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MTD ITSA

MTD ITSA impact on accountancy practices

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Taking an accountancy practice doing (say) 300 VAT returns each month, and having about 1,000 self-employed clients' tax returns to complete each year, between April and the following January, I wonder if HMRC have considered what impact MTD ITSA filing will have on practices post 6th April 2023?

The practice will still have 300 VAT clients, and yet have to file 1,000 tax returns within one month every quarter, plus one after the year end. Where VAT phasing is not aligned with the ITSA filing quarters, these accounts will need bringing up to date too, before filing the SA's .

The need for accounting personnel will 'spike' quarterly, as the practice tries to file 1,000 tax returns each quarter, which it previously filed once a year, over a 10 month period. 

I would be interested to know what thought others have had on this, and what HMRC's views on how this can be achieved?

Replies (89)

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By Paul Crowley
22nd Sep 2021 16:19

Unworkable as I have posted numerous times of late
One quarter being January

Quarterly returns also duplicated for various types of income

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Replying to Paul Crowley:
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By johnhemming
22nd Sep 2021 17:46

We are back in the same ding dong. What I would say is that the word "unworkable" is clearly not true as it is working for a very small number of taxpayers at the moment.

Doing everything in the January following the tax year won't work though.

Some accounting firms are promoting it
https://www.youtube.com/watch?v=5rmnILWRyn0

To be fair to Lewis Brownlee
https://www.lewisbrownlee.co.uk/

There is an opportunity for those firms of accountants that approach the change in a positive way to get more business.

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Replying to johnhemming:
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By GeoffBC
22nd Sep 2021 19:33

You are missing the point of my question, which is not about MYD, rather the resources an accountancy practices needs, in order to comeplete all tax returns in ONE month, rather than over 10 months.

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Replying to GeoffBC:
By petersaxton
22nd Sep 2021 19:47

Why don't you do the work in the THREE months before the one month you keep talking about?

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Replying to petersaxton:
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By GeoffBC
22nd Sep 2021 20:31

Supposing the first quarter being submitted for tax purposes is April to June. This tax return needs to be prepared to 30th June, and submitted by 31st July. A VAT return may have brought it up to a previous month end, but there will still be a period which needs to bring the accounts up to date first.

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Replying to GeoffBC:
By petersaxton
22nd Sep 2021 20:46

You can always align the VAT returns with the accounts.

I still fail to see any problem if you are keeping the accounts up to date on a regular basis. You just have to educate clients to a different way of working.

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Replying to petersaxton:
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By GeoffBC
22nd Sep 2021 20:57

The difficulty of aligning VAT with the ITSA reporting is that one would end up with 900 VAT returns do do in a single month, PLUS 1,000 tax returns to file. There would then be no work in the intervening two months…. A nightmare scenario in stuff planning!

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Replying to GeoffBC:
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By johnhemming
22nd Sep 2021 20:18

The point of my point was to highlight a different view from a different firm.

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Replying to johnhemming:
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By Jo Nokes
22nd Sep 2021 19:49

Unworkable for some or many accountants, not your small number of taxpayers. You’re looking at this from the opposing point of view

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Replying to Jo Nokes:
By petersaxton
22nd Sep 2021 20:41

Why is it unworkable?

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By ireallyshouldknowthisbut
22nd Sep 2021 16:30

HMRC simply don't care

Not their problem

The computer will do it, apparently.
or taxpayers

But if its taxpayer complaining, their accountant will do it.

Anyhow, dont care. lalalala fingers in the ears about sums up the response when its been put to them formally.

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Replying to ireallyshouldknowthisbut:
Tornado
By Tornado
22nd Sep 2021 17:33

"HMRC simply don't care"

I don't care much about MTD either!

"Not their problem"

That may be what they think, but in fact it is entirely THEIR problem to make MTD work, not ours.

"But if its taxpayer complaining, their accountant will do it."

No they won't!

