I spent this morning watching an IRIS webinar on MTD for income tax which is coming down the tracks in 2023.
Iris have clearly made significant preparations for this and their solution looks very slick and ahead of the curve. However the prospect of MTD for income tax fills me with horror.
The upshot is that self-employed traders will need to file quarterly ‘updates’ to HMRC within a month of the quarter end for each trade and also if they have a rental property, separate quarterly updates for that also (which may be different quarters to the trade). Add in end of period submissions etc and you end up with 14 submissions in this scenario.
With each submission there appears to be a declaration to be made to the effect that the submission is correct and complete and warnings of penalties and prosecution. This makes each submission a tax return in all but name.
This is going to be absolutely impossible.
Let’s say a practice has 1,000 tax return clients and currently has from April to January to get them filed – which is hard enough. From 2023 they will need to submit 1,000 tax returns quarterly with only a month to do it. Most of these will land the 3rd and 4th week of the month. It cannot physically be done. Taxpayers are required to keep records digitally which will mean in most cases either the accountant has to write the books up or the client presents them with their digital records. The client’s records will contain errors and requires the skill of an accountant to make sense of them – that’s what we do and how we make a living. There is simply not the time available to do this for each client. It will be January every month.
How on earth is this supposed to increase the accuracy of information and reduce the tax gap? If accountants do not have time to properly review the submissions and resolve queries etc, or be forced by time constraints to leave it to the clients to do then rubbish is going to get filed.
Why are the professional bodies not making more noise about this?