Umm……

If you read HMRC’s plan to impose the burden of quarterly digital accounting on business with care you rapidly realise it is only going to apply to small businesses. There is no mention of any such obligation being imposed on big businesses, although they are the only ones with the capacity to meet the demands HMRC is creating.

Why is that, I wonder?

Could it be that big business has already got its lobbying in?

Or is it straightforward bias?

It would be great to know.

Doesn’t big business already report much more often to HMRC?

41 thoughts on “Umm……”

  1. What’s hilarious is the implicit assumption (seen in numerous posts) that HMRC, or indeed any other organisation, is under the slightest obligation to tell him anything – they should just tell him to ‘F**k off’ and be done with it, leaving his to stew in impotence and ignorance , like some crazed Beer Hall orator/ pub bore..

  2. It is small businesses that should tell HMRC to fuck off.

    As with everything else Murphaloon is irrelevant to reality. As important as a “cork bobbing up and down in the mid-Atlantic”.

  3. One of the criticisms of the way large corporations are run is the fixation on quarterly results. Reporting once per year – for results or taxes – would probably be a good thing.

  4. Large companies need to pay tax quarterly, but there’s no reporting associated with it. You make your payments, but only when the annual tax return goes in will HMRC notice the difference. Most companies do a relatively simply calculation – last year’s return with profits replaced with the current forecast, or something – though some do get a bit more sophisticated.

    I’ve only once known of an issue: a company (not my client) made no payments at all, then submitted the return before the due date for non-instalment payments. HMRC started chasing up the overdue amounts immediately, and were threatening to send the boys round. Had the company not submitted the return early, HMRC wouldn’t have known they’d underpaid.

    Normally, all that happens if you underpay (or don’t pay) is that you get a bit of an interest charge (at 3% – cheaper than a bank…).

  5. So the quarterly VAT return where all figures are entered into the computer or books – this would merely utilise thos figures in a different way?
    They are already recorded by the business, what extra work would they require?
    The ones not doing quarterly figures could benefit from entering them if not already doing so. But come on, what business will leave the figures until after year end anyway?

  6. Remember Jeremy Corbyn’s leadership bid. Remember the tax gap figures? Remember Ann Pettifor on Newsnight talking about pulling g in £120bn extra? Remember John McDonnell signing up to this gleefully? AND remember Murphy explaining that this was due to evasion and confirming that £70bn could be recovered from MSEs if only the will was there?
    Well that would require information, about the businesses and from the businesses. And it would require an imposition of a previously unimagined nature. And Murphy was happy with all of that. Because it was a small price to pay for the Joy of Tax.
    So now he is not in a position to present himself as the defender of the small businessman. Except of course a true hypocrite is always in a position to present himself however he chooses to today.

  7. “So the quarterly VAT return where all figures are entered into the computer or books – this would merely utilise those figures in a different way?
    They are already recorded by the business, what extra work would they require?”

    Well unless HMRC are going to do the work of my accountant for free, its not going to be just taking the same figures as provided for quarterly VAT, which after all are just eight numbers – sales, purchases, VAT due on sales, VAT reclaimed VAT on purchases, and the same again for imports/exports.

    Its going to require that every purchase and sale is allocated to the appropriate accounting category – effectively you’re going to have to do your accounts every quarter.

  8. VAT is relatively simple, even for a business with complex VAT affairs, once you have the systems set up.

    For most business you simply add 20% to all your sales, and you deduct any VAT you’d been charged on your costs. These numbers fall straight out of the accounts payable and receivable entries.

    With a more complex business you might have to say that certain sales have different rates, but that gets wired into the billing process. With costs, if you have multiple VAT rates on your sales then you may need to split costs by cost centre, but again that can be wired into the accounts payable. The VAT return pretty much falls out of the system, and maybe requires a couple of minor tweaks of the sort that come up every month and a (ideally) reconciliation to confirm nothing odd is going on. Unless you do something unusual, of course, in which case you should have looked at the consequences at the time so the VAT can be paid properly, and know what the fall-out will be.

    With income tax and corporation tax, there are a large number of items you might need to adjust for. And, crucially, the tax you pay doesn’t relate to any particular transaction – you can’t say that because you’ve paid invoice X the effect on your CT will be Y, you have to filter that through the impact of all the other amounts paid, received, and accrued. Paying a bill doesn’t reduce your CT liability below nil in the way that it could generate a VAT repayment, for example.

