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> for perfectly legitimate reasons. Could you elaborate?

pyb 3y ago
I guess it's to reduce the validation workload at their end. They'd rather receive numbers generated and validated by a piece of software, rather than numbers that may or may not make sense.
- londons_explore 3y ago
  It doesn't seem to help much against fraud. Nearly all bits of accounting software can be manipulated to add/remove amounts from the totals. And remember the government normally only gets to see the totals. It might help slightly against accidental typos in the 7 numbers. But I really doubt that the transferring of 7 numbers from one bit of software to another once per year is a substantial contributor to accounting errors, when you compare that to hundreds or thousands of invoices/bills that need to be entered into the accountancy software.
jdietrich 3y ago
See the third link, but the short answer is that businesses that keep digital tax records make fewer errors on their returns and pay more in tax. HMRC's analysis suggests that the transition to mandatory digital accounting will reduce underpayments by nearly £400m per year, without imposing disproportionate costs on businesses. The API functionally mandates some level of digitisation, but it's extremely flexible - small businesses can use bridging software to maintain their existing spreadsheet-based workflow, while larger businesses can integrate the API into a bespoke system. What HMRC are really trying to rule out is pen-and-paper bookkeeping.
- londons_explore 3y ago
  > businesses that keep digital tax records [...] pay more in tax. Conversely, businesses that only earn £50 a year probably can have their accounts done in 5 minutes on a napkin, which is why those businesses are less likely to use accounting software and pay less tax on average... Forcing them to use accounting software won't suddenly make them earn more or pay more taxes. In fact, if the effort of running a tiny business goes up too much, many of them will just shut down.
  - jdietrich 3y ago
    Businesses with turnover of less than £85,000 are completely exempt from filing VAT returns. Self-employed people with trading income of less than £30,000 will remain exempt from Making Tax Digital for income tax and can continue to file returns using the web form or a paper form.

pyb 3y ago

I guess it's to reduce the validation workload at their end. They'd rather receive numbers generated and validated by a piece of software, rather than numbers that may or may not make sense.

londons_explore 3y ago
It doesn't seem to help much against fraud. Nearly all bits of accounting software can be manipulated to add/remove amounts from the totals. And remember the government normally only gets to see the totals. It might help slightly against accidental typos in the 7 numbers. But I really doubt that the transferring of 7 numbers from one bit of software to another once per year is a substantial contributor to accounting errors, when you compare that to hundreds or thousands of invoices/bills that need to be entered into the accountancy software.

jdietrich 3y ago

See the third link, but the short answer is that businesses that keep digital tax records make fewer errors on their returns and pay more in tax. HMRC's analysis suggests that the transition to mandatory digital accounting will reduce underpayments by nearly £400m per year, without imposing disproportionate costs on businesses. The API functionally mandates some level of digitisation, but it's extremely flexible - small businesses can use bridging software to maintain their existing spreadsheet-based workflow, while larger businesses can integrate the API into a bespoke system. What HMRC are really trying to rule out is pen-and-paper bookkeeping.

londons_explore 3y ago
> businesses that keep digital tax records [...] pay more in tax. Conversely, businesses that only earn £50 a year probably can have their accounts done in 5 minutes on a napkin, which is why those businesses are less likely to use accounting software and pay less tax on average... Forcing them to use accounting software won't suddenly make them earn more or pay more taxes. In fact, if the effort of running a tiny business goes up too much, many of them will just shut down.
- jdietrich 3y ago
  Businesses with turnover of less than £85,000 are completely exempt from filing VAT returns. Self-employed people with trading income of less than £30,000 will remain exempt from Making Tax Digital for income tax and can continue to file returns using the web form or a paper form.