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MTD ITSA notices

The legislation has landed...

Didn't find your answer?

Here's the draft legislation for our old friend Making Tax Digital for income tax self assessment:

https://www.gov.uk/government/consultations/tertiary-legislation-for-mak...

Initial thoughts anyone? *edit: we'll be following this with updates on the site once we've processed/dissected it*

Follow our updates on today's events via the link below:
https://www.accountingweb.co.uk/tax/hmrc-policy/mtd-itsa-legislation-hmr...

Replies (23)

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ghm
By TaxTeddy
04th Jul 2022 09:49

So a three line entry for anyone below the VAT registration threshold. Mind you, probably doesn't alter the work behind the three figures.

And a three line report puts to bed any notion that HMRC will perform any sort of analysis or interrogation of the numbers

Thanks (5)
Replying to TaxTeddy:
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By David Ex
04th Jul 2022 11:22

TaxTeddy wrote:

So a three line entry for anyone below the VAT registration threshold. Mind you, probably doesn't alter the work behind the three figures.

And a three line report puts to bed any notion that HMRC will perform any sort of analysis or interrogation of the numbers

Quite an achievement for them to make a shockingly bad idea even more pointless.

If it’s 3 numbers a quarter, why not allow these to be input directly rather than requiring taxpayers to buy software?

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Replying to David Ex:
ghm
By TaxTeddy
04th Jul 2022 11:32

Agreed. Confirms whet we thought from day one.

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By ireallyshouldknowthisbut
04th Jul 2022 09:50

Pretty much as expected, its just been lifted from the current tax return.

2 line accounts are viable for the vast majority of the sole trader/landlord tax payers by volume (it must be 90%+ of them), which of course makes a mockery of the whole thing as you can 'bucket account' money in/money out and let the accountant sort it out at year end and still be vaguely compliant so long as you mashed your numbers through some software and hit 'send' once a quarter which is about all many people will do. If that much.

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By Paul Crowley
04th Jul 2022 10:11

What a relief that the quarterly account is just so meaningless as to be pointless.
Confirms my thoughts that any vague estimate will be OK

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By rmillaree
04th Jul 2022 10:14

Does that mean that for rental income hmrc are expecting peeps to treat "residential finance costs" as a bog standard "alowable rental expense" on the 3 monthly filing ?

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Replying to rmillaree:
By ireallyshouldknowthisbut
04th Jul 2022 10:25

one of 1001 things HMRC's MTD computer nerds wont have thought of, and then have to do a "ah, I didn't realise this mattered for tax if you are higher rate"

The reality is of course you can put on any old rubbish you like as the figures are all corrected at the year end anyhow.

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Replying to rmillaree:
Tom Herbert
By Tom Herbert
04th Jul 2022 12:34

It's a point that at least one tax/accountancy body is raising as part of the consultation, but sources indicate you can record the total finance cost in the quarterly update, as there is no need to make tax adjustments there. You can then just disallow this and add the tax reducer in as part of the EOPS. You can choose to make tax adjustments in the quarterly updates, but there is no requirement to do so.

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By snickersinatwix
04th Jul 2022 10:22

When they are still taking a year to reply to letters in the Corporation Tax and VAT departments, it is a disgrace that they are even thinking of adding to our burdens like this. They are away with the fairies.

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By NotAnAccountant2
04th Jul 2022 11:21

"Functional compatible software must comply with the following condition: once a digital record has been entered into a software program that forms part of the functional compatible software, any transfer, recapture, or modification of that digital record within the functional compatible software must happen digitally and not manually."

Can anyone translate that?

Any transfer - that makes sense, you cannot type it into a second bit of software.

Any recapture - I guess this means that you can't capture it into two different pieces of software but the second piece of software has to be populated from the first. But I guess it also means that if an invoice has been scanned incorrectly you cannot rescan it and see if it gets it right next time but have to modify it.

Any modification - what does this mean? What if the data is wrong? How do you update wrong data "programmatically"? How does the software know it's wrong. Does it mean you have to keep the original data and any corrections have to be a delta to the original data?

And also, does this mean that the entire workflow is driven from the initial capture? So you accountants are going to have to start with your client's data. You're going to have to update it "programmatically", you cannot rescan/re-input their invoices - so you're going to have to match up each record they have to each invoice, add what's missing etc, make sense of their corrections, you're going to have to correct their data...?

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Replying to NotAnAccountant2:
Tornado
By Tornado
04th Jul 2022 11:45

So many questions and no answers !

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Replying to NotAnAccountant2:
By ireallyshouldknowthisbut
04th Jul 2022 12:14

The real question is: at what point is HMRC going to have the resources to check all this nonsense?

And even if they do, why would they care so long as the tax is right?

Thanks (3)
Replying to ireallyshouldknowthisbut:
Tornado
By Tornado
04th Jul 2022 12:39

"And even if they do, why would they care so long as the tax is right?"

The point here is that whilst those of us that work in the Industry generally get the tax right, MTD creates a situation where millions of people may not get it right and as a Taxpayer myself, I am becoming more and more concerned about HMRC messing up the tax system big time which I and others will have to pay for.

I think the tine has come to seriously knock MTD on the head before will fall into the abyss whilst there is still a chance.

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Replying to NotAnAccountant2:
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By Hugo Fair
05th Jul 2022 09:31

Picking up from the same extract with which your post opens ... and similarly having trouble trying to unpack its meaning in practice, when I had a thought:

Could someone (you?) knock-up a simple add-on with the following capability:
1. Tell it which value in your 'compatible software' you no longer like; then
2. Type the value you prefer direct into your add-on; and
3. Hit the 'update' button.

