https://www.gov.uk/government/collections/making-tax-digital-consultations is the place to start and the first scary bit is the first sentence: “The government is committed to reducing burdens for taxpayers and building a transparent and accessible tax system fit for the digital age.” Well if RTI (Real Time Information) and AE (Automatic Enrolment) are anything to go by, the odds of success are not very high… Lorraine, my wife and payroll specialist, can regale you for hours with stories about seemingly straightforward situations that prove almost impossible to sort out. Incompatible systems within HMRC lead to manual interventions that may or may not work, duplicating employees for no readily understandable reason (albeit we think we’ve got it sussed when this will occur) and HMRC allocating the payments you make to wherever they think is appropriate rather than what you thought you were paying off. And that’s just RTI. Ask John Le Poidevin from the Catherington Consultancy if you want to hear the fun and games happening regarding AE. Pretty much a full time job in accountancy practices throughout the country for no economic benefit in the real world whatsoever! I’m going to concentrate initially on the effect on the self-employed as most accountants are going to have the most trouble here. This “stuff” is due to be up and running by 2020 which is four years, JUST four years, from now… Much of your control over what is happening depends on the “Digital Tax Account” that each taxpayer has/will have. So far HMRC have:

• Started them up
• Vaguely told a few people about them
• Not worked out how to let your accountant view them, and
• Threatened various sanctions if you give your accountant your personal login details

Call me paranoid if you will! The Unincorporated Business PDF states: “At Autumn Statement 2015, the government announced that, by 2020, most businesses, self-employed people and landlords would be required to use digital tools, such as software and apps, to keep track of their tax affairs and update HMRC quarterly, or more frequently if they chose to do so, via their digital tax account.” There will be compulsion – except for a small number of exempt businesses, you will have to keep digital records. There is now a suggestion (which I welcome) that there will be free software for the people who can afford it least but that means having to have a computer (not all people do, or want to, and I cannot see any indication that free computers will be handed out with the software) and that means those people will need to be trained to use both software and hardware. All a bit “Big Brother” possibly? Which brings me on to quarterly “updating” which, according to HMRC “does not mean four tax returns a year”. We shall see… My concern is that there will be accounts for HMRC quarterly which do not represent what has happened to the business in the quarter (no prepayments, accruals or stocks to contend with if HMRC is to be believed) and no compulsion to do anything else. SMEs are not always renowned for their forward looking abilities and entrenched cash accounting is not the best way of getting meaningful information about your business and its profitability. But are you, Mr/Mrs. SME going to be willing to keep both HMRC at bay AND pay for information you can act upon? I hope so but only time will tell… ]]>