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MTD for income tax train crash incoming….

Completely unworkable proposals

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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?
 

Replies (113)

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Replying to davidross:
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By 0098087
22nd Feb 2021 10:06

Sorry. and every quarter who has time to check the entries as in my experience not a single one has done everything right

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Replying to davidross:
RLI
By lionofludesch
22nd Feb 2021 10:15

davidross wrote:

And remember, those clients who seem techno-phobic mostly have computers, smart phones, smart TVs etc. Sell the benefits, they adopt when it suits them.

There's a big difference between keeping your accounting records with accounting software and ordering a CD from Amazon. Or even claiming your SEISS grant.

I'd rather deal with carp paper-based records than carp computer-based records.

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Replying to davidross:
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By DaveyJonesLocker
22nd Feb 2021 18:20

Oh yes, because once everyone is using software packages all their entries will be impeccable and nothing for us to sort out......rolls eyes.

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By North East Accountant
22nd Feb 2021 12:56

I went to the local MTD consultation meeting in September 2016 following the launch of the original consultations.

Total PR exercise from HMRC and they didn't want to listen one little bit.

I suggested they scrap MTD but this was rejected.

I suggested if they must do MTD first simplify the tax system... we all know that's not happening.

I suggested they should engage properly, listen to the professions and act on what they are saying.... that's not happening.

I suggested they should phase it in over 5 years with businesses given a staging date like Auto Enrolment.... that's not happening.

I made many more sensible suggestions.... one of them are happening.

HMRC are devising this system and when it implodes under the weight of the garbage that is filed we should ensure that the stench from it lies squarely at the door of HMRC.

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Morph
By kevinringer
22nd Feb 2021 13:10

MTD train crash will be following the CGT 30-day train crash to be followed by domestic reverse charge train crash next month. No doubt HMRC have other train crashes planned too.

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Morph
By kevinringer
22nd Feb 2021 13:17

HMRC said they were introducing MTD VAT to close the tax gap. HMRC went very quiet on the tax gap once MTD VAT started. I wonder if the gap has closed or got wider.

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Morph
By kevinringer
22nd Feb 2021 13:17

HMRC said they were introducing MTD VAT to close the tax gap. HMRC went very quiet on the tax gap once MTD VAT started. I wonder if the gap has closed or got wider.

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Replying to kevinringer:
RLI
By lionofludesch
22nd Feb 2021 13:31

kevinringer wrote:

HMRC said they were introducing MTD VAT to close the tax gap. HMRC went very quiet on the tax gap once MTD VAT started. I wonder if the gap has closed or got wider.

I would imagine it's hard to say at the moment. Only the most compliant businesses will have signed up to MTD. Other VAT registered businesses will have delayed and made excuses. Most of the tax gap will be in the group that aren't registered for VAT. And then along came Covid.

I've often wondered how they measure the tax gap. Folk don't send it returns to say "I did a cash job for £200", do they ? Presumably the tax gap is somebody's guess. Which may be way out, of course.

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Replying to lionofludesch:
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By Hugo Fair
22nd Feb 2021 15:50

In the highly unlikely event that you really want to know "how they measure the tax gap", there are 55 'fascinating' pages explaining it at https://assets.publishing.service.gov.uk/government/uploads/system/uploa...
Of course the answer underlying all that explanation is that it's (at best qualified) guesswork - and not far advanced from the old Roman approach using entrails.

Bear in mind that 'tax gap' comes from the same people who produce TIINs (the 'tax information and impact notes' published alongside tax policy changes) - which invariably somehow manage to show a 'tax saving' for the taxpayer!

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Replying to Hugo Fair:
RLI
By lionofludesch
22nd Feb 2021 16:40

Hugo Fair wrote:

Of course the answer underlying all that explanation is that it's (at best qualified) guesswork - and not far advanced from the old Roman approach using entrails.

A guess ?

Thought so.

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By Jo Nokes
22nd Feb 2021 16:38

Never mind, Rebecca Benneyworth is giving a tax talk on Wednesday, and will show us how to sign up all our computer illiterate clients. Everything is going to be fine! Or not....

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By CardiffAccountant
25th Feb 2021 16:03

I can fully understand people's scepticism with MTD for Income Tax.

I appreciate that this all seems unworkable.

That said, I have a business in Spain, and for the past 5 years I have had to submit a quarterly tax return. Also, the deadline is not one month from the end of the period, but 20 days!!

I employ Spanish accountants to complete and submit my returns, and they tell me that they seem to manage with all their vary varied clients.

Personally, I am going to look at MTD for IT as an opportunity to let go of my 'C/D' clients and charge my 'A/B' clients for the additional work.

That said - 'fingers crossed'.

Thanks (1)
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By Agutter Accounts
26th Feb 2021 06:27

As someone who deals with individuals and microbusinesses I could not agree more about the impossibility of what is required. The sort of people I deal with are challenged both by the tax rules, and also by the need for timely and accurate bookwork.

I have a background in management accounts, and do monthly accounts for a few clients. But that takes time to set up and training your client to give you information in a timely and accurate fashion.

This latest wheeze from the Treasury and HMRC is asking for trouble. I am glad that by 2023 I shall be largely retired and not required to participate in what will probably turn into a fiasco.

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