    It would be possible to look at every invoice as it came in and decide how it should be treated for CT purposes, but CT treatment depends largely on specific facts whereas VAT treatment depends more on general rules. So you’d need your accounts payable people to have a relatively good level of CT knowledge to be able to decide the treatment. The only alternative is to have a specialist review everything in the ledger – this is what takes time to arrange, and therefore means that tax returns get delayed after the year end rather than being done within a month.

    It’s just not something that can be easily automated.

  9. @ Martin Davies
    Firstly many small buisinesses pay VAT on a cash receipts/cash payments basis not on accruals. I opted for this at outset because it avoided me paying out cash VAT on cash I hadn’t received and might never receive. Secondly some small businesses use a “flat-rate” VAT payments system where they just pay x% (x varies according to type of business) of gross revenue, no adjustment for expenses. On a cash basis that is very simple.
    So the numbers submitted for a quarterly VAT return are not the same as those for income tax/corporation tax calculations even before you start adjusting for items of expenditure on which VAT is not reclaimable but are tax-deductible or items in respect of which one can rerclaim VAT but are not tax-deductible or capital expenditure where VAT is reclaimable immediately but tax is done in stages via capital allowances.
    Thirdly contracts where you are paid by results which start in one quarter and finish in another – you’ve got to apportion revenue between quarters pro rata to work done in the quarter *before* you know how much work will be done in future quarters. This is the sticking point. Anyone who promises that he/shecan do this should be exorcised.
    .

  10. @Martin Davies

    Management accounts for internal purposes are simply do not require the same level of work/accuracy as accounts for CT/SA purposes. Partly that’s a materiality point – for example as a small business owner, I don’t really care what my prepayments are at any month end, I care what cash I have in the bank and what bills need paying the following month – and partly it is the fact that tax calculations aren’t prepared on the same basis as GAAP, so I need to apply a different set of rules and judgement because HMRC have a habit of getting upset and imposing penalties when they spot mistakes

    My business produces monthly management accounts but if HMRC are going to require accounts that can be used for CT returns, that’s significantly more work on three quarter ends than I currently undertake.

    And all so HMRC can effectively bring forward SA tax payments by 6-12 months. Unusually, on this one, Ritchie is right – will just result in a big working capital squeeze and additional cost

  11. Jim – when entering the figures will be in the appropriate section anyway.
    Perhaps I’m too used to retail where most payments are in the same quarter. The stuff I provide to accountant for annual accounts is what I have for VAT returns, Then a week later sign the paperwork before submission to companies house etc.
    If others are so different then ok.

  12. Typical Murphy, sounding off after reading a summary or maybe a booklet with pictures in it. If you read the detail you’d see that large companies (i.e. those within the QIPs regime) aren’t affected because there are reforms of the QIPs programme being planned anyway.

    The guy is such an ignorant twat.

  13. The real problem is that the government is running into a problem faced by any number of businesses under pressure. They are trying to bring forward as much income as possible in order to boost the short-term result, putting to the back of their minds the fact that this might create a hole in next year’s accounts, which means that yet more stuff has to be “found” and brought forward. Eventually the whole thing explodes – as per Tesco, ICL, and innumerable other companies in the past. Nobody learns the lessons of history.

  14. @Martin Davies:”When entering the figures will be in the appropriate section anyway.
    Perhaps I’m too used to retail where most payments are in the same quarter. The stuff I provide to accountant for annual accounts is what I have for VAT returns, Then a week later sign the paperwork before submission to companies house etc.”

    I do exactly the same. The point is that there is an accountant working between the figures I compile for VAT purposes, and the tax return. He works out which of my expenses are cost of sales, which are repairs and renewals etc etc, which are allowable income tax purposes and which aren’t, and in what proportion, which are purchases of capital items. He draws up my accounts and calculates my taxable income (not the same thing either). You can’t do that from a list of VAT entries automatically, unless you demand a huge amount of information on each line entry at the same time. Hence my point – either HMRC are going to be my accountant for free (taking my VAT figures every quarter and drawing up accounts from them) or I’m going to have to do a lot more work providing them with information.

    I really really don’t think its the former, do you?

  15. Could it be that this measure affects Murphy himself? And when things affect Murphy himself a very different Murphy emerges, with very different opinions.

  16. HMRC has been unable to register a client of mine as a partnership for 2 years 6 months.

    The complaints section of HMRC took 6 months and two reminder letters to reply.

