MTD – will it work ?

The CARL System Background information

The CARL System is radically different from any other computer system on the market all of which resemble book-keeping on a computer requiring the intervention of an accountant, whilst CARL goes automatically from a simple single entry of a transaction to final accounts and tax returns in one operation, which takes seconds. For the end user to understand the data they have to key in takes minutes whilst others, take hours and QB produce up to 36 videos to explain how their system works.

At the heart of our software is the copyright CARL system which provides a system of accounting codes and classifications that empowers the end user to accurately submit their own accounts.

Making Tax Digital (MTD)

With MTD starting to come into force I wonder whether it will be successful. My experience over many years is that the standard of record keeping by small firms has changed very little even where they have selected to keep them on a computer using a spreadsheet programme such as Excel or a computer accounting programme such as QuickBooks.

Way back in the 1980’s when Sage came onto the market and I was assessing computer programmes put forward to the ICAEW for accreditation, I commented that unless the user understood and could keep records using the principles of double-entry bookkeeping they would not be able to use a computer programme which was double-entry bookkeeping on a computer and in practice that proved to be the case. Clients who maintained their records on a computer took longer to unravel and put right than those who submitted their records in the old-fashioned handwritten way, referred to as Incomplete Records which have now been made more complicated by transferring them onto a computer.

Today, the only difference from yesterday, is that videos have been introduced to try and teach the user what they are required to do to find their way round the plethora of different menus, screens and procedures. Research has shown that most small businesses strongly resent the time and effort they have to put into book-keeping, a job which fetches them no return at all and computer software on the market today have extended the time and effort.

Accounting Software is Still Under Performing)

Some years ago, I was introduced to an American Software engineer who worked on the QuickBooks programme from the outset. He told me that they initially started to explore the avenue of producing a programme so that businesses could do their own accounts but after extensive tests they discovered small businesses were so incompetent at coding transactions they made a decision to change course and try and find a way to make it easier for accountants to handle small business clients and today with the advent of Smartphones we see them photographing various documents which tells them nothing about how their business stands and where it is going. It’s a filing system and provided they don’t lose or seriously damage their mobile all will be well. Most small businesses do not have either the time, ability or inclination to keep their records regularly up to date which will be necessary when MTD comes fully into play.

When MTD was first muted there was talk a programme would be produced by the government to simplify compliance with the requirements but to date nothing has been revealed.

Some accountants do introduce or refer their clients to particular computer software with which they are familiar but do not take into account when making a recommendation their client’s ability to comprehend or willingness to learn how to use the system. Consequently, the accountant is left at the year end to unravel their client’s attempts at understanding not only the instructions but also interpreting them on the computer. All good fee earning material for the accountant.

Contract Between Client and Accountant/Accounting Software

I have been reviewing today’s relationship between practicing accountants and their small firm clients and from what I have learned it is little if any different to what it was in the 1980’s. The vast majority of small firms engage the services of accountants to produce year end accounts, some months after the year end, from the wide variety of records they keep whether manually or on a computer. There is no standardisation or uniformity for handling these clients. Where records are kept in a form that is not computer compatible, they limit the benefits of a computer as they have to be martialled into a format to enable them to be acceptable for computer input.

Many small businesses engage accountants’ services to get their indiscretions past HMRC and reduce the risk of being chosen for an investigation. It is against this background that HMRC are hoping to introduce MTD. When independent reviews written by authors who examine in depth and report on the accounts produced by businesses from Quick Books and similar programmes, they read like horror stories they are so massively inaccurate they beggar belief.

Many years ago, I was invited, as a former research lecturer and main member of the IT faculty, to join a residential consortium for a week to review the future educational requirements of those aspiring to become Chartered Accountants. The meeting was dominated by members from major accountancy firms who had little experience of handling small firms. My suggestion that in future accountants would need to have an understanding of the fundamental principles of computer programming fell on deaf years, apart from one attendee who came from a small accountancy firm and clearly understood why I was making the suggestion which was prompted my decades of research and development work I had been carrying out at the request of the ICAEW.

Powerful gimmicky advertising is selling computer programmes to accountants and their clients but it is not realistic to what is required to generate reliable up to date accounts on which business, finance and tax advice can be given. Businesses and most accountants are ignorant when it comes to assessing a computer programme which promises the earth but delivers nothing intelligible in accounting terms to the business. My years with the IT Faculty of the ICAEW and the ICAEW project I was involved with taught me many things, not least that I would not develop and market a product based on the ignorance of the market and hype about being up to date if you kept your records on a computer.

