy professional press.
HMRC has commissioned research showing the massive task ahead to convince the self-employed of the benefits of MTD. Both the system and the software has come under intense scrutiny.
With less than two years to go to the planned start date of April 6 2024, HMRC is yet to tell accountants how they are going to market this to you, the public. However, there have been some hints:
HMRC commissioned a company to survey more than 2,000 self-employed people who will be directly affected by MTD. The research showed that taxpayers have a low awareness of MTD. They explained the basis of it in the following way:
It affects self-employed people with a turnover above £10,000, who would have to follow the MTD rules from April 6, 2023.
The only way to do this is through specialist, compliant software, which can keep digital records of income and expenses.
The software will compulsorily keep digital records only, and share tax data and information to HMRC. It will also be able to receive information from HMRC.
Tax payers will have to use either just one software package, or a number of digitally linked ones. There can be no offline transfer of data such as weekly sheets or spreadsheets, between the likes of you and me.
There’s something very weird about this – as this is not what we have been already told will be the actual rollout. Either we as accountants have not understood it properly or HMRC is being unclear.
At present, the accountancy profession’s understanding of MTD is:
It’s being rolled out in 2024, not 2023.
You will be asked to keep a record of income and expenses, but it can be on spreadsheets, apps, or software.
We, as accountants, can transfer it for you, from whatever bag of nightmares that you deliver to us. The data does not have to kept in specialist
MTD software initially, even if it ends up there (with, of course, the help of your accountant).
WHAT DID THE TAXPAYERS BEING SURVEYED THINK?
People’s judgements must have been biased by the questions. It’s no good asking how difficult your tax life will be if the benefits aren’t clear.
In reality, if you are already using software and apps to deal with your tax returns, like so many of my clients already are, then your transition to making tax digital was always going to be an easy one! This is of course thanks to our whizzy new Eazitax software -sorry for the plug, but we invested heavily to develop it, and to make sure it’s backed up by good oldfashioned accountants who then trained even our most technology-averse drivers, knowing that this was coming.
The tech whizz clients who already use software were also the ones who wouldn’t really see or understand further benefits of MTD. In reality, nothing changes, except the fact that there are quarterly returns instead of yearly. If you are supplying the information weekly or monthly already, it’s the accountant who must get their act together.
QUARTERLY RETURNS? NOW I’M WORRIED.
The survey did ask whether submitting quarterly returns would reduce once-a-year tax problems, (knowing that MTD is about quarterly submissions).
Most taxpayers surveyed saw this as a negative. We all know what a bind record-keeping is for normal people. Many people fear that they will simply not be able to keep up. Even the tech whizzes couldn’t see any further benefits to MTD. The truth is that people will need us even more for help and advice, but I for one want clients to come to me to feel the love, not the fear… Also I’m not sure how well HMRC’s support lines will cope with the onslaught.
SO HMRC, WHAT ARE YOU GOING TO DO ABOUT IT?
I am hoping that HMRC will be offering clear and easy to understand information. Maybe help with accessing software for those that cannot afford to buy it? A soft policing of the early years? I hope so. But history has not been kind to these types of big tax simplification schemes.
In conclusion, although change may not always be welcome, in theory MTD should make the tax process easier. Accountants like us should help our clients to share the journey and embrace software – and 2024 is racing toward us.
“The truth is that people will need us even more for help and advice, but I for one want clients to come to me to feel the love, not the fear… Also I’m not sure how well HMRC’s support lines will cope with the onslaught....”
