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MTD ITSA regulations laid

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By David Ex
23rd Sep 2021 14:48

johnhemming wrote:

https://www.legislation.gov.uk/uksi/2021/1076/contents/made

I hadn’t looked to see if there was a draft of this published previously but at least this is now something concrete to study.

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By AdamMurphy
23rd Sep 2021 14:50

Until "delayed" again

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By NotAnAccountant2
23rd Sep 2021 15:15

You can make a "calendar quarters" election.

https://www.legislation.gov.uk/uksi/2021/1076/regulation/7/made

It looks like if you make that election you'll get 5 extra days as I cannot see the deadline changing.

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By NotAnAccountant2
23rd Sep 2021 15:58

https://www.legislation.gov.uk/uksi/2021/1076/regulation/17/made

One for the accountants to answer:

Does this mean that you'd be advised to let your clients do the quarterly submissions on their own with no input from you at all and you only look at what they've done after the Q4 submission is done?

Otherwise, as I read it, if you spot something wrong it has to be corrected on or by the time the next submission is made. There's no waiting until the eops to fix it.

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Replying to NotAnAccountant2:
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By Jo Nokes
23rd Sep 2021 17:34

According to the TaxCalc blog, your quarterly updates have to be filed on the same basis as the end of year accounting, so that means accruals etc need to be included, unless you are content to use the cash basis (end of traditional methods) So much for filing a bank feed blind (by the client). And unless you elect for the calendar year option, I imagine you still have to file for quarters ending on 5th July, 5th October etc. Oh, and you can file before the deadline, up to 10 days, so you can go on holiday (but only if you don't expect any more entries to fall before the period end). Clearly, HMRC expect all this to be done by the trader, not the agent.

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Replying to Jo Nokes:
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By NotAnAccountant2
24th Sep 2021 04:26

https://www.legislation.gov.uk/uksi/2021/1076/regulation/6/made

(b) says that the digital records must include the date according to the basis used.

It's something for a lawyer but I cannot see anywhere that says you cannot also have 'bank date' and use that date for the quarterly reporting.

So it might be possible to use cash accounting for the quarterly dates. (although that feels to me like abusing a loophole)

Although it's minor, I cannot see who 'wins' where jointly owned property needs calendar and actual quarters. Accruals wins over cash. If one owner uses accruals, all must.

I also think there might be a loophole where flipping properties between husband and wife might keep them out of MTD by ensuring each of them owns zero properties for at least one day every two years and 'ceases' to have a property business so then restarts MTD in Y3

(incidentally, this 'join MTD in Y3' does resolve my earlier query about a property business stopping and a new one starting. Because you don't join MTD until Y3 a taxpayer can never have two property businesses for MTD purposes in the same year so the fact that the API doesn't let you distinguish them doesn't matter)

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By Paul D Utherone
23rd Sep 2021 16:10

Come on Premium Bonds...do your thing and get me out of this for good!!!

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By Hugo Fair
23rd Sep 2021 21:18

OK John, thanks but it's a hefty read - which I'll be attempting in chunks.

Tonight's attempt has raised basic queries to which you may know the answers?

3.—(1) A relevant person must use functional compatible software to comply with the following requirements (“the digital requirements”)—[lists all 4 requirements].
This doesn't seem to suggest, let alone mandate, that the same software is used to meet all 4 of those requirements ... so does that mean that different software can be used so long as (to use an old IT term) they are interoperable?
Presumably that's why bridging software is allowed?

3.—(3) “Functional compatible software” means a software program or set of compatible software programs which comply with conditions set out in a software notice, where such notice has been made, and the functions of which include—
(c) receiving information from HMRC using the API platform in relation to a relevant person’s compliance with obligations under these Regulations.
So it's not just a requirement to record & preserve digital records and to report on them via the quarterly & annual submissions ... you must be able to receive data from HMRC.
Is it the relative paucity of working exemplars of these data feeds that lies behind today's announcement of delays (i.e. HMRC have fallen behind schedule)?

4.—(1) Where a relevant person is carrying on a business immediately before 6th April 2023 the digital start date that applies to that business is 6th April 2024.
But later subsections state things like "In any other case, the digital start date that applies to the business is 6th April in Year 3, where Year 1 is the year of assessment to which the return relates."
It doesn't matter how many times I read that ... I end up none the wiser as to what it means. Can you explain the terms Year 1 and Year 3 in that sentence?

5.—(2) A relevant person must record a digital record by no later than—
(a) the quarterly deadline for the quarterly period in which the digital record falls.
So finding any item that was not recorded digitally 'in time' (and therefore failed to be reported in the relevant return) creates a catch-22 ... whereby you need to record it in order to update your return, but aren't allowed to do so?

6.—(1) Subject to paragraph (3), “digital records” for a business means records of each of the transactions made in the course of the business, including—
(a) the amounts of the transactions;
(b) the dates of the transactions, according to the basis used by the relevant person for recording transactions for the purposes of income tax; and
(c) the categories of transactions into which the transactions fall, to the extent those categories are specified.
This raises the first two truly major questions:
A. If the transaction dates are "according to the basis used", then how do bank feeds assist (rather than get in the way of) anyone not using the cash basis?
B. What are the other categories?/where is this specified?/how often will they change?

I will leave Quarterly Updates and End of Period Statements for another day - and Corrections & Omissions + Exemptions etc for another week - but would really be interested in your views/explanations of any of the above.

