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MTD for ITSA - Aahhhhhhhh !!!!!

Will you be significantly increasing your fees for clients effected?

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Hi all, sadly I am too young to retire so I am trying to contact my client base effected by the new MTD for ITSA rules.  From a business point of view the fees I receive from self employed and rental tax returns is relatively low circa £7k per year as I am a sole practitioner.   However, I have built lovely relationships with most of these clients and I would feel terrible sacking them.   I am interested to know if anyone is considering dropping clients effected or dramatically increasing fees to file the returns for them.  I am thinking fees will need to be at least quadruple to allow for the additional submissions and queries.  

I would love to hear your thoughts!

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By cbp99
12th Aug 2021 13:57

Quadrupling seems a bit steep *provided there is no penalty for inaccuracies in quarterly submissions*.
It is interesting you mention queries. I am pondering some per client basis for quarterly figures, with the proviso (confirmed via engagement letter) that we will file interim submissions without client review. For example, we agree with a client that we will file based on their quarterly spreadsheet (which we will have set up to be as tamper- and fool-proof as possible, using drop-down lists and protected cells).
I would be interested in what others think of this, which entirely depends on no inaccuracy penalties.

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By JD
12th Aug 2021 20:17

Whilst HM Revenue and Customs vision is clearly based on the client doing this work themselves, snap a few pictures of receipts and your done, having provided all sorts of fool proof spreadsheets, in the past to clients I have found that if there is a way of making a mess of it, clients will find it

MTD will not turn poor book keepers into good ones whatever system is used and equally I am afraid those will also be the ones least able to pay for any sort of service we can provide.

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By VCM Accountants
12th Aug 2021 14:21

The issue is I have lots of small clients that fall into this category and they are the most time consuming to deal with. Many of them handwrite recordsand drop in physical files, altough some would probably move to Excel with a bit of support. I feel it is going to be time consuming to chase/check/submit 30+ clients spreadsheets/software in a 30 day period,

This will be on top of the VAT returns that fall in the quarter, plus the RTI and CIS submissions. It's going to be tight to say the least!

I will definately have to significantly increase fees, giving the option for those who do not want to pay to manage this themselves. Otherwise it just isn't going to be viable for me to offer this service.

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Replying to VCM Accountants:
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By cbp99
12th Aug 2021 15:18

£7k / 30+ clients - are you charging enough now?

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By VCM Accountants
12th Aug 2021 15:37

My clients mainly effected may have one or two properties, so their affairs are simple so fees for these client are fairly low. I have very few self employed.

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By Barry Adams
15th Aug 2021 18:01

We’ve stopped receiving paper records. Makes everything a lot simpler

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By lionofludesch
12th Aug 2021 14:32

Well, of course it all depends on how much you're asked to do!! I suspect a lot of mine would've wanted me to enter the transactions into the software which would have cost a lot. They obviously might have then toned their demands down.

I doubt if anyone will stand for quadrupling so it'll be a case of coming to some compromise or a parting of the ways

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By SXGuy
12th Aug 2021 14:57

Depends what you're charging now as to whether it will be quadruple but for my annual clients it's ranging from extra half to double what they pay now depending on the level of service I'll need to provide

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By Duggimon
12th Aug 2021 15:08

I would first carefully consider how much actual extra work there will be. For my clients who keep records digitally already, there's no problem. For those who keep paper records, I put them all in to a spreadsheet or accounting package once a year for the full year, or once a quarter if they're VAT registered.

So, under MTD for Income tax, I will instead, for those who are not VAT registered, have to do 1/4 of the work 4 times a year, which is a change but not an increase.

Then there's the additional work, that will be reminding clients to give me their records and then actually pressing the button to send the information. What seems reasonable for this? Well we don't know because we have no idea what's in a submission or how we'll send it, but I wouldn't be surprised if that took an extra fifteen minutes.

1 hour a year extra, for those clients in self employment who are not VAT registered and don't keep digital records.

In fairness, I expect there will be an additional overhead in bringing them together and doing the year end return that will be extra, over and above what we do now, but suggesting it's four times the work is just doomsaying, if it adds more than 50% on to the fees of the worst possible candidates among my clients I'll be surprised.

However, I still think it's stupid and have zero faith it will work properly or be in any way useful to us, clients or HMRC, I just don't think the theoretical version of it is as bad as all that.