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By bluebaron
22nd Sep 2021 16:40

It's a nightmare. I refuse to get involved in it, and accept a drop in income as the lesser of two evils, compared to the stress that MTD ITSA would bring on. I'm getting more convinced that it will blow up in HMRC's face, and there will be mass non-compliance (unrepresented tax-payers for starters).

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By petersaxton
22nd Sep 2021 16:48

"The need for accounting personnel will 'spike' quarterly, as the practice tries to file 1,000 tax returns each quarter, which it previously filed once a year, over a 10 month period."

Why would there be a quarterly spike? The quarterly spike will not happen because it doesnt take long to submit the quarterly return. The time should be taken up ensuring coding is done daily or weekly throughout the quarter.

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Replying to petersaxton:
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By David Ex
22nd Sep 2021 17:38

petersaxton wrote:

The time should be taken up ensuring coding is done daily or weekly throughout the quarter.

I wonder how many (or what proportion of) small businesses look at their accounting on a daily basis - or, indeed, weekly.

Anything is possible if you chuck enough time and resource at it. Alternatively, we could all spend the same time and resources doing something productive.

Show me the massive benefits to anyone of MTD for IT and I’ll be behind it like a shot.

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Replying to David Ex:
By petersaxton
22nd Sep 2021 17:47

"I wonder how many (or what proportion of) small businesses look at their accounting on a daily basis - or, indeed, weekly."

When MTD for ITSA comes in they would be crazy not to.

"Show me the massive benefits to anyone of MTD for IT and I’ll be behind it like a shot."

If they extend it to HMRC being able to look at the bookkeeping then HMRC will be able to carry out compliance checks efficiently.

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Replying to petersaxton:
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By David Ex
22nd Sep 2021 18:31

petersaxton wrote:

When MTD for ITSA comes in they would be crazy not to.

Right so I’ll now spend time I was doing something productive to doing daily accounting. That’ll boost the economy.

petersaxton wrote:

If they extend it to HMRC being able to look at the bookkeeping then HMRC will be able to carry out compliance checks efficiently.

That’s not a “massive benefit” even if you think it’s true. The House of Lords committee didn’t believe it and neither do I!

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Replying to David Ex:
By petersaxton
22nd Sep 2021 19:21

"Right so I’ll now spend time I was doing something productive to doing daily accounting. That’ll boost the economy."

I dont think you understand. It's got to be done sooner or later.

By April you will have done the vast majority of the work under the new system but if you keep to your way of working you wouldnt even have started.

"The House of Lords committee didn’t believe it and neither do I!"

Have you got a link to that? I'd love to read it.

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Replying to petersaxton:
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By David Ex
23rd Sep 2021 12:14

petersaxton wrote:

I dont think you understand. It's got to be done sooner or later.

I understand that picking up and putting down a job 5 times a year costs more and takes more time than doing it once a year.

petersaxton wrote:

Have you got a link to that? I'd love to read it.

Not sure how many reports the HoL committee did. This is maybe not the last.

And it seems to relate to VAT. I have a great link somewhere more on the MTD IT but this gives a flavour.

https://publications.parliament.uk/pa/ld201719/ldselect/ldeconaf/229/229...

“ we remain unconvinced that MTD will reduce error and thereby the tax gap. If Making Tax Digital does not deliver the additional tax yield HMRC expects, the argument for mandating Making Tax Digital for VAT in April 2019 is much diminished.”

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Replying to David Ex:
By petersaxton
23rd Sep 2021 12:40

"I understand that picking up and putting down a job 5 times a year costs more and takes more time than doing it once a year."

Where do you get 5 times a year from? If you are going to do the job after the end of a quarter you will be in trouble. You need to do the work daily, weekly or monthly. You log into the software when you start work and code the different transactions. You may have to attach PDFs of documents or even scan documents. You dont have to do all the work yourself. Your clients should be able to scan documents for you. You could have junior staff scanning, attaching PDFs and coding. Forget the old ways of sometime after March and before January picking up the records and doing all the work over a few of hours or a couple of days. You might want everything to stay the same but that isn't an option.