I went on IBM training courses who were seeking to recruit programmers. I explained the CARL System to them and a few months later I received a letter from IBM containing the following ambiguous comment “We will not be held responsible for infringement of your copyrights however it may arise”. I contacted my Patent and Copyright agents who made me an appointment for the same day to see lawyers in London who specialised in Patent and Copyright law. After a few hours the five lawyers told me the copyrights were watertight and this was proved later when I won infringement of my copyrights against firms of accountants. IBM, however, were not the first international firm to look into acquisition of my copyrights and Kalamazoo Business Systems became a partner in my firm with the principle objective of acquiring them.

MTD – Building Castles on Sand

I mention again my concerns about the introduction of MTD in April 2020, next year, based on my fifty plus years of experience studying the handling of small firms accounting and taxation requirements and have proved beyond reasonable doubt how they can be handled better by the accountancy profession operating the CARL System which enables the backlog of accounts to be brought rapidly up to date which will be absolutely necessary for MTD to operate efficiently.

There are three key factors that the architecture of a 21st century computer programme requires: –

  1. Simplicity, ease and understanding of the data to be input into the system by the business proprietor.
  2. Verification of accuracy of data input to ensure instant production of accurate accounts and tax returns without the intervention of accountants.
  3. The incorporation of artificial intelligence to produce advisory reports to assist proprietors in making business decisions.

Until the contract between the accountancy illiterate average user and the accountancy jargon heavy accountant and software is completely revamped, there will continue to be a mismatch in the data needed for accurate MTD and the ability of the end client to provide it.

The copyrighted C.A.R.L. (Computerised. Alpha-mnemonic. Response. Language) System achieves all of the three requirements outlined above.

Signing Up For MTD

  • 1. Go to
  • 2. Click Sign up your business for Making Tax Digital for VAT
  • 3. You will be asked “Do you have accounting software for managing your VAT records? ” As you are a CARL user you can say yes.
  • 4. You will be asked “Is your software ready to submit your Making Tax Digital for VAT Returns directly to HMRC?” . Yes CARL is ready to submit your returns so reply yes to this question.
  • 5. When prompted, enter your Government Gateway credentials then click Sign in. If your business is not yet eligible to sign up for MTD you may be guided to different pages.
  • 5. Follow the on-screen prompts, providing any requested information

HMRC should then confirm you can begin to submit your MTD VAT returns. We have found that there can be a lag to your activation. When you use the CARL system and you login to HMRC using your MTD credentials you might receive an error such as CLIENT OR AGENT NOT AUTHORISED. We have found that if you wait a couple of days it starts to work. NB we have now seen that you will be sent a code to your registered mobile phone as well know when logging in.

Setting Up as a Sole Trader

Being a Sole Trader is the most common form of running a business here in the UK. This post is likely to be a work in progress for a little while but it aims to show the most important stuff to cover if you are looking to start trading as one.

The post has various links to various official documents from HMRC and the like to help you with your background reading.

How to register

You need to set up as a sole trader if any of the following apply:

  • you earned more than £1,000 from self-employment between 6 April 2017 and 5 April 2018
  • you need to prove you’re self-employed, for example to claim Tax-Free Childcare
  • you want to make voluntary Class 2 National Insurance payments to help you qualify for benefits

To set up as a sole trader, register for Self Assessment and file a tax return every year.

Your responsibilities

You’ll need to:

You’ll need to apply for a National Insurance number if you’re moving to the UK to set up a business.


You must register for VAT if your turnover is over £85,000. You can register voluntarily if it suits your business, for example if you sell to other VAT-registered businesses and want to reclaim the VAT.

Working in construction industry

Register with HMRC for the Construction Industry Scheme (CIS) if you’re working in the construction industry as a subcontractor or contractor.

Naming your business

You can trade under your own name, or you can choose another name for your business. You don’t need to register your name.

You must include your name and business name (if you have one) on official paperwork, for example invoices and letters.

Business names

Sole trader names must not:

  • include ‘limited’, ‘Ltd’, ‘limited liability partnership’, ‘LLP’, ‘public limited company’ or ‘plc’
  • be offensive
  • be the same as an existing trade mark

Your name also can’t contain a ‘sensitive’ word or expression, or suggest a connection with government or local authorities, unless you get permission.

ExampleTo use ‘Accredited’ in your company’s name, you need permission from the Department for Business, Energy and Industrial Strategy (BEIS).

Check which words you need permission to use, and who from.