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By ireallyshouldknowthisbut
12th Aug 2021 18:21

Fees are going to be a function of how long it takes.
Which is a function of how seriously you take the data being filed.
Given the data would appear not be used for anything, quality is largely irrelevant.

You just need to file "something" to keep HMRC's computer happy.

How you do that, is between you and your client, but I wont be filing 5 tax return quality files per annum. I'll be doing one of those, and 4 utter garbage.

What do HMRC care so long as Q5 is right? I cant see them putting any more resources into checking "data in" than they do now for VAT. Ie........none.

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By lionofludesch
12th Aug 2021 18:29

ireallyshouldknowthisbut wrote:

Fees are going to be a function of how long it takes.
Which is a function of how seriously you take the data being filed.
Given the data would appear not be used for anything, quality is largely irrelevant.

You just need to file "something" to keep HMRC's computer happy.

How you do that, is between you and your client, but I wont be filing 5 tax return quality files per annum. I'll be doing one of those, and 4 utter garbage.

What do HMRC care so long as Q5 is right? I cant see them putting any more resources into checking "data in" than they do now for VAT. Ie........none.

Sounds OK but it's a risky plan, imho, and you may need to completely rethink it if - no, when - HMRC bring in quarterly payments based on your made up figures.

What you all need to be focusing on is how you're going to manage your workloads. Somehow, five, maybe ten, years down the line, clients are going to have to take some responsibility and molly-coddling them now is giving them totally the wrong impression.

Like the accountant, the taxpayer also needs to learn quickly. A couple of late returns while the penalties are non-existent might prove instructive*.

*Or they might not, obviously..

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Replying to lionofludesch:
By ireallyshouldknowthisbut
13th Aug 2021 10:30

@Lion, when HMRC do quarterly POA (which I agree will happen), then you are correct clients will have the options of:

1. Pay Q guesses based on MTU
2. Pay Q guesses based on quarterly data (no guarantee they will be any better) + all the hassle.

Many of my clients would be more bothered about extra compliance work and cost of that vs timing of the payments. They don't tend to be impoverished.

I think its about client choice vs a one 'one size fits all' approach. If firms force an approach clients dont like, they will soon be ex-clients. A local firm to me put everyone on software 4-5 years ago due to the first wave of MTD when if you recall this was going to be all compulsory years ago, and this has resulted in a steady stream of decent clients to our door as I am happy with excel for smaller clients with limited transactions (under 250 or so per annum its fine IMO). If I impose software those same clients are going to be off, but if I delay for 4-5 years, they will have been good profitable clients for me for 8-10 years and a sizeable proportion will at that point be retired or sold up if landlords and so ducked the whole thing anyhow. Pushing out to the future is decent strategy. For all I know the threshold might go up to £25,000 not £10,000 turnover when push comes to shove and political pressure starts to bite which will at a stroke take out probably 60% of cases.

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By lionofludesch
13th Aug 2021 10:41

Sure. But what about the penalties?

And won't you need to have all the transactions digitised anyway? In which case, are you saving yourself any work at all? You'd just be buying a bit of time.

Much of this is unknown. Things can change. But I suspect that the basic requirement will not.

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Replying to lionofludesch:
By ireallyshouldknowthisbut
13th Aug 2021 11:59

What penalties?

You just have file on time.

And yes we would be buying time. Lots of time to run a profitable practice catering for pragmatic tax compliance. And hopefully, eventually, run forward 10 years either it will be really easy to do, or the project will be like iXBRL. Completely ignored and yesterdays news.

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Replying to ireallyshouldknowthisbut:
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By eppingaccountant
13th Aug 2021 12:38

What are Q Guesses and what is MTU please? Am I missing something?

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By lionofludesch
13th Aug 2021 12:46

eppingaccountant wrote:

What are Q Guesses and what is MTU please? Am I missing something?

They're techniques to build up trouble for yourself by deliberately filing incorrect returns. It'll bite you in the backside one day.

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By GHarr497688
12th Aug 2021 19:45

My clients are small older clients who don't understand spreadsheets or cloud software. Historically I have been forced to take them of computer accounts as they mess up with entries leading to garbage figures. Xero and Sage is totally confusing and spreadsheets prone to errors. I will apply exemptions based on - age - increased risk of error - anxiety of using computers - previous errors with computers - reliance on third parties and costs quadrupling. I will happily demonstrate to HMRC that they will lose tax revenue if they allow unchecked data to be transmitted by unchecked computer garbage. Any clients that do not get an Exemption will be asked to leave and then I will challenge HMRC that they have effectively put me out of business with a system that is flawed from inception. A sad day for Accountancy , a profession I once loved. If HMRC are singing the prised of MTD then they would not fear delivering it rather than passing the buck to the innocent Accountants. SO NO FEE INCREASE/

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By Duggimon
13th Aug 2021 09:42

That'll teach them, HMRC won't know what's hit them when you complain about putting yourself out of business and then they ignore you.