    They apologised that my clients had been registered as joining another partnership and admitted the service provided was “below expectations”.

    The collector of taxes thinks that the two years 6 months delay is irrelevant and despite the fact that we could not file returns because of their pathetic incompetence, my client should be fined thousands of pounds.

    The inspector of taxes says he has no say in what the collector does.

    The complaints department has lost another letter.

    And this pile of shit expects small firms to submit quarterly accounts?

    Our worst fears are realised. Osborne sees the Marxism of Corbyn and covers the ground of the left. Fuck me, if Osborne is pissing off Ritchie from the left, we know that some serious shit is happening.

  17. Years ago, I read an article that proposed that the Blair government was intent on making everyone guilty of something, so that anyone could be picked up by the Old Bill at any time.

    I thought that the paranoia displayed by the writer was beyond the normal 1984 stuff.

    Now I’m not so sure.

    Dr Fox may be celebrating a bit early, if DLT is anything to go by. The abolition of double jeopardy came in on the back of the MacPherson inquiry and was only going to apply to murder. Then when all politicians agreed it was a really super idea it ended up being applied to DLT.

    Similarly, SOCA was used, not to deprive known drug barons of their immense wealth, but to persecute 3 trawlermen without trial.

    Quo vadis?

  18. @ Ironman
    It certainly *ought* to affect Murphy himself. It will affect me unless it gets changed or I retire before it takes effect – so I’ve written to my MP and I’ll quit if it goes through unchanged. I cannot do quarterly accrual accounts within HMRC’s proposed timescale because I won’t have all the data. I am a bit worried about some clients of my principal client who rely on me (albeit for a very minor part of their operations) – if it comes to the crunch I should rather work a few days a year unpaid than pretend to do quarterly tax accounts.

  19. John77

    This is quite amusing the more I think about it…

    I know “practising accountants” (and I guess there must be a fair few on here too) who have to move heaven and earth to get many of their small clients to provide them with the right data – and on time – just once a year.

    Boy George & “tax simplification” – what an imbecile!

  20. @ PF
    I *can* understand that it is – to you.
    When I was talked into becoming self-employed (which was actually the right thing to do as I could then get more work), I was advised to make my year end March 31st so I had 11 months to do my accounts. This was very valuable advice. To me! Not to some semi-numerate accountant!
    Pause while I watch Tim’s website temporarily collapse under the tirade of abuse from accountants and then rise up again.
    If I can’t do it, how many people paid, partially or wholly, by results can?

  21. John Miller

    DLT was retried on two counts on which the jury could not reach a verdict, double jeopardy was not involved.

  22. John77

    *can* understand that it is – to you.

    I didn’t really mean “amusing” (to me) literally, it was more rhetorical, in the sense that the more I think about it the more I realise that the whole thing is somewhat farcical!

    Increasingly, I can’t accept that this is in any way whatsoever a “Conservative government” – it just isn’t…

  23. @ PF
    Sorry, I took it literally because I think it does verge on the amusing. I spend a large part of my work-time indulging in analyses of accounts demanding accuracy (as distinct from precision) so I’m being hoist on my own petard over this.

  24. just see my earlier comment…this is a government working itself into a needless crisis by trying so hard to bring tax receipts forward. The Murph should be creaming his corduroys.

  25. Murphy has no real experience of large companies and their accounting and tax arrangements that isn’t very out of date and often trots out ‘the rules have changed since I did it’ which is a pretty poor excuse for someone claiming to be a tax expert.
    This does seem barmy though, if it was something simple like turnover times last tax years known rate as an estimated payment I can see how quarterly payments would cut down on late payments etc and allow them to chase non-payers earlier than waiting a year etc.
    Also improves gov’t cash flow and makes it easier for business not to inadvertently spend tax due that they haven’t put aside. My father always used to put aside money during the year so he had the funds available when needed

  26. It is barmy.

    I’m meeting the Treasury (well, the OTS bit of it) next week to discuss their review of small company taxation, and will be bringing this up. If anyone wants to let me have any particular comments, I can see about bringing them in. They always seem particularly keen on hard examples of where rules give problems.