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Replying to petersaxton:
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By AdamMurphy
22nd Sep 2021 21:11

petersaxton wrote:

"I wonder how many (or what proportion of) small businesses look at their accounting on a daily basis - or, indeed, weekly."

When MTD for ITSA comes in they would be crazy not to.

"Show me the massive benefits to anyone of MTD for IT and I’ll be behind it like a shot."

If they extend it to HMRC being able to look at the bookkeeping then HMRC will be able to carry out compliance checks efficiently.

Oh well, let's all change just to make HMRCs life easier.

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Replying to petersaxton:
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By GeoffBC
22nd Sep 2021 19:38

Submitting 1,000 SE tax returns in one month, rather than over 10 months is bound to create a spike in staffing requirements. If these tax returns also have to be approved by clients, it promises to be a nightmare.

In our industry, clients only consider accounting data quarterly, for VAT submissions. A complete sea change of attitude won’t happen.

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Replying to GeoffBC:
By petersaxton
22nd Sep 2021 19:45

"Submitting 1,000 SE tax returns in one month, rather than over 10 months is bound to create a spike in staffing requirements. "

When you do tax returns over 10 months you do all the work required.

When you do the quarterly returns you have four months to do the work. The submission is simply that. Pressing a button.

You either have got your logic totally wrong or you dont understand what is needed. You dont have to start the work in the month before the deadline.

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Replying to petersaxton:
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By cbp99
23rd Sep 2021 11:41

[quote=petersaxton]

When you do the quarterly returns you have four months to do the work. The submission is simply that. Pressing a button.

Peter - I take it you dont obtain/intend to obtain client approval for the quarterly submissions?

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Replying to cbp99:
By petersaxton
23rd Sep 2021 12:18

"Peter - I take it you dont obtain/intend to obtain client approval for the quarterly submissions?"

I wont. I consider that only returns that result in a liability need the client's approval.

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Replying to petersaxton:
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By cbp99
23rd Sep 2021 12:26

Thanks for your reply Peter

That seems ok while no penalty can arise for errors and omissions in quarterly submissions. However it seems to me that the rationale for quarterly submissions disappears if accuracy is not a requirement. (I mean accuracy of transactions, not the more refined accuracy of accruals-based accounts.)

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Replying to cbp99:
By petersaxton
23rd Sep 2021 12:44

We all know that correcting errors can take more time than getting it right first time. Accountants will have to be realistic about what their clients are capable of doing properly. Having said that, changing the coding for isolated transactions or using "find and recode" doesnt take long.

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Replying to petersaxton:
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By cbp99
23rd Sep 2021 13:13

But that misses my point, which is that the quarterly information sent to HMRC is no use to them, because a) there is no requirement for accuracy, and b) HMRC won't know which submissions are accurate, and which not.
The supposed rationale for MTD is to reduce inaccuracies, but HMRC are in effect acknowledging the necessary trade-off between frequency and accuracy of reporting, and allowing inaccuracy to be a feature of the system, which is only rectified by the annual submission.
HMRC will only be able to rely on the accuracy of year-end submissions, same as now. The difference will be that instead of beginning with a clean slate, many year-end submissions will have four inaccurate quarterly submissions as their starting point.

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Replying to cbp99:
By petersaxton
23rd Sep 2021 13:38

This is why I am saying that HMRC is talking rubbish.
If there wasn't quarterly returns then clients would act the same as now and many would leave doing any work as late as possible. I'll be making sure that the quarterly returns are accurate. If clients dont give me sufficient information I wont submit the quarterly returns until I have the information.

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Replying to petersaxton:
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By cbp99
23rd Sep 2021 14:31

So you will allow your clients to suffer late submission penalties even though these could be avoided by submitting - legally - incomplete returns?

