Here it (MTD) comes again ...

(apologies to The Fortunes all the way back in 1965) ... A heart without a home, Here it comes again

Didn't find your answer?

For all those, including me, who thought (or at least hoped) that HMRC had finally seen the light go out in the eyes of MTD ITSA ... they are still actively and optimistically applying the electric paddles, whilst claiming the future is (digitally) bright.

Yesterday saw the publication of another Open Consultation - this time on "Draft legislation: Income Tax (Digital Requirements) (Amendment) Regulations 2024"

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The cynic in me does wonder at the timing ("This consultation closes at 11:59pm on 12 January 2024" - so now we know how much they believe in their definition of the 'SA peak'), but the contents reveal how little they've been deflected from their central belief system.  The draft regulations primarily amend the 2021 regulations in order to:

  • revise MTD mandation date and threshold
  • 'improve' the design of quarterly updates
  • 'simplify' processes by removing End of Period statements
  • introduce easements for landlords with jointly owned property
  • exempt specific groups from MTD requirements

The draft Regs can be found at https://www.gov.uk/government/consultations/draft-legislation-income-tax...

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Personally I find the claims (that these changes 'improve' or 'simplify' the areas tackled) strange - and I'm being circumspect in my choice of wording!

The usual trick of reinforcing the suspect core, whilst applying copious quantities of sticky-backed plastic (i.e. exceptions, variations et al) to all the acknowledged broken bits, is more likely to lead to confusion - but what do others think?

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[For example: Software notice – made further to regulation 3 ...

"Functional compatible software must comply with the following condition: once a digital record has been entered into a software program that forms part of the functional compatible software, any transfer, recapture, or modification of that digital record within the functional compatible software must happen digitally and not manually."

Not much change to what HMRC always wanted, but now it's being put into Regs.]

Of course you may be more interested in how they aim to address: Joint Property Owners / the QU content dependency on the relevant person’s business(es) / or simply the unresolved questions about *how* QUs are meant to operate (or *what* they will deliver) in the absence of an EOPS?

Replies (14)

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By FactChecker
08th Dec 2023 21:07

It's not that surprising if (like the boy crying wolf) my post above has sent everyone if not actually straight to sleep, then scurrying off in search of more fun topics.

But, for those to whom the MTD ITSA acronym doesn't act like a sleeping draught, it's worth studying the draft Amending Regs ... and even responding to the Consultation.

My fear is that instead of facing up to all the issues raised so far and trying to tackle them with specific changes, HMRC are falling back on classic Civil Service techniques (see Yes Minister).
One of which is to do the opposite of refining the Regs to address specific concerns; and instead to broaden them to the point where they can later rely on their 'guidance' to change meanings without bothering the legislature.

One simple example - within 'Reg 8 - Update Notices'

The Income Tax (Digital Requirements) Regulations 2021
(3) For different descriptions of relevant person, different designatory information or different categories of transactions may be specified

vs

The Income Tax (Digital Requirements) (Amendment) Regulations 2024
(3) For different descriptions of relevant person, different update information may be specified

'update information' (aka 'whatever we want it to mean')!

Thanks (2)
Replying to FactChecker:
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By Postingcomments
12th Dec 2023 12:04

How many hours have people wasted on all this stuff so far? Time that they could have spent earning fees or smelling the flowers?

I say let them enact it however they like. If chaos ensues, so be it.

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By GHarr497688
10th Dec 2023 16:36

I have retired. Let the madness begin.

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By richard thomas
11th Dec 2023 14:02

Your post didn’t send me to sleep, but then I’m by no means typical of the average reader of draft statutory instruments (as I have previous, in that I have been responsible for, and to a degree actually drafted, 115 statutory instruments in my time in the Revenue).

I shall definitely be commenting on the latest draft SI and Commissioners’ notices. Though most of my comments will be about the dreadful drafting of the SI and especially the notices - what I think about these documents is the same as what (in substance) I said to HMRC when I commented on a draft of the so-called Insurance Companies (“The Long-term Business Fixed Capital”) (sic) Regulations 2023 (SI 2023/1236), namely that I would have been ashamed if in HMRC still to let such an abortion reach public attention and I cannot for the life of me understand how the Solicitor’s Office in HMRC has once again let this MTD abomination escape captivity.

That said I do not agree with all your strictures about the amending regulations. HMRC have announced what changes they have accepted and have drafted changes to the regulations and notices to achieve that and are now consulting. It is unrealistic for them to have drafted regulations which abolish QUs as that is not what they have accepted.

And surely abolishing EOPS is a major simplification, though they have not published anything that amends the (not yet in force) legislation modifying TMA that will be needed as a result. So also is abolishing the need to correct QUs constantly. The changes here also make it much easier for HMRC to suddenly realise that abolishing QUs would be an even bigger improvement and simplification and to achieve that much more simply.

And I fail to understand the point you make about software notices. In 2021 when the regulations were made, HMRC published draft notices to be made by the Board which included:

“Software notice – made further to regulation 3

Functional compatible software must comply with the following condition: once a digital record has been entered into a software program that forms part of the functional compatible software, any transfer, recapture, or modification of that digital record within the functional compatible software must happen digitally and not manually.”

In the draft notices published last week there was the bit you quoted (not from the draft regulations as you imply):

“Software notice – made further to regulation 3

Functional compatible software must comply with the following condition: once a digital record has been entered into a software program that forms part of the functional compatible software, any transfer, recapture, or modification of that digital record within the functional compatible software must happen digitally and not manually.”

It is therefore wholly unchanged.

As to the point in your additional post about regulation 8(3), again I don’t see that this example supports the general point you are making.

Regulation 8 as it stands says:

“8.—(1) “Update notice” means a notice made by the Commissioners which is stated to be made further to this regulation and which specifies update information to be provided to HMRC.

