HMRC's Making Tax Digital scheme also made tax more expensive – by £300M The UK tax authority's push to digitize services has backfired, saddling taxpayers with hundreds of millions in extra costs, according to a report by Parliament's public spending watchdog. The Public Accounts Committee (PAC) found that Making Tax Digital (MTD), launched ten years ago, was imposed with little consultation and …
I used to be able to use the HMRC gateway to enter the figures on a web form. Took a few minutes and cost nothing.
I am now expected to file electronically, either by:
1) Use of accountancy software (Sage, etc), at a cost of £hundreds (I currently use a spreadsheet for my trivial accounts).
2) Use a third-party system to make the submission for me. This only costs about £4 a quarter, but the process is a pain and takes up my time.
From my POV, there was nothing wrong with the old way.
"HMRC loves brown envelopes."
The postman turned up with a load of letters, and as I walked to them I saw 2 brown envelopes. And I go "Oh no it's a brown envelope!". My 3 year old who loves letters coming through the door, thinks it's all magical, couldn't understand why I'd be so down on a brown envelope. He thought they were special because all the other letters are often in white envelopes.
It then dawned on me that my child could well turn out to be a future HMRC tax man.
I looked at a few MTD "web-based" providers and for GBP 3.50+VAT per quarterly VAT submission, I use https://anna.money
Just log in, download their Excel-based template, add your figures into the 9 boxes, then upload the completed XLS file to their website. Takes seconds to do and so far, over the last 10 returns, I've had no issues with HMRC.
(I'm not affiliated with anna.money !!)
Surely the point is that it used to cost nothing at all to do it via a web form. Now there is a cost borne by the tax payer filing the submission. Doesn't matter that cost can be relatively small. There was no cost before. They made things worse, not better.
I doubt it's saving HMRC anything, since the input from all these different providers will still have to be processed. If that's automated, what was wrong with just automating the old web form? HMRC still has to maintain the automation itself.
Funny how all the "improvements" from government always seem to require more money from citizens. Remember, when you pay someone else that provides another cut of taxes. Wait until CBDC comes along! We wont even be able to save. Don't want the hoi poloi saving money they could start organising against us, paying solicitors with it, buying property, that's not for them - subscription living that can be withdrawn when we don't like them.
Provider of web-based MTD VAT bridging software for spreadsheet packages that can spit out an Excel file here... I don't charge a subscription fee, but I do charge per return, because:
- I hate being locked into subs too and prefer a PAYG model myself.
- HMRC frequently add new requirements and obligations to software providers, which all take time to implement, and often require several iterations because they are terrible at articulating requirements.
- HMRC's support model for MTD software providers is still, 5 years after its introduction, totally unfit for purpose and usually requires lots of email ping-pong to resolve even minor issues.
- I have to pay AWS to keep the lights on (I'm aware that it was my choice to offer a web-based service, but there are plenty of people who sensibly don't have Excel installed at all, much less third-party add-ins)
"Not forgetting that your old accounts software was a perpetual licence. Now it seems to be impossible not to get tied into a monthly fee."
My biggest objection was to have my accounting online for the next clever group to download due to the accounting software company being lax about security.
I have an older Mac Mini bolted to the underside of the desk that runs the last version of the accounting software I've been using that doesn't require anything to be online. It does way more than I've ever needed it to do. The only updates have been to tax tables but I don't have a payroll and the software doesn't process annual taxes so it's not an issue. The computer runs headless so once it's turned on, I can access it from any other Mac on my network, do what I need to do and then switch it off. If the computer dies, I'll harvest the RAM and drive to put in another ancient Mini that I can probably get for less than the cost of a McD's Happy meal. There was a network edition that would allow several users access on the local network but I didn't get a license for that version. There's still value in old boxed software if you find any for this sort of thing. Really, how much is new in double-entry accounting over the last century?
For VAT returns I use the free service available at:https://mytaxdigital.co.uk/
It only takes a couple of minutes to enter the 9 boxes!
There are other similar sites I believe.
HMRC have just sent me a letter saying filing Ltd company accounts is changing next year. I've always submitted on line via the web but the suggestion is I'll need to buy software.
For the partnership I'm in I use Andica.com software, about £25 a year.
I use a similar service that started out as free but became a monthly subscription (including services I do not need) or £4* a quarter for the VAT filing. Any idea if this one is going to stay free?
* Not worth fussing about, I know - but I do object to having to pay to pay the tax I owe (or, even worse, to get the refund I'm owed).
