Mechanics of MTD

How will MTD be implemented in practice

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Apologies for yet another topic on MTD especially if this question is still one of the as yet unexplained aspects.

I get the impression that MTD involves reporting a client's transactions in real time so to speak.

For example, if the client makes up their books to 31 March each year then quarterly figures would need to be filed for each of the calendar quarters ending 30 June, 30 September, 31 December and 31 March within one month of the end of those quarters.

For example, if a self employed client becomes subject to MTD from, say, 1 April 2019 then quarterly returns will be due for the quarters ending 30 June 2019, 30 September 2019, 31 December 2019 and 31 March 2020.

As at 1 April 2019 the last set of accounts produced for the client will be those required to be included on their 2017/2018 tax return (i.e. the year ended 31 March 2018 accounts) which should have been filed by 31 January 2019.

My question is, how are the accounts for the year ended 31 March 2019 to be reported? I presume in the normal manner on the 2018/2019 personal tax return?

Are we now playing catch up and, while we are filing the quarters under MTD, at the same time we are also compiling the accounts for the year ended 31 March 2019?

If this is the case, how am I supposed to file figures for the quarter ended 30 June 2019 when I don't yet have accounts for the year ended 31 March 2019?

If the first quarter MTD report for the quarter ended 30 June 2019 was due by 31 July 2019 I would have the period from 1 April 2019 to 31 July 2019 to produce both the accounts for the year ended 31 March 2019 and the quarterly MTD report for the quarter ended 30 June 2019.

For clients who have year ends other than 31 March (for example 30 April) the catch up is going to be even worse.

The same problem arises with limited companies but will be more problematic.

Or have I got the wrong end of the stick on this?

Replies (11)

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By Peter613
08th Mar 2017 23:19

This is precisely the issue. The matter has not been thought through properly because it has been conceived by people who are not involved in the process in a practical day to day way as we are.

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By bosclibby
09th Mar 2017 06:52

I have raised this question (albeit that I used the example of 30th April year ends) on several occasions, including at two webinars, but to date nobody has ever come up with an answer. Pretty important to know to say the least!
At least we now (presumably!) have the final decision on thresholds etc but I still can't see any reference to this specific issue.

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Replying to bosclibby:
By johnjenkins
09th Mar 2017 14:14

My feeling is that, because you can choose your own basis period, HMRC can't see a question therefore no answer is needed.

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Replying to johnjenkins:
By bosclibby
09th Mar 2017 15:33

I think you've misunderstood the point!

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Replying to bosclibby:
By johnjenkins
14th Mar 2017 09:25

I haven't misunderstood the point but HMRC have.

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The triggle is a distant cousin of the squonk (pictured)
By Triggle
14th Mar 2017 19:16

Hi all

I've just done some CPD with 2020. Rebecca Bennyworth was the presenter.

It's bad news in that Rebecca confirmed that there will indeed be a catch-up process as I outlined above.

There will, in fact, be three catch-up periods, the first when unincorporated entities with turnovers above the VAT threshold join MTD, the second when the remainder of the unincorporated businesses join MTD and the third when limited companies join.

The good news, if it's good news, is that the quarterly MTD data that HMRC will require will not be full blown accounts (i.e. including balances brought forward) but just a summary of the transactions that took place during an actual quarter.

For the four "MTD quarters", provisions for prepayments, accruals, stock, depreciation etc. are not required. These are only required for the fifth finalising return (or could be included in the fourth quarter return if all the detail was to hand by then [i.e. one month from the end of the fourth quarter]). However, you can supply figures including them, if you want, for any quarter.

Yes, MTD is real-time. Obvious, now, when I think about it.

The next three years are going to be fun.

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By johnjenkins
15th Mar 2017 09:13

Whatever HMRC decide about how these 1/4 figures are to be presented you are dealing with people who are not computer literate and cannot be made to be computer literate. So that will manifest in a major problem. Just how HMRC think they are going to deal with it is beyond me, or perhaps they don't see it as their problem. They will when the money stops rolling in.

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By norstar
15th Mar 2017 15:16

My worry is, this is calendar quarterly correct? So what are we supposed to do in the eight months of the year that we're not reporting in? It sounds like we are going to have to condense our work into four months of the year?!?!

So for example, we will do all our work in April, July, October and January each year for the calendar quarters.

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Replying to norstar:
paddle steamer
15th Mar 2017 15:46

I thought the quarters were to depend on the business year end, but I could well be wrong.

Whilst most of my clients have 31 March year ends, and have their vat quarters matching, I do have some with other year ends that are not March,June, September and December, albeit far far fewer.

I suspect, ignoring solely tax return clients, I am looking at 80% following that quarter profile

I also have one March year end with vat quarters Jan,Apr,Jul,Oct, so I guess will eventually need to sort to match (company so last batch)

I think regular fishing holidays beckon, May can be good and so can August, but Easter holiday in April and summer holiday in July looks unlikely going forward.

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15th Mar 2017 16:49

A lot of press reports state that under MTD, as well as reporting income and expenditure, tax will have to be paid quarterly as well. Whilst many of us felt that was the ultimate purpose for mandating quarterly reporting, I have not seen anything from HMRC categorically stating payments need to made quarterly as well - or have I missed something?

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By johnjenkins
16th Mar 2017 09:26

I've been looking at this in a bit more detail, using my own clients as guinea pigs.
The outcome is really very simple. There are not likely to be many problems with 1/4 reporting for those VAT registered, however paying the tax liability on a 1/4 basis could prove a major stumbling block.
The real problem is those below the vat threshold, and those whose SE income together with rental income come to more than the VAT threshold. I have looked at different ways in which it might work, sensibly, and cannot come up with anything that will help computer illiterate business, let alone getting them to pay tax on a 1/4 basis. I'm really very shocked that MTD in this format has been allowed to continue. Perhaps before Hammy goes he might want to have a good look at where we REALLY are.

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