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Replying to Duggimon:
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By GHarr497688
13th Aug 2021 13:56

Well I expect 100% exemption as I achieved for MTD. Your arrogance once again is shocking.

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By Duggimon
13th Aug 2021 14:04

I'd never have guessed from how much you complained about it. Seems like you made a tremendous amount of noise for someone entirely unaffected.

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By lionofludesch
13th Aug 2021 09:54

GHarr497688 wrote:
SO NO FEE INCREASE/

Very noble of you - but this is presumably just until you put yourself out of business.

Keep it real. Just retire. It's great craic.

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Replying to lionofludesch:
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By GHarr497688
13th Aug 2021 13:57

I received 100% success rate on my exemptions so doubt I will be out of business unless I choose to retire !!

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By lionofludesch
13th Aug 2021 14:16

GHarr497688 wrote:

I received 100% success rate on my exemptions so doubt I will be out of business unless I choose to retire !!

Why did you claim you would be, then ?

Baffled.

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By Rgab1947
13th Aug 2021 13:55

HMRC will care naught you going out of business. They will probably cheer and say "got rid of another agent checking up on us"

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By GHarr497688
13th Aug 2021 13:59

As I got 100% exemption for MTD then I think my going out of business is unlikely however I think I will retire anyway as I have made enough profit too. I think HMRC don't like Accountants (well some) due to the arrogant nature they show. Read above.

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By Richard Cliff
13th Aug 2021 08:00

Maybe we ought to push for a legal aid system for accountancy. The government pay us and then they means test the clients to arrive at what the clients can afford. Just an idea to be put into the works!

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By Richard Cliff
13th Aug 2021 08:01

Maybe we ought to push for a legal aid system for accountancy. The government pay us and then they means test the clients to arrive at what the clients can afford. Just an idea to be put into the works!

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By bernard michael
13th Aug 2021 09:50

As my rental clients generally have the same income monthly and their expenses can usually be anticipated. I intend setting up a standard monthly spreadsheet from day 1 and just submit it quarterly until HMRC wake up to the nonsense MTD actually is

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By bluebaron
13th Aug 2021 10:01

I will be aiming to avoid MTDfIT altogether. However, I think for my self-assessment clients I would probably have been looking for around a doubling of their fees if I were getting involved in quarterly filing.

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By [email protected]
13th Aug 2021 10:09

I have enough trouble getting information once a year from my clients. I am dreading having to do it 5 times a year. Unfortunately it will almost quadruple my workload so I will have no alternative but to charge extra.
I am approaching retirement age and I think I will take this as my cue to bow out gracefully

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By lionofludesch
13th Aug 2021 10:12

Very wise.

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By lionofludesch
13th Aug 2021 10:13

Very wise.

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By fozia
13th Aug 2021 10:28

Depends! Quadrupling would be ideal - but this is unchartered territory so only time will tell. Most webinar polls I have seen suggest 10%-30% as a fee increase.

Yes we will be collating the information more often, so our four molehills will become the mountain we normally submit, however, the normal time taken will be divided in four only for the actual data entry time. What will be the nuisance and eventually determine if we got the pricing right, is the additional time taken to re-open that work (4 times a year), remind / chase / send queries to the client (4 times a year) as opposed to once. Most of the clients are micro in size and there is a fair deal of small talk, which used to happen once a year and now will have to be four times a year! So there will definitely be an increase in time spent as it is not all transactional work.

HMRC in a recent webinar said they would accept best estimates and allow corrections. If push comes to shove, you may want to keep things simple for landlord clients and submit the known recurring income and expenses on an excel sheet and submit quarterly (via bridging software) and do full / final year review + adjustments on the EOPS...