Agreed, been using it for years and it's great.
Also they have an API which means that (with a slight delay) I can retrieve all my bank transactions for use in my own software. Getting direct bank feeds as a lone developer is pretty much impossible so this was a welcome addition.
Exactly same here. When MTD for VAT came in, in 2019, I had to buy software subscription at about £250 per year. During covid years I deregistered for VAT but once re-registered after 2 years, got my accountant to do it for £360 per year. Next year will have to use accountant for self employed MTD too and, as, yet price not specified. Like to be well upwards of £500 per year at least. Many will choose early retirement rather than submit to all this HMRC regulation.
"Next year will have to use accountant for self employed MTD too and, as, yet price not specified. Like to be well upwards of £500 per year at least."
No matter how much the cost will be, these software would be allowed as expenses but I also hate the idea of having to pay someone a relatively large sum of money to perform something on my behalf.
Especially when I was perfectly able to do it myself until some knob at HMRC thought it would be a good idea to make it harder to submit ones VAT and Self Assessment Tax returns, given this need to use proprietary software, that seems to be requiring an annual subscription/renewal fee to use... :-(
And of course in the background is the fact that HMRC want businesses to pay VAT on a monthly basis, rather than quarterly...
Yes, however allowable expenses still aren't free.
At the "small profits" rate of 19%, assuming a normal profit of £10,000:
Tax paid is £1900, income after tax is £8100
With an extra £500 expense, pre-tax profit is £9,500, tax paid is £1805, income after tax is £7695.
So that £500 expense cost £405.
Real taxes are a lot more complicated because the rates for various expenses vary wildly for no apparent reason, which is of course why you pay a tax accountant. The maths is easy, but the rules are deliberately obtuse.
"And of course in the background is the fact that HMRC want businesses to pay VAT on a monthly basis, rather than quarterly..."
In the US, it's often that it can be quarterly for businesses that don't need to remit that much money (B2B, service companies). Past some threshold it becomes a monthly filing. It would be more money to process the returns monthly than what's collected for some businesses.
"Like to be well upwards of £500 per year at least"
Yes, but it comes out of your tax, not your pocket. Accountancy fees are tax deductable. The more expensive your accountant is, the more it costs HMRC, not you...unless you're submitting a tiny return...in which case you get to carry over the expense to next year which means you're probably not paying a lot of tax anyway.
No, it comes out of your pocket - it's just that you'll pay a little less tax with it being an allowable expense.
For me it's not about VAT (not VAT registered), but as a landlord it's not entirely clear when or if I'll be required to join in this mammoth waste of time and effort - I can't see a clear statement on whether "gross income" includes my day job or not, or pension or not, or ...
I do my accounts on a spreadsheet (ODF) where I can see all the transactions on on page - I have them templated (copy the last sheet before I start filling it in), so 12 payments for mortgage, one entry for interest, 12 payments for contract with a company for gas/boiler services, 12 entries for rent income, and space for the ad-hoc stuff. Down at the bottom, totals for the columns, a calculation in a column on the right to flag up and double-entry errors, job done and takes only minutes (getting the infor together takes the time).
I tried a management package, but gave up as it just obfuscated stuff so much that I had to use my spreadsheet to get the right answers and find the errors !
I'd be really happy if I could just copy-paste a few figures into a web page like I currently do (accurately) with HMRCs SA service - but from what I read that's not allowed as it would be too easy to make mistakes. Pah, that last bit is a load of male genitalia.
"From my POV, there was nothing wrong with the old way."
Totally agree.
HMRC have moved the goalposts from being able to log in to the Gateway system and (for VAT) entering numbers into 9 separate boxes which are then "submitted" into their back-office systems.
And now, they insist on VAT businesses buying software from a list of "providers" at various costs, none of which appear to offer "trial versions" and all of which require you to give these providers access to your Government Gateway ID and to do exactly the same "submission" as you could do previously.
I wonder how much HMRC earn (perhaps as commission for each business that signs up) from these software providers?
(Anon as I do not want HMRC hounding me for my above opinions ).
Exactly my experience. Used to upload figures from my spreadsheet to a web form taking abut 3 minutes, now have to use 3rd party software and go through multiply verification and confirmation steps taking 10 times longer.
My accounts consist of typically 8 - 10 invoices per quarter plus travelling expenses and a few off purchases of stationery etc.
Absolutely disporportionate.
