Archived blog from the developer, Mike Towle . . . . . . . . . . .
For many in the United Kingdom, Making Tax Digital probably sends a chill down the spine! Due to be introduced on 1st April 2019 (the date is probably apt....), it will force 1.2m businesses to change the way they send their VAT information to HMRC. For quite a few businesses it will mean a big change in the way they handle their accounts.
HMRC (the United Kingdoms tax authority) seem to be pushing this through, despite protests. Even the House of Lords Economic Affairs Committee are highly critical in their report published on 22nd November 2018. Read the summary here.
In a nutshell, they say it's being introduced too quickly, and many businesses will not be ready by 1st April 2019. They recommend delaying the introduction of MTD for VAT returns by at least one year, and then introducing it in stages.
In their report, paragraphs 9 and 56 both read:
"The software industry is, unsurprisingly, responding to the
commercial opportunity of Making Tax Digital for VAT. We have
seen no evidence that any free software products will be offered."
They are, it seems, unaware of Adminsoft Accounts!
It's certainly true, that many businesses will have to completely change the way they handle their accounts. Perhaps because they're using older software that will not be updated to handle MTD, or in many cases they do not use a computer based accounting system at all. Perhaps they have few enough transactions to be able to manage just using a spreadsheet. Software will be available that will allow those businesses to continue using a spreadsheet, called 'bridging software', it can accept a file output by a spreadsheet and take the VAT figures from that and send them to HMRC. Some packages may be able to extract the figures from cells directly from within the spreadsheet (Adminsoft Accounts will be able to do this). The big problem with filing VAT returns under MTD, is that the final VAT figures to be filed can not be input by hand. They have to be calculated. Which is why businesses with a turnover in excess of the VAT threshold will no longer be able to use the existing HMRC portal for filing their VAT100 returns.
For a more detailed look at the introduction of MTD, and how Adminsoft Accounts can help, click here.
Will HMRC pay any attention to yet another report critical of it's tight deadline? Probably not. The House of Lords Economic Affairs Committee report notes that it's previous report of March 2017 was ignored! It seems, HMRC only listen when it suits their agenda, and turn a deaf ear (or is it a 'blind eye'?) when it does not. They could be playing a dangerous game. If come 1st April 2019 large numbers of business still are not ready for MTD, what happens? Do HMRC issue millions of pounds worth of fines, perhaps at a time when businesses may also be struggling under the weight of Brexit? Especially if it's a 'no deal' Brexit. Brexit and MTD all around the same time could be just too much for many businesses.
Although I've been working hard to ensure Adminsoft Accounts will be MTD compliant for VAT by 1st April 2019, I agree with the House of Lords Economic Affairs Committee, it should be delayed a year.
I fully expect HMRC to ignore my recommendation too!
How safe is your data? I don't mean the data you hold about other people or organizations, I mean the data that's held about you. Things like postal address, date of birth, political leanings, sexual orientation, bank details, credit card details, etc. It's all out there. Particularly if you use social media. Perhaps, your data isn't where you thought it was, isn't as safe as we're normally told it is?
So far this year, major security breaches have been reported by Facebook (details of 90m users stolen), Uber (57m customers), British Airways (380k transactions), T-Mobile (2m customers), Reddit (numbers so far unknown), Timehop (21m users), Dixons Carphone (10m customers), MyHeritage (92m users), Under Armour/MyFitnessPal (150m users), FedEx (actual numbers unknown). Source: www.techworld.com
There are a great many smaller data breaches, most of which we don't get to hear about. In fact, many small to mid-size organizations may not even be aware the data they hold has been compromised. Large organizations often monitor their systems for any unusual activity. Smaller organizations often do not have the resources to do this, or they are not sufficiently internet/security aware to realize the extent to which their systems are at risk. The reality is, any device that connects to the internet is a security risk, considerably more so if the device also connects to the organizations network.
The worst thing about it is, you can't really avoid it! Today, most people will use social media, on-line stores, on-line banking, and/or other internet related services. There is no escaping it. We're all vulnerable.
As the internet becomes more sophisticated, and more things like security systems, heating systems, camera's, and even household appliances all become exposed to the internet, that vulnerability is increasing. Self drive cars are next on the list, sometime next decade. Some planes are connected now, or at least their passengers are. Yet at the same time, we have ever increasingly onerous data protection rules and health and safety legislation. The world we're moving into is a strange place, where the greatest danger may not be in front of you, or even anywhere near you. The thing that threatens you most could be thousands of miles away, and is far more insidious.
No one likes paying tax. But often it's not just that we don't like paying it, it's actually a serious burden. Businesses have collapsed under the weight of taxation. One tax that should have been abolished years ago is the tax on business property, particularly retail. 'Business Rates' it's called in the UK. If there was ever an archaic tax, this is it.
As we all know, the high street is under threat from the internet. Many retail outlets are struggling, many have gone out of business. We've all aware of this problem, except it seems the government. They seem bent on extracting huge amounts of money from retail outlets who simply don't have it anymore. The retail boom of the 1990's is well behind us. Yet the government seems to be stuck in the past, they don't seem to appreciate it's 2018. It's a different world now. How can retail compete with on-line shopping when retailers have to pay vast amounts of tax, based on some notional value of their premises, when the operators of many on-line shopping sites are paying little or no tax on their premises? Many large international web site operators aren't even paying tax on their profits........
If the situation is allowed to continue, one day they'll be no high street, or shopping malls.
Tax should ALWAYS be based on profit. Taxes that aren't are usually unfair, and rarely work well. There are other examples, like stamp duty. This is paid on property purchases (among other things). There are three main issues with this tax: it is not based on any profit or ability to pay. Neither seller nor purchaser could be making money, yet the purchaser still gets taxed. You can not even claim it as an expense to reduce corporation tax, even though it's effectively reduced your profits (assuming a profit has been made). It has to be added to the capital value of the property. The idea is you eventually get corporation tax relief on it when you sell the property, but in practice the amount of stamp duty paid gets inflated away if the property is held for a substantial period. As if that wasn't bad enough, if the property is subject to VAT (20% in the UK), you actually pay stamp duty on the VAT!! For example, if you purchased a property for £200,000 plus £40,000 VAT. You can claim the VAT back, if you're VAT registered (if you're not, tough). But you don't pay stamp duty on the £200,000, you pay it on the whole £240,000! So you're actually paying tax on the £40,000 tax you're paying! And, you can never claim back stamp duty, once paid, that's the last you see of your hard earned cash. I don't know how HMRC (the UK tax authority) get away with forcing businesses to pay tax on tax?
Anyway, I digress. The UK government has been tinkering with business rates for a few years now. All business premises have been revalued, and the threshold below which business rates are not payable has been doubled. This means a lot more very small businesses now don't pay business rates. That's great. Except they're mainly businesses run from offices or workshops which tend to have a much lower notional value that retail promises. Most shops are still paying rates, and at a higher level because they're now subsidising all those small businesses that are no longer paying rates! So a great many businesses that can least afford to pay rates are now paying even more! How does this make sense?
All I want is a government that realises it's in the 21st century, and plans it's taxation accordingly. Is that too much to ask?