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Replying to cbp99:
By petersaxton
23rd Sep 2021 16:57

I'll have a discussion with my clients. If they really do want to not give me information for four quarter's returns and then expect me to do all the work I will tell them to look for another accountant. I have never had a client with accounting software to not do any bookkeeping for the year. Are you sure that HMRC have said they are happy to receive returns with no information and not give penalties.
Why are you against doing proper work?

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Replying to petersaxton:
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By cbp99
23rd Sep 2021 17:26

Peter, you have no reason to infer that I am "against doing proper work". However, when, for one or more of many possible legitimate reasons some information is unavailable at the relatively short notice required for quarterly submissions, I would not refrain from submitting a quarterly submission on time, and thereby push my client into the new points-based penalty regime.

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Replying to cbp99:
By petersaxton
23rd Sep 2021 17:56

I would be quite happy to submit quarterly returns if clients were doing their best but why would anybody not be providing information. The last I read was that HMRC would be happy to accept revenue entries and you could enter expenses later. If 90% of my clients were giving me their information and 10% were not I would be concentrating on the 90%.

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Replying to petersaxton:
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By cbp99
24th Sep 2021 08:26

Good, it seems we are agreed that there are *some* circumstances in which we would submit quarterly returns without every "t" being crossed and every "i" dotted. That seems a good place to leave it. Thanks for engaging.

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By David Ex
22nd Sep 2021 17:03

GeoffBC wrote:

I wonder if HMRC have considered what impact MTD ITSA filing will have on practices post 6th April 2023?

Doesn’t appear so. Or indeed the impact on unrepresented taxpayers. What if you have a month’s holiday starting at a quarter end, for example??

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Replying to David Ex:
By petersaxton
22nd Sep 2021 17:39

"What if you have a month’s holiday starting at a quarter end, for example??"

I would recommend not having a month's holiday when you need to submit a quarterly return but if you insist on having one then make sure you don't have too many other late returns in the 12 months before or after.

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Replying to petersaxton:
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By David Ex
22nd Sep 2021 18:58

petersaxton wrote:

I would recommend not having a month's holiday when you need to submit a quarterly return but if you insist on having one then make sure you don't have too many other late returns in the 12 months before or after.

So I can’t take my holidays when I want to now then because of my MTD obligations? That’s a sensible and proportionate tax reporting system - not.

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Replying to David Ex:
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By GeoffBC
22nd Sep 2021 19:42

I am sure you can bring your accounting records up to date prior to your holiday. You should have sufficient time on your return from holiday to catch up. I haven’t seen any guidance on how ‘current’ each quarterly tax return must be. I am sure costs entered later shouldn’t be a problem. I am sure there will be HMRC guidance to follow on this point.

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Replying to GeoffBC:
By petersaxton
22nd Sep 2021 19:53

I saw some statement in a Q&A that you only need to enter revenue each quarter. Sounds crazy to me. But it does mean that if client is prepare invoices on cloud accounting software you would only need to go in and submit while on your holiday - or train your client to submit.

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Replying to GeoffBC:
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By David Ex
22nd Sep 2021 19:56

GeoffBC wrote:

I am sure you can bring your accounting records up to date prior to your holiday. You should have sufficient time on your return from holiday to catch up.

Indeed, as I said, you can do almost anything if you drop all other priorities and have the resources. In the run up to a holiday, maybe I’m making sure that business needs will be met in my absence. But no, stuff the business, I’ll do some work on the numbers for HMRC.

GeoffBC wrote:

I haven’t seen any guidance on how ‘current’ each quarterly tax return must be. I am sure costs entered later shouldn’t be a problem. I am sure there will be HMRC guidance to follow on this point.

And it always amuses me then when a first line of defence for MTD for IT is, and I paraphrase, “Never mind, it doesn’t really matter what you submit”! Aargh!