Just had a relative with his own business complaining about this! Having seen a little of how HMRC operate it looked like all big projects using big name software components. Didn't look like the MVP and improve on it. Have long thought that what big government institutions lacked is good strategy, simply picking some core tools and approaches and building. Even then it would be hard with a ton of legacy to deal with. Would be interesting if someone was allowed to audit their management approach and strategies but impossible of course. The only organisations that would be given the job would be those that wont rock the boat. That is why DOGE (here come the down votes) was good in the US. They have really rocked it! Maybe making it harder to use taxpayer money and down-sizing government would help focus minds? Best still simplify taxation.
They could easily make the systems simpler to implement by scrapping the ludicrously complex legislation and reduce it in size. Decades of plasters on top of bandages on top of 100 year old rules has resulted in an unworkable mess that not even HMRC can understand.
I don't see how any system could be expected to support it given the people who created the rules can't even understand them.
Absolutely.
It's also unfortunate to see that Clifton-Brown lacks any reflection that everything his committee is criticising happened under fourteen years of HIS party's government. Tax complexity, check, poor performance of HMRC, poor project management, poor procurement. The Tories had fourteen years to fix all of this, and simply made things worse.
It's not the Tories, it's the Uniparty. Labour attack the middle classes, Tories attack the working classes, no one attacks the super-rich who provide donations and executive roles. That's why the tax system is complex. If you are rich enough to economically afford offshore companies, bank accounts and expensive lawyers you don't have to pay much tax at all. I don't resent the rich for it, I'd do the same, I resent the system that lies through its teeth and strips the masses of their meagre wealth.
There is idea behind it, why it stays like this.
Complex legislation is perfect for tax avoidance and keeping small players at bay.
Big corporations can easily absorb compliance costs and given the complexity they often can just pay tax that makes tax man happy, but not necessarily correct.
Whereas if small business done the same, they could be easily destroyed.
So I suppose whenever idea of simplification rises in the air, a magical invitation to an expensive banquet arrives, where such idea suddenly disappears.
"Big corporations can easily absorb compliance costs and given the complexity they often can just pay tax that makes tax man happy, but not necessarily correct."
The tax office can often be multiple full time people in a big company. For a sole trader, it's a half of a day of trying to figure out the new form and making sure everything is properly beamed and propped because the fine for not getting it right is a month's wages.
Being self employed myself and having to submit tax details 4 times a year going forward rather than just doing my tax return once every 12 months as I do now, it just more work for zero benefit to me.
And HMRC don't even try to give BS reasons as to why the change could be a benefit the self employed, cos they know its just a pain in the arse for no reward.
Successive governments have shown they don't care about small businesses, maybe it because we can't afford to give freebies to MPs like concert ticket or holidays that large corporations can?
MTD (making tax digital) is about bringing in digital submission (from approved software, keying in data from your spreadsheet, or even bit of paper, isn't allowed) every quarter. The claim is that this will give HMRC more current information, and benefit businesses from having a better idea how things are going. I call male bovine manure on all their claims - I know how my rental business is going - if the tenant pays the rent, it's doing well, if they don't it's doing badly, if I have some big bills (e.g. for new windows or a boiler) it's not doing to well either.
The plan is that if you have a business then eventually you'll come under MTD - it started at the VAT threshold, and worked itself down, and (from memory) in a few years it'll get down to just something like 10K gross income from rent to trigger MTD.
It's interesting to read that there are outfits that will allow you to type in the figures like we'd do for the online SA form, and they'll submit it. Seems like money for old rope. I'm sure we'll soon have complaints like I've heard about from the USA where software suppliers went (still go ?) to great lengths to hide the free or low cost options while pushing everyone to expensive subscriptions - apparently everyone over there has to do an IRS return, our HMRC couldn't cope if everyone had to do a Self Assessment !
The only reason for big corporations being more successful than SMB is they don't pay the same taxes. Big corporations are slow and inefficient, bloated with bureaucracy, but they have the needed 'friends' to get an unfair advantage when it is about paying taxes. Some try to know the laws, others know the ones who make the laws.
"Being self employed myself and having to submit tax details 4 times a year going forward rather than just doing my tax return once every 12 months as I do now, it just more work for zero benefit to me."
The US has a threshold for sole traders that if you bring in more than a certain amount of revenue in any one quarter, you have to file an estimate along with paying the estimated tax. If the rest of the year wasn't that great, you might wind up with a bit of a refund, eventually, if you beg for it.