You’ll need to register your name as a trade mark if you want to stop people from trading under your business name.

Doing the Accounts

Doing the accounts is never going to a task that fills the small business owner’s heart of the with joy.

If you have read any of the content on our site, you’ll know that we want to try and challenge some of the negativity about accounting and get the business owner to see the benefits to their business of taking control.

This post is an introduction to how people actually use the CARL System of accounting in its simplest form. We have customers that have been using CARL way before internet accounting was even thought of, however they have been successfully providing accurate business transaction information to our partner Lloyd, Thompson & Carl Accountants in a paper form and getting back their accounts within weeks.

The secret to this is to provide an easy to use, error proof and memorable system for identifying what a transaction is, write the code next to the transaction and then send that to the accountant to process. What causes problems both in the past before accounting software and now with various types of cloud based accounting systems, is the accountant not knowing what a transaction was for or not knowing that the client has misidentified a transaction or created a new account in the Chart of Accounts and putting the balances in the wrong place. All this requires sorting out by the professional and wasted time and increase costs.

In the manual form of the CARL System the client just needs to grab a copy of their invoices and/or bank statement and “Code Up” these documents with the right CARL Code as can be seen in a fictitious example below.

The statement shows the transactions and the RED ink letters are what the client wold jot next to them for the accountant to follow. The client can only use one of the codes allowed and in many years of usage we have not seen any client fail to grasp how to use it.

The key thing is once learned it becomes quick and easy each month.

Therefore the CARL system provides cast iron contract between what the client knows about their business and the transactions they have and what the accountant needs to know about the trading of the business.

Nothing can fall through the cracks.

Many years ago HMRC asked one of Lloyd, Thompson & Carl’s clients why they, as a business based near Newcastle, was using an accountant hundreds of miles away in Shropshire.

Quite simply they said they liked the CARL system and didn’t need to see an accountant face to face to sort of messy bags of receipts and the like.

Now that the internet age is here and HMRC is pushing us all to “go digital” with Making Tax Digital (MTD) for VAT being their starting point, the CARL System in its manual form is still alive and well.

Some businesses have such poor internet access, using a cloud accounting package is not feasible so businesses unable to use online software are going to struggle more and more. They will have to make trips to the accountant to sort out issues to ensure the accountant can submit returns in time.

All looking a bit messy and time consuming.

Don’t loose track of the prize here. Getting your accounts done for quarterly VAT is important if you are VAT registered but getting your accounts done so you can fix immediate issues and grow your business is what you want.

The CARL System allows you to give us the coded paper work i.e. bank statements, cash sheets and invoices in the post where you have coded up the transactions.

We input the data into the CARL System software for you and we can do your VAT returns and provide paper version of all your returns and ongoing accounts. If you wish you can use the system yourself and we can guide you.

Eventually you can do it yourself and be confident that your data is correct.

The CARL System software is a recognised HMRC MTD VAT capable system so your VAT returns will be MTD compliant.

MTD – Making Tax Digital

In an ever increasingly joined up world, where most people pay for goods and services with plastic and people bank online more and more, it was only a matter of time until we see the various government agencies request that we pay our dues electronically.

Quite a while back HMRC laid out its ambitions for Making Tax Digital (MTD). From the viewpoint of businesses, i.e. Sole Traders, Limited Companies and Partnerships, those paying VAT and other taxes would need move away from submitting their returns via the HMRC online portal and instead begin using software that connected to HMRC and submitted the data.

Some delays have occured and more have been suggested including from the House of Lords and even in the shadow of Brexit there seems to be little evidence that HMRC will waver in its ambition that on 31st March those businesses with turnover in excess of the VAT threshold £85K will have to submit VAT returns using MTD compatible systems.

Are we walking in to a mess. The jury is out but based on the current level of proficient usage of accountancy software which anecdotally is not good it looks likely that the accounting profession will have to take up the slack. Does you average plumber or mechanic want to learn the complexities of Quick Books or Xero. Learn it to the point where they can confidently submit a correct VAT return and “gulp” in the future a corporation tax return.

In the discussion section of on MTD article the following entry hits home and hints at the trouble that may be ahead.

“For the very smallest of clients I deal with not one have been able to understand Sage or Xero and I am unable to spend hours trying to teach them how to use these systems when failure is almost guaranteed.

There is a fundamental mismatch between the task required of the user and the tools they have to hand. Only when the software tools available to business work to a simple universal standard coding system that is easy to use and highly accurate will the notion of fast and accurate tax returns from the end user become a possibility.