Said before on various of these threads, give me an objectively credible account of the proportionate (to the taxpayer cost and effort) benefits that MTD will bring - to anyone - and I’ll be signed up tomorrow.

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Replying to David Ex:
By petersaxton
23rd Sep 2021 13:47

If you dont have time to do the quarterly returns then get somebody who can do them to do them.
If you want to take a holiday long enough to ensure it's impossible to do the work why are you blaming HMRC instead of yourself?
If I have a client's monthly payroll to do in the first five days of the next month and I choose to go on holiday on those days, who's fault is it?:
A client - for having a monthly payroll
B HMRC - for setting deadlines, or
C accountant - for choosing to have a holiday when work needs to be done when they could have had the holiday the previous month or after the 5th or refusing to ask another accountant to do the work.

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By SXGuy
22nd Sep 2021 17:44

I thought I had it bad with 200 SAs and 10 vats.

My advice is, either scale up or cut back. Either way there's likely to be extra fees involved.

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Replying to SXGuy:
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By GeoffBC
22nd Sep 2021 19:43

We are in the same boat…

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By AdamMurphy
22nd Sep 2021 18:47

Is it that time of the week again?

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Replying to AdamMurphy:
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By David Ex
22nd Sep 2021 19:58

AdamMurphy wrote:

Is it that time of the week again?

Just like MTD obligations will be - coming round with monotonous regularity.

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By Hugo Fair
22nd Sep 2021 20:51

Same old, same old ... it's groundhog day.
John 'it works for my users' Hemming and Peter 'do it daily' Saxton take up positions to ward off the attacks from (nearly) everyone else.

The reality appears to me to be that MTD for ITSA involves two things:
* quarterly submissions of extracts from books (not accounts); and
* annual submission of final accounts (as before).
What seems to be missing is any shared understanding (by HMRC and accountants) of how the book-keeping exercise and accounts are related - either as data (digital or otherwise) or as processes (pre- and post-submission).

If these twin routes remain divorced (which of course is not what HMRC either want or expect but is the reality currently envisaged by many accountants) then the whole set of objectives will fail to be met ... which would be a shame given the blood likely to be spilt along the way.

There are several (not mutually exclusive) potentially preventative solutions - from provision of integrated book-keeping & accountancy services (only truly effective if taxpayers are prepared to pay for increased resources allocated) ... to common data formats across both sets of products and across competitors allowing specialists to perform new hybrid roles (better for taxpayers but a lot of investment by developers along with a change of mind-set) ... and no doubt other options.
BUT the common factor is that none of these can be up-and-running within the scheduled implementation dates - and vested interests continue to stand in the way.

Zzzzzzzzzzzz .. what? Was I talking in my sleep again?

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Replying to Hugo Fair:
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By AdamMurphy
22nd Sep 2021 21:06

Exactly this. It's worse than the repetitive furlough posts we got.

Talking of which I've just submitted my last furlough claim, cue Happy Feet dance.

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Replying to Hugo Fair:
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By johnhemming
22nd Sep 2021 21:18

Hugo Fair wrote:

Zzzzzzzzzzzz .. what? Was I talking in my sleep again?


I don't really know. Tonight I am experimenting with Pernod. It worked very well last night. Whether I have over indulged or not remains to be seen.

However, as I am currently souping up my metabolism the effect of Pernod is quite welcome.

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Replying to Hugo Fair:
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By GeoffBC
22nd Sep 2021 22:13

You have totally missed the point of my post. Yes, everything is digitally connected. Accounting and tax merged harmoniously merged in software that communicates and links up.

Someone still has to check it, and press the button. For 1,000 clients, this is a lot of work.

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Replying to Hugo Fair:
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By GeoffBC
22nd Sep 2021 22:13

You have totally missed the point of my post. Yes, everything is digitally connected. Accounting and tax merged harmoniously merged in software that communicates and links up.

Someone still has to check it, and press the button. For 1,000 clients, this is a lot of work.

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