Making tax digital - beta trial

Princess Pooper · Jan 11, 2017

https://www.gov.uk/government/publications/making-tax-digital

Is anyone else taking part in this? For those that are not aware, HMRC are soon going to be requiring all but the smallest businesses to submit business records and pay tax on an ongoing basis, not just after the end of your year when the accounts have been completed. For a business such as agriculture where we have little control over our sales price, often have a long period between incurring costs and generating a profit, might make substantial capital investments which would reduce our liabilities, or claim farmers averaging, use herd basis or BEN valuations, and of course may have our profits wiped out by bad weather etc, this is extremely concerning. And that is without the hassle/cost of the additional time in administering. For that reason, I have signed up for the voluntary trial, which gives them a chance to test the software and think about the implications for different sectors. I'm not up and running yet, but have done the first questionnaire where they ask you some basics to then send you the right software.
Anyone else doing it, so that we can compare experiences?
This WILL be coming to affect almost everyone who runs a business, so I thought I'd better get my head round it at the earliest opportunity. I can drop out at any time during the trial and none of the data submitted for the trial is used by HMRC for tax purposes.

They aim for tax calculations and eventually payments to be closer to 'real time' - and that means earlier and having to pay tax earlier (even if it is to be refunded later), brings cashflow implications.

rob1 · Jan 11, 2017

Did my returns yesterday and paid the tax but their system crashed a couple of times while i was using it, perhaps they need to sort the current one out first, i did see the beta trial but didnt look through it, so much for less red tape etc

Greenbeast · Jan 11, 2017

I already do monthly VAT returns, don't know the added impact of this proposal

Princess Pooper · Feb 1, 2017

OK, so have now reached stage 1, they have sent me an email recommending what they think is the best commercial software for me to use, based on my initial replies to questions asked. There will be HMRC software available but they haven't got it yet. They have recommended Quickbooks, which I know is widely used by small businesses.

However, they have said that this is best suited to businesses that raise their own sales invoices.

We don't. (self billing invoices from dairy, livestock market, grain merchant and cull cow purchaser, little else sold - typical farm).

This is best suited to businesses that bank online.
We don't.

This is best suited to businesses that deal mainly via the bank rather than in cash - OK fair enough that does apply.

It will be a free trial for a year for the QuickBooks software. If I wanted QuickBooks software I would have it already.

They invited me to reply and I have done, pointing out the issues above. We'll see what happens next. I have told them that like thousands of other small businesses I do the accounts on a spreadsheet, on a cash basis, with year end adjusts for creditors and debtors, providing the accountant with a final trial balance. They pop through one or two journals and then do the tax comps and tax return.

Watch this space - I'll keep you updated. This is why I wanted to do this trial, to make sure that they understood what record keeping in family farming businesses is like and how I can't see how making tax digital is going to work for us.

upnortheast · Feb 1, 2017

Princess Pooper said:
and how I can't see how making tax digital is going to work for us.

I suspect a little issue like that won`t stop them, big brother knows best (or is that nowt)

Princess Pooper · Feb 1, 2017

Talking to our accountants earlier this week they cannot understand why it is starting with small businesses, they think it is going to be absolute chaos and cannot see it working in such a tight timescale!

David. · Feb 1, 2017

Accountant was talking about this recently, he does not see how it can possibly work, and neither apparently, did the other delegates at a meeting he was at about the subject.

franklin · Feb 1, 2017

I can see this being fine for businesses with fairly regular anual income.

I get three cheques in a year. One from the RPA whenever they feel like it, and a couple of grain cheques.

This is going to be a complete pain in the arse.

ewald · Feb 2, 2017

Well done for getting involved, without farmer input there is no chance of getting a usable system.
What little I have seen about this proposed new system is worrying - costly in time and money, and does anyone have any faith in the ability of a government body to introduce a new it system on time?

neilo · Feb 2, 2017

Princess Pooper said:
OK, so have now reached stage 1, they have sent me an email recommending what they think is the best commercial software for me to use, based on my initial replies to questions asked. There will be HMRC software available but they haven't got it yet. They have recommended Quickbooks, which I know is widely used by small businesses.

However, they have said that this is best suited to businesses that raise their own sales invoices.

We don't. (self billing invoices from dairy, livestock market, grain merchant and cull cow purchaser, little else sold - typical farm).

This is best suited to businesses that bank online.
We don't.

This is best suited to businesses that deal mainly via the bank rather than in cash - OK fair enough that does apply.