  27. @Pellinor: I’m no tax expert but I would have thought that any business where income and expenditure come in sudden, irregular and large amounts, and not spread at regular intervals across the year would struggle to pay tax on shorter timescales than a year (which seems to be the proposal as I understand it). My industry (farming) would struggle even more as production time scales are across years, numbers of years when considering livestock farming. Arable farming already straddles two tax years regardless of when your tax year end is, as crops are planted in the autumn and spring for summer harvest. There is also the issue of capital allowances – how would they be accounted for on a quarterly basis? The Chancellor just recently announced that farming would be allowed to average its profits across 5 years – how does that fit in with this proposal? One seems the exact opposite of the other.

  28. Capital allowances are definitely an area where the calculation has to be annual, yes.

    Farmers’ averaging is a claim you make after the end of the year, so I suppose you could be required to report normally and then adjust afterwards.

    But as we don’t have any firm proposals yet, it’s a bit hard to speculate. I would certainly be pushing for reporting to be limited to a clear statement of what the income sources are, with at most a rough indication of what the size of them might be.

    Moving to quarterly instalments of the sort large companies have would be OK-ish, so long as there’s only an interest implication for paying out of time, but I think large companies find it hard enough to grasp the concepts and so it’s not a suitable option for individuals or small businesses. It’s not really necessary at the moment, given that people already pay by instalments, but I suppose some acceleration of the timetables could work.

    What I would very much *not* like to see is a compression of the return preparation period. For a personal tax specialist it’s already quite hard to fill the months after January. You can do 300 returns in 10 months, but to do them in 6 would mean you’d need more staff who’d be lying fallow for longer. And I’ve already had threats from staff when I mention doing say VAT work in their “spare time”… 🙂

  29. @ Pellinor
    What on earth is the point of quarterly tax returns with a ten-month preparation period?
    This IS a move to shorten the time in which one prepares returns.

  30. Yes, and that worries me intensely. It’s just not going to work, unless the return periods are staggered (which is highly unlikely).

  31. Actually, the one group of people who will benefit hugely from any shift to genuine “quarterly accounting and reporting to HMRC” will be accounting and tax practitioners…

    However loud the gasps, or threats of early retirement (and in fairness we don’t know yet just how stupid George is eventually going to be – but he does have form), it will basically mean lots more work and higher fees – this extra work is not going to get done for free…

    Everyone else will lose. Oh, except for the extra cash that might be coming early into the Treasury, but perhaps offset by longer term damage to the economy from increased bureaucracy?

    Andrew,

    “Yes, and that worries me intensely.”

    Nah – just employ more people and bump your fees up…;) As long as you all do it together..!!

    “It’s just not going to work, unless the return periods are staggered (which is highly unlikely).”

    Surely, it makes it easier for you… 4 returns with a short-ish (say 3 month) reporting period gives far more consistency of work than one return per year with a 10 month reporting period? It’ll be a complete transformation… You’ll need bigger offices..:)

  32. I’m going to stop talking about this sort of thing until the consultation’s over and we know what’s coming 🙂

    It will just be a complete SNAFU if it goes in as Murphy suggests HMRC are proposing – but I have no reason to believe he has any sort of inside line (after all, he said it wouldn’t include companies, but clearly does).

    My prediction if it goes through:
    – Many clients leave to do their own tax, as HMRC say it’s now going to be dead easy
    – Clients who stay with us object vociferously to the suggestion that doing 4 returns a year should cost more than doing 1: after all, HMRC say it’s dead easy
    – Personal tax staff complain that they have to do 8 times as much work, as not only do they have to do 4 returns but they have to chase the information all the time.
    – All the personal tax work is compressed into the last month before the deadline, so they have 1 month of frantic work, 1 week of late returns, and 2 months of nothing to do but appeal against late finling penalties
    – I get bloodily assassinated by a certain manager of mine for suggesting that these 2 months should be filled with corporation tax – or even VAT (“the evil tax”) – work 😀

    I think there’s a compromise that can be reached that would fulfil the “quarterly reporting” aim without false precision. I’ll see what I can do to get us there 🙂

  33. Pellinor…if it goes through, then what happens next year, when Georgy realises that the tax revenue pulled forward will not be renewed and there has to be a new scheme?

  34. @ diogenes
    Next year, revenue will be pulled forward from the following year and the amount is expected to be somewhat larger as the economy continues to recover.
    Maybe you mean that the additional tax revenue compared to what would have been the case will be a lot smaller so there will still be a deficit? In which case I should agree. The assumption seems to be that the revenue just needs a temporary boost ‘cos things are going to get better.

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