Lo and behold ... the overarching legislative mandation has been met, but you can hand-edit (at one remove) any previously captured (or even submitted) value?

Thanks (1)
Replying to Hugo Fair:
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By NotAnAccountant2
05th Jul 2022 12:09

Hugo Fair wrote:

Picking up from the same extract with which your post opens ... and similarly having trouble trying to unpack its meaning in practice, when I had a thought:

Could someone (you?) knock-up a simple add-on with the following capability:
1. Tell it which value in your 'compatible software' you no longer like; then
2. Type the value you prefer direct into your add-on; and
3. Hit the 'update' button.

Lo and behold ... the overarching legislative mandation has been met, but you can hand-edit (at one remove) any previously captured (or even submitted) value?

I don't think this should be hard to do. But I think the MTD quarterly submissions should link back to the source records, so I think you have to update the source somehow...

"I don't like that value in my spreadsheet" so write a macro that does (I forget the exact syntax off the top of my head)
Sheets["MTD"].getCellByReference("B7").Value = 13;

And then run the macro. Hey, presto, value updated and untouched by human hands.

Finally hit the "resubmit quarters" button which gets the current data from HMRC, and if it's changed in the spreadsheet, submits the corrected value.

For genericity have a "update cell" sheet where you enter the cell you want to change in box A1, the value you want it to have in A2 and a button in A3 called "do it"

What I _think_ HMRC want is an audit trail for every edit. That pretty much rules out spreadsheet based solutions. It's theoretically possible to do...

Thanks (1)
Replying to NotAnAccountant2:
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By Hugo Fair
05th Jul 2022 12:44

Your second last para ("For genericity ..") is indeed exactly what I envisaged ... although the 'add-on' doesn't have to be restricted to spreadsheets (they're just simpler to work with because most users understand the concept of a 'cell ref').

But a true add-on can be made to work with any specific 3rd-party product using the native data dictionary (or whatever it's now called - my days of system design pre-dating APIs).

It's certainly NOT what HMRC want ... but, if after all this time, these draft regs are the closest they've got to defining the 'rules' then some entrepreneurial spirit will come up with legal work=arounds (possibly like this one)?

Thanks (1)
Replying to Hugo Fair:
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By NotAnAccountant2
05th Jul 2022 19:12

I'm missing something or this won't be possible in general.

If you have a cloud based app then the only way to modify data will be via the app. Clearly the app will have to deal with modifying bad data without human intervention.

I'm more than a little bit worried about the datamining of peoples tax information that will go on. So far I've not seen anything at all about what sort of privacy of data taxpayers are entitled to expect.
This is possibly going to be some of the most valuable data for both legitimate businesses wanting to target advertising, and criminals wanting to defraud.

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Tornado
By Tornado
04th Jul 2022 11:48

Apart from the clarification of Retail Sales income, are all other transactions listed based on Receipts and Payments (Cash Accounting) or Income & Expenditure (Prepayments, Debtors, Accruals and Creditors).

It does not seem to be clear, or perhaps it does not matter. HMRC have consistently ignored Accounting Standards so perhaps we should too.

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By Paul Crowley
04th Jul 2022 11:59

Who writes this stuff
Full accounts quarterly are ordinary accounts showing depreciation
Quarterly tax comps complete BS
Capital allowances come after the year end
Cash basis accounts and vans?
Where does the van go?

So glad they told me where the fax goes
But good news, business entertaining is now allowable with advertising

Thanks (2)
Replying to Paul Crowley:
Tornado
By Tornado
04th Jul 2022 12:13

It is unbelievable!

They are getting rid of the excellent Self-Assessment system that works extremely well and replacing it with what is possibly the WORST tax administration system in the World. A system that will create nothing but widespread chaos and confusion and is so full of holes that fraud will be widespread and no one person will understand it all.

We already have the second longest Tax Code in the World at over 22,000 pages, what clown thought it would be a good idea to add to it.

It is unbelievable!

PS Vans will probably be treated by some as an expense in the Profit & Loss Account (including VAT that has probably been claimed as well) and then there is an Annual Investment Allowance equal to the cost of the van to claim and there is then the writing down allowance to claim as well. Easy really.

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Replying to Tornado:
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By David Ex
04th Jul 2022 12:12

Tornado wrote:

It is unbelievable!

Well, not when you see the bunch of clowns we elect as MPs.

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Replying to Tornado:
By ireallyshouldknowthisbut
04th Jul 2022 12:29

Tornado wrote:

It is unbelievable!

They are getting rid of the excellent Self-Assessment system that works extremely well and replacing it with what is possibly the WORST tax administration system in the World. A system that will create nothing but widespread chaos and confusion and is so full of holes that fraud will be widespread and no one person will understand it all.

Quite. The current system has some significant flaws, all of which could be fixed. Eg The farce around Class 2 NI, the 'double reporting' of some overseas income. But the bottom line is is works and is (reasonably) well understood. I don't see how the new system is in any way more efficient for HMRC or the tax payer. If the new system aint demonstratively better, why go through he enormous pain of adoption for what seems like nothing more than dogma.

This project is going to end up a scandal once it hits tax payers suddenly unable to file and tax receipts going begging.

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me
By Will Cole
04th Jul 2022 12:57

Afternoon folks!

The AccountingWEB team will be keeping a close eye on today's events on the topic over on our live feed so keep an eye out for updates via the link below:

https://www.accountingweb.co.uk/tax/hmrc-policy/mtd-itsa-legislation-hmr...

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