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By johnjenkins
13th Aug 2021 10:30

We have 132 clients under the £85K threshold and all are now on some sort of digital package. Most are on VT cashbook and yes problems galore. They will at some stage migrate to VT transaction+ which will be a one off per year cost. We do not intend to check any of the quarterly updates (frankly I don't give a monkeys what my clients put in) but will continue to do yearly accounts as we always do. My view is that the only thing that matters and determines my clients tax liability is the year end accounts. If HMRC want to play silly games they will soon realise nobody wants to play with them.
As for fees, we will charge, as normal, what we feel is right for the job (no complaints as yet).

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By Swabber
13th Aug 2021 10:31

Never be sad you are too young to retire - be sad if you are too skint to retire!!

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By Ammie
13th Aug 2021 10:54

This is a very interesting subject.

My fees will definitely increase, just not sure by how much. I anticipate that some will laugh and leave, others will work harder to do more and some will just pay.

Each client will be judged on their own merits and some will be charged more than others depending on how much of my time (and patience) they use up.

I will be leaning more towards sensibly computed estimated submissions followed by the detailed correct accounts. If the figures are fair I cannot see HMRC getting too excited.

How I will manage each submission will be more of a challenge and I will need to be more rigid with late comers and time wasters, who will need to step up or pay the penalty.

I will also need to fine tune my client base and focus on a lower number of better quality, better paying clients, otherwise I will struggle to find any down time for myself!

You're a long time dead in this world so a rewarding balanced approach needs to be addressed.

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Replying to Ammie:
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By johnjenkins
13th Aug 2021 11:08

Why worry about quarterly updates, when the only one that means anything is the 5th amendment. HMRC can't fine or penalise for submitting wrong updates (as yet). Let's face it we do not have the time to check every quarterly update, so why bother.
HMRC don't penalise the net values (not the actual VAT) on VAT returns if they are wrong, and how many are wrong? How many business put wages in net value? Do not make work for yourself when there is no need.

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By Ajtms
13th Aug 2021 11:08

I have advised my clients that they will have to keep spreadsheet records (using a template that I will provide) and then submit their own quarterly MTD reports. I have advised them that this is because it will be impossible for me to find the time to carry out quarterly data entry and MTD submissions whilst at the same time preparing accounts and tax returns for the previous tax year. Fees will have to increase to cover related advice and also to cover an almost certain increase in our software licence costs, but it is too early to say what these increases in fees will be. The quarterly returns as submitted by my clients will naturally then be total gobbledygook as the clients will key in all expenses, whether allowable or not, so capital expenses as well like a new car as they cannot be expected to know how it is done properly. Regardless of this, MTD reporting will always be inaccurate as it uses the cash basis rather than a more robust and accurate accruals basis which we always use at the year end.

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By K81
13th Aug 2021 11:34

most of my rental clients collect rent in cash & provide me with a rent book to copy plus an insurance certificate & receipts for any work done on premises in the year. We put this straight onto tax return no spreadsheets involved - most of my older clients don't have smart phones let alone computers/tablets. I am dreading this.

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By johnjenkins
13th Aug 2021 11:59

You should be able to get exemptions for your older clients.

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By K81
13th Aug 2021 12:06

one hopes so but I have read that as long as internet is available in the area no exemption will be granted just because of age plus a lot of my clients are late 60's so probably would not be qualified as "old"

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By johnjenkins
13th Aug 2021 12:54

Even if HMRC say no it's worth an appeal. The FTT might actual take notice of the problem and teach HMRC a lesson.

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By Rgab1947
13th Aug 2021 14:00

Over 60 not old?

Thank you for that. Feel better for that.

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By lionofludesch
13th Aug 2021 14:24

Rgab1947 wrote:

Over 60 not old?

Thank you for that. Feel better for that.

Some days I feel 40. Some days I feel like 90.

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Replying to lionofludesch:
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By Hugo Fair
13th Aug 2021 14:34

How do 40 and 90 feel about your ever-changing affections?

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By lionofludesch
13th Aug 2021 14:46

Hugo Fair wrote:

How do 40 and 90 feel about your ever-changing affections?

Arf arf.

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By lionofludesch
13th Aug 2021 14:46

Hugo Fair wrote:

How do 40 and 90 feel about your ever-changing affections?

Arf arf.

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By Hugo Fair
13th Aug 2021 15:06

Is that cockney for 50:50? ... well it is Friday afternoon!

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By Rgab1947
13th Aug 2021 13:59

What if I as an accountant am digitally excluded? Age, location whatever the rules say. Does that mean all my clients are automatically exempted?

Just asking.

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By johnjenkins
13th Aug 2021 14:02

Come on, as an Accountant you should know the answer to that.

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