For over 40 years the CARL accountancy coding system has provided the means for business owners to code up their accounts accurately. At the time of writing we are in the midst of implementing MTD VAT in our CARL software but don’t forget you can still use us to get your accounts done and VAT returns done much faster and we can tell you how.

Small Business & Joined Up Technology

The promises made by technology continues to grow and without a doubt software is at the forefront, often in ways that are invisible to the average person. When it comes down to the day to day workings of the small business owner, technology has played a part in improving things, however there is some way to go before it reaches its full potential in one key area of small business life…

Quickly adjusting to trading conditions.

Our own company Carl Systems has a mixture of skill sets but mainly in and around the areas of accountancy/, bookkeeping, software development, internet business & internet marketing. But one thing we all agree on is that for a small business to survive and prosper even with all the latest marketing tools, mobile communications, cloud accounting, e-commerce systems, they have to be able to react to changes in their market and also their own circumstances, and they need to do so rapidly.

We have met countless small business owners over the years. They are typically highly motivated and committed individuals with at least one highly developed skill which they offer in return for payment. In many cases this all encompassing aspect to their business, that of doing a very good job in return for cash in the bank is not very different to how they used to function if they were an employee. Many small businesses start with the owner, having become good at their job working for someone else, deciding to set up on their own.

But often they have no real training in the mechanisms of business management.

They can get aspects of it by seeing leads come into via their Google Business page or a current balance in their bank via their cloud accounting package but they are missing something very important. This ingredient which is missing means that they are not able to react to trading conditions and keep their future bright.

Before we describe what they are missing we need to define what a “change in trading conditions” is.

A business offers a product or service or both for a fee. When a customer makes a payment this is income which is the good stuff. However in many cases the business has had to spend in order to make that sale either as costs of purchasing stock to be resold or components used to manufacture the product, advertising costs or standard overheads like light, heat and power.

Just say a business which we will call Acme Widgets sells among other things Standard Blue Widgets (SBW) £100 and Super Gold Widgets (SGW) £120. Both products are sold online via an e-commerce website and they are keenly using Google Analytics to measure visitors to the site and conversion of that traffic into sales. They have recently began to pay for Google Adwords PPC and also some Facebook Ads and they have been making sales !

They see that the SGW widget – the more expensive one has a cost per sale of £20 i.e. they are making £100 profit on selling SGW widgets whereas the cost per sale of the cheaper SBW is also £20 thereby making a profit of £80.

Having read up on PPC and how to measure success they decide apportion a larger percentage of their PPC budget to selling the SGW widget. No brainer isn’t it and the tech savvy e-commerce guru in the business high fives himself and heads to the bar to celebrate.

All OK ?

Sure ?

The slightly more old fashioned MD who has been running the company since well before the web was a twinkle in the eye of Tim Berners-Lee sees the increase in orders for the SGW widgets and initially thinks great but then asks where they are coming from. The “PPC” guy says PPC and the internet. The MD eyes phase over just temporarily as he has no clue how that stuff works but he does know one crucial question.

How much did it cost us to make those new sales ?

The PPC guy says £20. The MD says does that include cost of the raw materials, manufacturing costs, overheads and delivery?

Err No.

They fire up their flashy cloud accounting screen and look at the purchases they have made. They haven’t yet put in the figures for the last quarter as they usually leave it to a week before the end of the quarter as their accountant then checks it and fixes any mistakes for them.

So there is no easy way to work this out.

A weekend spent pulling together recent invoices and bank statements leads them to the realisation that a recent increase in the cost of raw materials for making the expensive widget means their margin has dropped and actually when taking into account the cost of selling them online, the cheaper widget makes a better margin. Plus another sting in the tail is they have a lot more of the cheaper widget stock already in the warehouse and so rather than spending cash on new SGW stock they should have been selling of current stock.

Doh !

This story makes one point. If you are going to make decisions on your company’s trading activity you better have a joined up set of figures.


The figures from different parts of your business need to be as fresh and as accurate as possible and as equally fresh. If your sales figures are for this month then your expense figures need to ideally be the same.

What does this mean to the business owner as far as the systems they use. In our experience small business owners do not tend to have up to date accounts and if they do they are not trustworthy enough to be making accurate decisions with.

By putting the accountancy platform at the center of the business and using a simple but accurate coding system across your business it then becomes possible for the business owner to run the show without the need too wait for the accountant to spot any mistakes.

