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HMRC blasted for forcing landlords to change to Making Tax Digital

A group of MPs has unveiled a scathing report about the inadequacies of HM Revenue & Customs, with a particular reference to why the authorities are forcing small scale buy to let owners into the Making Tax Digital initiative. 

The Public Accounts Committee of the House of Commons is an all-party group which has issued a report which describes a litany of longstanding concerns over HMRC’s ability to fulfil its most basic remit of collecting tax owed.

The committee is also critical of how HMRC responds to tax avoidance schemes, how it is failing on implementing or realising benefits from the Making Tax Digital and other programmes, and completely lacking “a convincing plan for restoring compliance activity back to pre-pandemic levels”.

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The 25 page report devotes a section to Making Tax Digital, the process being introduced by HMRC and which many landlords are being obliged to conform with in the coming months.

The Public Account Committee’s report on this subject reads: 

The benefits of Making Tax Digital to those with simple tax affairs are not clear. 

The requirement for taxpayers to keep tax records and submit quarterly returns to HMRC digitally is a key part of its 10-year modernisation strategy. 

From April 2024, HMRC will extend Making Tax Digital to 4.2m taxpayers with business and/ or property income over £10,000, including small landlords and sole traders, to meet their income tax obligations. 

HMRC considers Making Tax Digital is making tax easier, keeping tax in line with the digital age, making business more productive and will provide better data if it needs to introduce further support schemes like SEISS. 

However, it is far from clear how those taxpayers with the most straightforward tax affairs, such as a retired person with rental income, will benefit from completing quarterly digital self-assessment returns. 

There is also no guarantee that the software they will need to submit returns digitally on will be readily available or easy to use, although HMRC is confident this will be the case. 

We question the value of asking the large number of taxpayers with simple tax affairs to take on additional costs and reporting.

The PAC then says HMRC should explain to it how the introduction of Making Tax Digital will be made easier, and less costly, for taxpayers with the simplest and most straightforward tax affairs.

Overall the report - which obviously extends far beyond the Making Tax Digital programme - will make uncomfortable reading for HMRC.

It warns that HMRC’s “unambitious plans” for recovering a total of £6 billion it estimates it spent incorrectly in Covid-19 support payments – whether through fraud or mistakes - could lead to “government writing off at least £4 billion” of taxpayers’ money. 

The PAC says this “risks rewarding the unscrupulous and sending a message that HMRC is soft on fraud”.

The committee also says that “yet again customer service has collapsed and HMRC’s recovery plans are not clear”, and it is extremely concerned about HMRC’s capacity to clear backlogs while tackling the “avalanche of error and fraud it now faces on the Covid-19 schemes”.

The committee also says HMRC simply doesn’t know why the cost of key tax reliefs has increased, or how much of that is due to abuse.

Dame Meg Hillier MP, chair of the Public Accounts Committee, says: “The PAC is concerned about how long HMRC will be playing catchup to get back to revenue collection levels before the pandemic.

“The level of fraud and error in furlough that employers will get away with is a real concern. What signal does it send when HMRC rolls over on billions of pounds of fraud and error directly related to Covid support packages? With the current parlous state of the public finances we can ill-afford to be so cavalier over so much taxpayers’ money.

“Every taxpayers’ pound lost to a fraudster will lead to honest ordinary people feeling the post-pandemic pinch harder and harder.”

You can read the full report here.

Want to comment on this story? If so...if any post is considered to victimise, harass, degrade or intimidate an individual or group of individuals on any basis, then the post may be deleted and the individual immediately banned from posting in future.

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    Added costs for the end user to pick up, our tenants will be paying yet again.

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    I'm fairly neutral on the whole MTD idea. I can't quite see the point of it for landlords but if a straightforward landlord focused version of software is available I'd probably be fine with using it.
    The problem I have is knowing where to start. What am I supposed to be looking for? Does a suitable program currently exist or are landlord focused ones still being developed?
    I would want to be able to see exactly what it did and how to use it before signing up to it. We seem to be bombarded with various versions of landlord computer based services supposedly designed to do everything for us. Then it turns out they don't do everything but have a big overlap with something else that does the missing bit. So it feels like a lot of duplication. Finding something that is right for our particular business seems to be the hard bit and is incredibly time consuming.