It will be a free trial for a year for the QuickBooks software. If I wanted QuickBooks software I would have it already.

They invited me to reply and I have done, pointing out the issues above. We'll see what happens next. I have told them that like thousands of other small businesses I do the accounts on a spreadsheet, on a cash basis, with year end adjusts for creditors and debtors, providing the accountant with a final trial balance. They pop through one or two journals and then do the tax comps and tax return.

Watch this space - I'll keep you updated. This is why I wanted to do this trial, to make sure that they understood what record keeping in family farming businesses is like and how I can't see how making tax digital is going to work for us.

I've been on Quickbooks since 2012, originally Simplestart and now Pro, and both desktop because I'm not happy with paying monthly subscriptions and someone else storing my data. I couldn't recommend it highly enough.
Like most farms, a lot of my sales are self billing invoices from the mart, but also a few invoices that I send and some sales (lots of rams) where there are no invoices at all. I receive a mix of cheques and BACS payments, but mostly cheques from mart or ram customers. I bank online as much as possible, and while QB allows you to download statements and reconcile automatically, I don't wish to and you can still do it manually. I do VAT returns monthly, on the morning of the first of the month, so that I get it repaid at the earliest opportunity, and it takes me a couple of minutes each time. Most of that time is looking over to cheque there are no mistakes. You can do VAT online with a click, or enter the numbers produced in QB manually on HMRC's website.
The number of reports that you can generate in QB Pro is far in excess of what I will ever require, but allow for some fairly in depth analysis at home. QB is a relatively cheap package too, certainly compared to Sage and the likes.

I really can't see how it would not be a hell of a lot easier than using spreadsheets, but I guess that's simple enough once you're used to it. I really would recommend at least trialling QB, I've certainly found it intuitive and flexible (did I mention it was cheap too

). QB and Xero (cloud only) are way out in front of the rest of the accountancy packages that I've seen, in terms of ease of use and price.

rob1 · Feb 2, 2017

neilo said:
I've been on Quickbooks since 2012, originally Simplestart and now Pro, and both desktop because I'm not happy with paying monthly subscriptions and someone else storing my data. I couldn't recommend it highly enough.
Like most farms, a lot of my sales are self billing invoices from the mart, but also a few invoices that I send and some sales (lots of rams) where there are no invoices at all. I receive a mix of cheques and BACS payments, but mostly cheques from mart or ram customers. I bank online as much as possible, and while QB allows you to download statements and reconcile automatically, I don't wish to and you can still do it manually. I do VAT returns monthly, on the morning of the first of the month, so that I get it repaid at the earliest opportunity, and it takes me a couple of minutes each time. Most of that time is looking over to cheque there are no mistakes. You can do VAT online with a click, or enter the numbers produced in QB manually on HMRC's website.
The number of reports that you can generate in QB Pro is far in excess of what I will ever require, but allow for some fairly in depth analysis at home. QB is a relatively cheap package too, certainly compared to Sage and the likes.

I really can't see how it would not be a hell of a lot easier than using spreadsheets, but I guess that's simple enough once you're used to it. I really would recommend at least trialling QB, I've certainly found it intuitive and flexible (did I mention it was cheap too). QB and Xero (cloud only) are way out in front of the rest of the accountancy packages that I've seen, in terms of ease of use and price.

I used a quick books system many years ago but the programme I had wouldnt work when I changed to a new computer and ms2000 (I think) so just made my own spreadsheet up, its simple and works for me and I can see at a glance which area of the business makes what , The only time saving computers really give are in the number crunching instead of having to use a calculator

renewablejohn · Feb 2, 2017

No idea what the new quickbooks is like but my version I have been using since 2007 and its very easy and I would recommend it although like most paperwork it does take time but if 2 hours per week keeps HMRC happy then its a small price to pay. What I dont like is this big brother attitude by HMRC that you must use something like quicken as it gives them far greater power to drill down into the nuts and bolts of your accounts assuming everyone is guilty of accounting fraud until proven innocent.

Feldspar · Feb 2, 2017

This MTD is causing us quite a headache. It's basically going to precipitate me having to do much more of the office based running of the business. We are going to have to computerise four businesses which are currently run on paper in a not very long length of time if the government stick to their proposed timescale.

@Princess Pooper, I had a brief read through your first link. I am sure I have missed it, but is there somewhere allows you to sign up to the voluntary trial?