(2) The update information which may be specified includes (but is not limited to)—

(a) providing designatory information;

(b) providing totals of the amounts falling within specified categories of transactions, being amounts derived from the relevant person’s digital records; and

(c) identifying the properties which form part of a property business.

(3) For different descriptions of relevant person, different designatory information or different categories of transactions may be specified.”

The important words in regulation 2 are “may” and “includes (but is not limited to)”.

Regulation 8 after the 2023 draft is incorporated says:

“8.—(1) “Update notice” means a notice made by the Commissioners which is stated to be made further to this regulation and which specifies update information to be provided to HMRC.

(3) For different descriptions of relevant person, different update information may be specified.”

The specification is in the draft Commissioner’s notice. The 2021 notice and the revised 2023 draft notice both deal only with regulation 8(2)(b) information. In addition the revised draft deals with joint owners, though not very well or very grammatically.

I shall have lost to say to HMRC about both the draft regulations and the draft notices, though I doubt if this forum would appreciate seeing what I say unless there is popular demand for another does of sleep inducers.

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Replying to richard thomas:
Tornado
By Tornado
12th Dec 2023 16:10

The changes here also make it much easier for HMRC to suddenly realise that abolishing QUs would be an even bigger improvement and simplification and to achieve that much more simply.

An interesting observation which seems to imply HMRC may already be planning to scrap quarterly returns and are embedding the necessary face saving exit route in legislation well in advance.

This does not help HMRC much as it seems to back up those who feel HMRC keep running with this project to ensure those being paid fortunes to keep it going as long as possible, get their promised rewards. Scrapping the project now would leave many people with vested interests much less than they anticipated.

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Replying to Tornado:
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By FactChecker
12th Dec 2023 19:25

I certainly don't claim (or even aim) to speak for Richard, but I think he's being unduly optimistic with his observation that you've extracted (in bold above).

The point that I was trying to make in my first response of this thread was on the same aspect, but with a much more suspicious frame of mind (which no doubt says something about me)!
- basically, the change has removed some fairly specific definitions of what can be demanded re content of QUs, and replaced it with a phrase of such vagueness that HMRC might choose any interpretation as & when it suits them (even if that means reversing previous interpretations).

Of course that *could* make it easier to drop the QUs or to water them down in some way, but it could equally enable them to be made broader in terms of what has to be reported.
It seems to me to be an abnegation of controlled direction ... more a bit of legal candy-floss that admits no-one (at least yet) actually knows what is required.

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Replying to FactChecker:
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By richard thomas
13th Dec 2023 17:02

The reason I said what I did is that the consequence of abolishing EOPS (omitting Part 4 from the amended Digital Requirements Regs and the relevant Commissioners' Notice) is that QUs will sit in a limbo totally unconnected to the self-assessment process. EOPS were part of that process as shown in the modified section 8 TMA set out in F(No 2)A 2017 and coming into force only when a commencement order is made: that legislation, including the new Sch A1 TMA, will have to be amended pretty drastically before it comes into force.

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Replying to richard thomas:
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By FactChecker
13th Dec 2023 20:11

Aah ... so much like the closing rhetorical query I posed in the original post:
"the unresolved questions about *how* QUs are meant to operate (or *what* they will deliver) in the absence of an EOPS?"
- but as usual expressed more clearly by you, for which thanks.

It all feels a little like NASA, on being told that the components of their latest space vehicle won't operate together cohesively, then announcing that they've removed one of the criteria for being a qualified pilot. How does that help?

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Replying to FactChecker:
Tornado
By Tornado
13th Dec 2023 22:34

Talking about qualfications, the MTD Project requires people to be well versed in the use of Accounting Software and have a good knowledge of MTD taxation (which many of us don't even understand because HMRC don't yet know themselves how it will work), all without a single qualification required

How mad is that?

It is just a hopeless project that has absolutely no chance of working.

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By David Ex
12th Dec 2023 11:19

It’s enough to make you weep.

The review outcome introduction starts:

“The government’s vision is for a trusted, modern tax system – one that fits with how customers live their lives and run their businesses, keeps the tax gap low, and helps to create the right conditions for UK economic growth”.

More holes there than the proverbial Swiss cheese. The phrase “fits with how customers live their lives” sounds as if it was taken from an advert for incontinence products.

HMRC/Treasury have been told multiple times what the issues and misconceptions underlying the plans are and they have declined to properly address the concerns. The project is being pushed through because they can.

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By AdamJones82
12th Dec 2023 11:56

This could be made so much simpler if the threshold was aligned with the VAT threshold. For those clients, quarterly transactions are already reviewed and good for submitting.
Of course, that is far too simplified for them to consider it.

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Replying to AdamJones82:
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By richard thomas
17th Dec 2023 15:55

Well it is in a way, given the facility for a person with turnover under the VAT threshold to make a 2 line QU - 1 receipts, 2 expenses.

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Tornado
By Tornado
12th Dec 2023 13:25

You know what they say -

You can take a horse to water but you cannot make it drink

MTD is just like this. No matter what is done to try and drag people down the MTD route, there is nothing to say that when they get there, they are going to do anything.

There is also the other saying -

Flogging a dead horse

MTD is dead, so there is no point in Flogging it!

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By I'msorryIhaven'taclue
18th Dec 2023 12:24

Whenever I hear the Fortunes' other big '65 hit "You've Got Your Troubles, (I've Got Mine)" it puts a smile on my face thinking of the Barron Knights' parody in their Golden Oldie Old Folks Home Medley:

You've got that worried look upon your face,
You need a bedpan, so do I.

What's that... you want to hear it for yourself? Oh, go on then: https://www.youtube.com/watch?v=X3rSj4id2HA

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