    What I'm not OK with is committing to paying a monthly fee, spending hours setting it up and then discovering it doesn't really work for my rental business.
    Whoever designs these things needs to remember a lot of landlords tend to be a bit older. We left school before computer studies was a subject. Our computer skills are largely self taught and some of us rely on Google and YouTube to teach us how to do things. So keep it relevant and provide clear instructions that cater for people with limited computer skills. And remember we are landlords not accountants.

    Peter  Yednell

    It is probably probably OK for younger landlords.. For my elderly computer illiterate uncle not so much.. Why can't small existing landlords with a turnover of less than £50,000 continue with a yearly paper return? Even if that "right" ends with death and with new entrant landlords being obliged to file on the new system? I may end up doing my Uncles tax (altho' I am busy enough). Alternatively, he will need to pay a "professional".. Another xtra cost of those who invested for their retirement.. The HMRC is there to raise tax but it is also there to help tax payers pay tax.. This is arrogant disregard for the elderly.

     
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    I'm definitely NOT neutral on this.

    Landlords' costs are "lumpy" and new roofs, boilers, kitchens etc. can mean a tax loss in a single quarter but a profit over the tax year.

    If we were to incur the major costs in the last quarter of the tax year, we would have overpaid our tax over the first three quarters and be even more out of pocket.

    Before anyone says we should plan to do the work in the first quarter, the timing is often not within our control.

    By quadrupling the number of tax returns and payments, the tax inspectors will have even less opportunity to pick up on fraudulent tax claims.

    In any case, the proposed limit of £10k is far too small. Even £100k is too small to have any significant cash flow benefits and won't outweigh additional costs.

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    I'm with you in this Robert. As student landlord, I've got 3 quarters of relative peace and quiet on expenditure, and then 1 quarter where there is an avalanche of expenditure with a void month or so. Smooths out fine for a single tax return, dread to think what it will look like over 4 quarterly ones.

     
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    Yet another Hare brained scheme that will cause a lot of extra work for Landlords.
    Also I thought the Government was committed to improving Property standards for Tenants, so how is a Landlord going to do improvements, when the profit has gone in Tax.
    The Government and all it's departments are totally incompetent, they spend money on stupid schemes that benefit no one, but expect Landlords to adopt this ridiculous idea.

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    Its more & more Digital University hands off LL only ever capable of IT so called work, to exclude traditional proper LL’s hands on proper LL’s. Her Majesty got it right she prefers people that do it, not the people that talk about it.

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    Why don’t HMRC make it monthly then the Tenants can pay the rent directly into the Revenue’s Account and be done with it, let the Revenue pay for the Mortgage’s, maintenance. Licensing, fix the washing machine, Deal with Deposits, get the gas done, get DICR, EPC’s, all the other requirements see how the go on, no problem they call all this unearned income, work that one out. Its all becomes farce.

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    Check out the post office horizon scandal , faulty software caused 700 sub postmasters to be accused of fraud sent to prison bankrupted etc many committed suicide even when they knew faulty software was to blame the PO staff embarked on a cover up destroyed documents etc only now years later have convictions been quashed
    Guess who will be the first to be accused under the making tax digital program , they will soon run out of space in prisons for landlords
    Looks like they will have to build concentration camps for landlords and their families,but that idea has been the ultimate aim of the big tenants groups for years

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    I thought this government was supposed to be cutting down on red tape and making life easier for businesses. I have a series of linked spreadsheets the totals from which get uploaded onto my tax return once every year. Will I have to buy special software? I will also have to sit down 4 times a year and update everything. I very rarely increase rent for existing tenants, but if I incur additional costs for this they will receive a letter explaining why there rent has been increased, a direct consequence of government policy.

    Theodor Cable

    For sure, if I have to do tax returns 4 times a year, then for all the administration I will have to do, that will mean that the costs will definitely be passed on to tenants. Who else will pay for unnecessary beaurocracy...???????
    MAD

     
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    Christopher, spare a thought you are lucky to have spread sheets. I have only shoe boxes can you begin to imagine the administration burden that has been placed unjustifiably on me. So it’s nothing to do with quality affordable housing anymore, what should be supplementary to a business is now being use to destroy it. I have been a Landlord longer than anyone I know and fought for Section 21, without which none of you would be a LL’s and no Computers at that time either, now making it so it can function without it. Put that in pipe and smoke it.

  • michael davies

    Shoes boxes!luxury, i have paper bags!.

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    Mr David, great idea are they black bags.

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