Princess Pooper · Feb 2, 2017

Feldspar said:
This MTD is causing us quite a headache. It's basically going to precipitate me having to do much more of the office based running of the business. We are going to have to computerise four businesses which are currently run on paper in a not very long length of time if the government stick to their proposed timescale.

@Princess Pooper, I had a brief read through your first link. I am sure I have missed it, but is there somewhere allows you to sign up to the voluntary trial?

@Feldspar I read an article in our CLA newsletter a few months ago which said send an email to '[email protected]' just saying you would like to participate in the beta trial. If they have enough businesses already no doubt they will tell you. They will then a few weeks later ask you to do the initial survey about your business type etc. You can drop out at any point and they do not take any notice of any data that you submit to them as part of the trial.

Cowmangav · Feb 16, 2017

Hmmm. Looking at the fictional examples HMRC offer, only one has an irregular level of business through the year, and in the HMRC's comments following the business description , the point is just ignored.

Goweresque · Feb 16, 2017

Princess Pooper said:
https://www.gov.uk/government/publications/making-tax-digital

Is anyone else taking part in this? For those that are not aware, HMRC are soon going to be requiring all but the smallest businesses to submit business records and pay tax on an ongoing basis, not just after the end of your year when the accounts have been completed. For a business such as agriculture where we have little control over our sales price, often have a long period between incurring costs and generating a profit, might make substantial capital investments which would reduce our liabilities, or claim farmers averaging, use herd basis or BEN valuations, and of course may have our profits wiped out by bad weather etc, this is extremely concerning. And that is without the hassle/cost of the additional time in administering. For that reason, I have signed up for the voluntary trial, which gives them a chance to test the software and think about the implications for different sectors. I'm not up and running yet, but have done the first questionnaire where they ask you some basics to then send you the right software.
Anyone else doing it, so that we can compare experiences?
This WILL be coming to affect almost everyone who runs a business, so I thought I'd better get my head round it at the earliest opportunity. I can drop out at any time during the trial and none of the data submitted for the trial is used by HMRC for tax purposes.

They aim for tax calculations and eventually payments to be closer to 'real time' - and that means earlier and having to pay tax earlier (even if it is to be refunded later), brings cashflow implications.

Are you sure that the tax will be have to be paid quarterly? I can see no evidence this is the case, indeed it appears that is specifically stated not to be the case in the write ups I have read. There will be the voluntary option to 'Pay as You Go' but other wise tax will still be due 9 months after the end of the tax year, with the 31stJan/July payment dates remaining the same, and your accountant will still have to do the end of year calculations to work out how much tax is due, after taking things like capital allowances and seasonal averaging into account. It appears that its purely information (invoices in and out) that they will require on a quarterly basis. The main issue is that ALL businesses will need to a professional accounting software package that is able to send this data direct to HMRC. Whether you can get your accountant to do that for you on a quarterly basis I couldn't say.

https://www.freeagent.com/central/making-tax-digital-consultation/

Sonoftheheir · Feb 17, 2017

Why are they doing this? How does it help them?

DrDunc · Feb 17, 2017

Sonoftheheir said:
Why are they doing this? How does it help them?

Filing quarterly requires four times as much processing as filing annually, hence more civil servant minions required for the Treasury, who ultimately will need more managers to direct them, and human resources to hire and fire them?

Actually, what I'm suggesting contains an error: civil servants never get fired.

Tongue out of cheek,I understood that it was to reduce the bottleneck of workload for hmrc.

Quarterly digital returns is considered to allow more accurate assessment of tax owed. In theory less checking and adjustment of annual payments should be required, while allowing more automated computer analysis.

The reason small businesses were chosen as the guinea pigs and not large concerns is likely to be that there are fewer loop holes exploited, so human intervention in checking small business returns is simpler to digitally automate.

The outcome of this endeavor really depends on whether the hmrc are using the same quality of consultant software design manager that all the other government departments have used.

If so, the computer program will cost a small countries national gdp, and contain so many design flaws and bugs that it will actually increase the administration burden upon human paper pushers.

DrDunc · Feb 17, 2017

@Princess Pooper my thanks for becoming part of the beta trial and reporting back how it's progressing.

All the farm accounts here are still written in a ledger and cash book. I'm still trying to decide which software package would be best/easiest to set up and use. Understanding a little more of what hmrc is expecting helps to motivate the switch from paper to computer.

fudge · Feb 17, 2017

Along with potential changes in corporate tax rates, with this sort of "reduction" in red tape the govt seem to be herding sole traders and partnerships in the direction of incorporation.

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