Plus ça change…

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In his latest blog post, David Macdonald, The Martlet Partnership discusses the merit of "carrying on" in a changing world.

David Macdonald
When I was asked to prepare a blog back in September, I commented on some of the crazy things that seemed to be going on in the world on which nobody seemed to have a handle on, and for which nobody could predict the outcome.

Six months on, and predictably the madness continues, and above all the uncertainty.

We have little option other than to “carry on carrying on,” as very few of us can influence these various outcomes.

Yesterday I attended a lecture on changes to Accountant Standards. I accept that some Accounting Standards have to change to acknowledge and reflect developments in technology, but I find myself scratching my head as to why we have a Financial Reporting Council which brought in changes to certain accounting policies three years ago, with the intent to ensure that companies’ accounts show a fair view which is the overriding obligation of all company directors to do, requiring interest to be calculated on a net present value of certain loans even if those loans were to be interest free in the real world.

Common sense now appears to have prevailed and has been a substantial rethink on this.

Well, I am all for that but I have to ask why these provisions were introduced in the first place.

I also learnt that so far as the new micro-entity accounting regime is concerned; where we produce accounts for clients which comply with the new legislation but have to send them other documentation to provide any meaning to them, has not been implemented properly. Micro-entity accounts only require notes in four circumstances.

One of these is to indicate the number of employees. This was apparently a Companies Act requirement which got overlooked when the new standard was brought in. It has now been made mandatory, but again I have to ask why was this not brought to everybody’s attention in the first place and indeed why is this requirement even considered necessary, given the paucity of information in these thinned down statutory accounts!

And then we come to our good friends at HMRC. Making Tax Digital will be a reality before long. We read that HMRC estimate that they will be able to raise an additional £2 billion in taxes due to the information that will be at their disposal which they haven’t had before. I believe there is probably some mileage in that, as it may highlight expenditure which certain traders have been claiming as deductible, either wilfully or in blissful ignorance, and HMRC may be able to compare those transactions with computations submitted to see whether such expenditure has been added back.

However, even if their super-computer is able to assimilate all this information, how will HMRC communicate any amendments to returns given the reduction in their staff numbers and their inability to communicate?

A couple of weeks ago, we submitted a form to HMRC containing the client’s National Insurance Number. A few weeks later, we received a reply saying that they could not trace the client’s National Insurance Number and quoting as the reference at the top of their letter, the National Insurance Number in question.

Already, the self-assessment filing system cannot cope with a number of different scenarios. One of the tax returns we filed in January was for a client who had employment income of £60,000 and self-employment income of a similar sum.

We made the appropriate calculation to calculate the National Insurance liability by following the fairly complex rules where Class 4 National Insurance applies to the self-employment, and Class 1 National Insurance has already been deducted at source from the employment income and submitted the tax return with the correct calculation.

HMRC’s system could not cope with this and before long our client was receiving threatening letters demanding she pay a substantial amount of underpaid tax. This was entirely the fault of HMRC’s failure to program their system correctly. Nothing was due. Fortunately, on this occasion we managed to speak to an HMRC officer who actually knew what we were talking about – when we made our initial call, the respondent was not even aware that an offset of National Insurance was possible. The situation has now been resolved, but at a cost of £150 to our client which hopefully, we will recover from HMRC. But it all takes time and effort due to a flawed system.

In the meantime, all we can do is “carry on carrying on”.

Tags: UK200

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