How estimated? Plucked out of thin air? HMRC has zero track-record to boast about in managing IT and so equally incompetent to build up a reliable estimate. Interesting to ask what their risk or contingency provision is. Also how arrived at when they are clueless about the risks. In any case it is always 100's of million and presumably they justify as they deal with billions annually and represent millions of tax-payers, irrespective of what value for money is. The IT Industry will of course oblige with a commensurate or higher bids. Perhaps it is even their own bloated and assumption-laden estimate they surreptioiuly fed to HMRC. You then have costs running away which also then happens to be in 100's of million. Crazy!
I've happily used Web Filing to file my accounts for years. The recent announcement that it's about to be scrapped is very disappointing.
HMRC...why are you making it harder to file accounts and pay tax?
You claim, in your letter to me this month, that the current web based system isn't compatible with modern digital systems. If it isn't why don't you leave the human facing aspect of it alone, and redo the back end of it? If you want to allow 3rd party software to interface as well then fine, but leave the current user interface alone. You must of ironed out any problems with it over the last 10 years or so. Stop re-inventing the wheel.
It's simple and effective. It's not dependent on a particular OS or system. You'd probably tell me that it takes xyz to maintain it. Which sounds like the words of cost-cutting accountants who don't understand a business holistically. I wonder what it takes to maintain the lengthy list of 'approved' providers of software? Adding more software to a process isn't usually a way of fixing problems. Software that comes with the dreadful subscription model.
Companies only have ONE set of data to be entered to submit accounts and tax. The interface which does it should as straight forwards as possible. Why add another layer to it?
Mind you... you are the same organisation that prior to webfiling used to use the 'smart' PDFs. Anything with the word 'smart' in front of it is usually a warning of impending disaster. And it was. I had smart PDFs which would not authenticate. Your solution to it....you got me to send you the 'smart' PDFs and YOU authenticated them, and sent them back to me... for me to send them back to you. What a joke that was.
Next you'll be using Hoyoo verification to try to verify who I am.....the system which can't even agree with itself on whether it has completed its own processes or not.
Ggrrrrrrrrrrrrr.
......you can be ABSOLUTELY CERTAIN that what is going on is actually "transferring costs to the customer".
(1) Beeching, British Railways - Yup balance the books, close much capacity.....move transport costs onto the (former) customers
(2) Internet - Yup shut down fax/phone processes.....move all data entry onto (all) customers
(3) HMRC - add millions to costs -- guess who pays!!!
....and so on......................
Actually, that latter bit is not allowed as I read about it. What HMRC claims is that by forcing you to manage your business with proper accounting software you will make less mistakes - which you can probably interpret as "pay more tax". And by doing quarterly returns, you'll have a better view of your business - which is also ... rubbish.
But as I read them, you are explicitly not allowed to use "something else" and just copy the figures into a form as that's prone to mistakes - and if you believe that with a straight face, I've got a spare bridge to sell you.
>>What HMRC claims is that by forcing you to manage your business with proper accounting software you will make less mistakes -
Not really, the MTD spec allows a 3rd party to post using an API. Many of the 3rd parties allow you to leverage your existing spreadsheet and allow copy and paste an entry in which they then post using the API.
prefer the previous method of copying and pasting my results to a online form
Since MTD came in I've been using DC software MtdSubmissionPro at £25 per year to do the a copy and paste from my Excel sheet, to the software which then sends the resulst to HMRC API.
What a waste of time and money, plus I now have another bit of software to manage
To those of you explaining that you simply key your 9-box return into Excel and use a service to squirt the data down HMRC's REST API, do be aware that this approach is not MTD-compliant. The regs explicitly forbid keying in the figures sent to HMRC. The figures on your return are supposed to be derived from your transaction record-keeping data using a "digital link", e.g. by calculating them from data in another tab, or pulled electronically from a spreadsheet where the figures are calculated.
Whether they'll ever find out is open to debate.
Frustrating via snail mail post.
Esp. When HMRC aren’t subject to needing to Sign for Royal Mail ‘Signed for’ mail and then claim the post was received after a faux deadline.
Doubly frustrating when the reply was resend information they already had and lost first time around…18 month turnaround.
It’s ok - I fudged my next year self assessment figures to recover the £600 they robbed from me by being ‘too late’ for a reply deadline.
Where I live the Post Office is defunct so no snail mail at all now but HMRC insist on posting things to me. Their processes do not allow this kind of communication to be sent by email. Spend millions wanting to be at the forefront of the digital age (just for the hell of it in some cases) but yet cannot find a way to send such emails.