The CARL Coding System was developed specifically to allow the business owner to accurately record the nature of every transaction in their business and to therefore know how they stand right now. If you want Time Equivalence across your business in order to make quick decisions you need the right technology in house.

Call Carl Systems on 01743 35 35 85 to ask about our Accounting/Bookkeeping/Software services that can allow you to reach these goals.

Does Your Accounting Software Leak ?

I remember the first time I met my future father-in-law Jim. Now more than 20 years ago the first conversations we embarked on are still fresh in my mind.

At that time I was an I.T contractor working somewhere in London for some bank or was it a telecoms company? It matters not. Jim who was born in the US and who has since retired, was at that time working for Lucas Aerospace in the West Midlands in the helicopter control systems division, working with hardware and software. We obviously had a certain amount in common and so swapped “techie” talk over cups of coffee.

Apart from the different programming technology we used – I was a C++ and Java guy and Jim was an Ada and something called Lucol sort of guy, we had vastly different perspectives on what was meant by safe software.

Whilst I was writing software that aimed to correctly send messages across networks, Jim had to make sure his software didn’t kill people. The whole process of developing safety critical software is swathed in mathematical proof theory and testing systems that had little or no margin for error. Very expensive stuff and very time consuming but when you get into a helicopter you expect all that to have been done don’t you.

Why this little bit of personal history? Well today I’m the lead developer on the project building the CARL System and I have been kicking back and thinking a lot on why it is great at what it does.

But first of all, what is leaky software?

If an event or an input happens to your software that causes it to fail or worse still causes it to store some information incorrectly, the integrity of the system is broken either temporarily or permanently. Just like a bucket with a hole in it, your input has leaked out of the confines of accuracy and consistency.

When it comes to accountancy software, this can mean that information you rely on may not be trusted. However, unlike the helicopter that could crash, broken accounts can be fixed but it needs the eyes of an accountant to look at what you have. And even then when it is fixed, those holes are still there waiting for the next input to fall through.

The problems that can affect small business owners doing their accounts with software currently popular on the market, is that current technology is built on the principles of double entry bookkeeping. So long as you pour you data carefully into the correct buckets you’ll be fine, however the average business owner can be a few steps away from the level of knowledge in accounting required for such accuracy, and also the software is often unable to spot mistakes.

The onus is placed on the user of the software entering the data correctly. Ultimately this often means you need the helping hand of an accountant to tidy it all up.

If you are flying a helicopter you want the control systems flying it to detect and prevent bad input or error conditions and so it should be with your accounting software.

When the CARL system was developed more than 40 yrs ago, the accounting profession had quite a few problems. Accountants were unable to get accounts done in a timely fashion because of incomplete or erroneous data from their clients. The bridge between the client and the accountant was too shaky.

The purpose of the CARL system was to provide a solid contract between the client and the accountant. Then the client could accurately and quickly provide the necessary data to the accountant, and the accountant could prepare the accountants, thereby clearing their backlog.

The CARL coding system allows this to happen. Now that we are in the age of the computer, we are now able to provide this solid contract between the client and the computer system. The coding system plus the inherent knowledge of the coding system inside the software, ensures that the client knows what input to provide and the software knows exactly what accounting function this represents. The chance of leaks due to inaccurately submitted data reduce significantly and eventually, with the machine learning capability borne from having a specific identification for each activity, tending to reduce to zero.

So if you want to trust your business to software, think about how far away your current accounting software of choice is from feeling leak free. Then you might want to consider looking at the CARL System.

Our New Blog

We have a lot to talk about.

We plan to be the business that breaks down the crazy complexity endemic in the business accounting industry. The number of hours and the amount of money wasted by small businesses trying to get their accounts done and actually know where they stand is vast. Getting information in a format that actually helps them and in a timescale which means decisions can be made now rather than 6 months later or worse seems such a simple idea, however a lot of owners don’t even realise it is possible.

The CARL system puts the power back into the hands of the small business owner. It beaks down the process of doing your own accounts into something that is child’s play but means something very powerful. You are no longer having to get all this done solely for someone else’s benefit i.e. HMRC but for your benefit.

CARL does a lot of the hard work behind the scenes and when you watch the results appear on the screen in front of you, even owners that know absolutely nothing about accounting will start to learn how it all works.

You never know you may actually enjoy it.

So now we begin. We have a couple of pages on the blog site that talk about the history of how the CARL System came to be so they are a good start. You may not be surprised to learn that not a lot has changed in the past 30 yrs even with all this new accountancy software on the market.

The History of the CARL System

The CARL System in brief