I send anything by recorded delivery - and then print out the PoD as it disappears from Royal Mail's site after a couple of months.
Also, by law, if you have proof of posting, then the item is deemed to have been delivered (next working day for first class, in 3 days for second class). We all know that's rubbish these days, but that's the presumption in law - and why they won't use anything other than standard post when sending things as it's up to you to prove you didn't receive something (at all, or by a certain date).
I'm seeing a pattern here. Systems suppliers are huge businesses. Why? They charge obscene amounts. That is why they are huge. I'm not talking about the programmers etc. The companies and owners are basically being fed our money through contracts that don't cost hundreds or thousands in terms of overspend, but BILLIONS.
In the UK, we have HORIZON. The Post Office continued to pay MILLIONS to a company that screwed up.
We are mugs for allowing it to happen and to keep happening.
Debarment from Public Contract's under the newly in force Procurement (2023) Act
https://www.gov.uk/government/publications/procurement-act-2023-guidance-documents-procure-phase/guidance-debarment-html
I’d start with FJ over Horizon, Cr@pita over SmartMeters, Motorola over Airwave, E&Y over Horizon, Oracle over Birmingham CC ….. etc …
It's insane that possibly the most important department had the most incompetent mangement & seem to hire the dumbest consultancies. All of whom have ZERO experience of actually talking to their users or delivering a service that people ACTUALLY want.
What kind of genuine idiot thinks "our phone lines are overloaded. I know! Let's just close the help desk ".
The online stuff is OK but a lot of people just want to talk to someone! We're not tax experts.
I was owed £3500. My accountant put a refund request in. I waited. Nothing. I put a refund request in online. Nothing. I did it again. Nothing.
It wasn't until I actually spoke to someone, who was actually helpful & she chased down what was going on did I find out that they're was a years old debt hold on the account. Nothing from the online system had this. No markers, nothing. No emails. No texts. No "we can't give you a refund because of X". Literally nothing.
If it hadn't been for the ability to actually talk to someone who obviously could go talk to another department who had access to more details than are put online, I'd STILL be waiting for a refund.
For good measure, if you work for certain government departments (hence posting as AC), certain agencies (HMRC amongst them as apparently they aren't secure enough !) are prohibited from holding your home address. They don't actually tell you this. Nor do they tell you when, for no apparent reason, your correspondence address gets automatically updated from your employer's monthly payroll tax submission - using an address where post just isn't going to get to you.
For good measure, when you write to them with a complaint, no-one notices that the address you've used on your letter doesn't match the address they have on file - and nor does anyone notice this when you write to complain that you haven't had a reply to your first complaint !
Shifting to a digital system should mean that the data can be sorted far more quickly and with less human input leading to lower costs. If it's costing more, something has gone seriously wrong. Mission creep is often a big thing. The other is not having a properly working system to begin with and trying to computerize the chaos. A person I know took over his dad's school sports scheduling system that was sold as a binder set and forms to fill out. It was all laid out really well so a coach could look at a page and make sure all of their players were eligable (grade requirements), referees have been scheduled, the field(s) have been booked, etc. Moving everything to a digital version was step one. Nothing new other than some reports. Over time it evolved into having online aspects so data could be exchanged between schools to the last version this person had running before he sold the company which was almost completely online. The key was getting the core functionality that already worked very well into a computerized version without trying make it all singing and dancing right from the start. I think plenty of coaches kept the paper version going for some time as will happen. There comes a tripping point where one coach in a district starts using the connected version and chivies the rest of the coaches to get with the program. The first adopter can also be the local tech support as first adopters are often the ones that "get it" the fastest.
There seems to be some misapprehension that; government cares about the people it "serves" (choke). Look at it in terms of a sophisticated Mafia racket. When non-government entities act the same we call it extortion. They want you to own nothing. They want total control because they have this strange idea they know better and that people should serve government. They even want to decide if you live or die. Guess what the answer will be to that if you are no longer productive, paying taxes, god forbid requiring taxes back in care and health services. Wait and see what travesties occur under the Assisted Dying Bill in a decade or two. That'll save a fortune in payments for healthcare. Am I the only one that notices the wealth gap seems to increase as we pay more taxes?
I say no chance, but strictly speaking it's "not if you want it to work"
That's because only the certified, commercial, software providers will get the details of upcoming changes.
So open source software will always be out of date.
You could get on the list, but I don't think the rules have any way to handle anyone except a (large) company. Even if you could it would cost a**** load.
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