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Replying to Hugo Fair:
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By Jo Nokes
23rd Sep 2021 22:12

I’d like to know if one is expected to report up to the 5th of the month, and whether it has to be for the calendar quarters

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Replying to Jo Nokes:
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By NotAnAccountant2
24th Sep 2021 06:40

Jo Nokes wrote:

I’d like to know if one is expected to report up to the 5th of the month, and whether it has to be for the calendar quarters

You can elect to use calendar quarters.
https://www.legislation.gov.uk/uksi/2021/1076/regulation/7/made

(6) (7) (8) (and (9) for the special case where this is the first year of MTD for the business)

If you don't elect then the accounts need to be made up to 5th of the month, otherwise it's regular calendar quarters from 1st April.

Minor point but it doesn't say what happens for jointly owned property where you might have two record keepers involved who might want to use different dates. For the cash or accruals question it's "accruals if one person uses accruals"

I think you get five extra days to report too if you use calendar quarters as I think the deadline stays as 5th of the following month.

(absent a "winner takes all" rule like for cash vs accruals, I think your professional bodies ought to have a de-facto standard and ought to decide it soon so that everybody starts on the same page)

There is a rare, but possible problem corner case. Person A is using calendar quarters with accruals, Person B is using actual quarters with cash basis. Post MTD go live A and B acquire a jointly owned property to introduce into their respective businesses. A and B are committed to using different quarters and accruals methods for their quarterly submissions. AIUI currently the cash vs accruals question is resolved by the cash person changing to use accruals for the year when they do their SA.

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Replying to Jo Nokes:
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By johnhemming
24th Sep 2021 06:47

I think this is a choice for the taxpayer.

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Replying to Hugo Fair:
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By johnhemming
24th Sep 2021 06:44

You may know that I have a lot of practical experience with Statutory Instruments and their passing. I have also written all of the MTD ITSA interfaces myself. Hence I know that reasonably well.

I, however, only get the standard briefing for developers (and agents) from HMRC and don't have any more detailed knowledge.

Hence I will have a stab at answering your questions, but don't claim any special knowledge beyond the above:

>so does that mean that different software can be used so long as (to use an old IT
>term) they are interoperable?
I think this will always be necessary. I don't think they can sensibly require that you have only one bit of code that does not link to another bit of code. They can require digital links and AFAICS that is the same as VAT.

I think Bridging is harder for ITSA because there are so many different figures including private usage disallowed expenditure. I have written the bridging interface, but I think people will tend to prefer to use my cashbook because of the complexities of bridging.

Superficially reading the SI It does not seem to deal with the issues of submitting data other than the income and expenditure. It may be that this does not require an SI anyway and that would not surprise me, but there are lots of other figures that can be submitted where taxpayers have a wide range of income.

>it's not just a requirement to record & preserve digital records and to report on
>them via the quarterly & annual submissions ... you must be able to receive data
>from HMRC.
Its not really that significant as a point. At stages in the process the taxpayer agrees the tax calculation and/or the figures for income and expenditure. However, inherently any software will always communicate both ways. I am not sure why this is in the SI, but I don't see it as significant anyway.

I can demonstrate the data feeds if you wish using the sandbox system. I have no objection to doing a zoom call demonstrating how HMRC's API works, but I am not doing recorded videos at the moment because my fan is too noisy.

>It doesn't matter how many times I read that ... I end up none the wiser as to
>what it means. Can you explain the terms Year 1 and Year 3 in that sentence?

I think what it means is that if people start up a new business after 6th April 2023 they don't have to use MTD to submit data in the first year of MTD ITSA.

I think it is a bit garbled, however and may be subject to a revised wording. I know there are restraints on joining the pilot scheme for new businesses because one of my clients was refused by the pilot scheme for that reason. I have looked at the TIIN and there is nothing there I can spot quickly about this, but as I said I know there is an issue.

I once spotted a drafting error in primary legislation where it was drafted to say the opposite of what was intended. I raised this with the minister and was told I was wrong only to see them fix the error at a later stage. I think it relates to new self employments. (but possibly not new property businesses) This is all a bit of a guess, however.

>So finding any item that was not recorded digitally 'in time' (and therefore
>failed to be reported in the relevant return) creates a catch-22 ... whereby you
>need to record it in order to update your return, but aren't allowed to do so?
That looks like another drafting error. SIs are subject to judicial review and I think this would fail under the Wednesbury Reasonableness test.

I think what they mean to say is that if you notice a mistake you should fix it either before putting any more submissions in or at the same time as.

>A. If the transaction dates are "according to the basis used", then how do bank >feeds assist (rather than get in the way of) anyone not using the cash basis?
This is the issue really that relates to the ability to put the periodic submissions in on a cash basis, but do business summary adjustments on an accruals basis. This is a complex technical point that really does need sorting out and probably was not taken into account on the drafting. I would happily work with the accounting bodies on lobbying to make sure this is possible.

>B. What are the other categories?/where is this specified?/how often will they
change?
These are specified in the API. They are much the same as the boxes on the SA1nn forms. Such as CIS payments, stock,admin, finance etc etc.

These have changed over time in the past and I would think although they would be primarily static they could change.

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Replying to johnhemming:
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By Hugo Fair
24th Sep 2021 12:17

Thanks, John ... you certainly get up earlier than me. And don't worry I won't be quoting you as the final arbiter, but it is useful to try exploring these queries.

---
I agree that true MTD interoperability is but a pipe-dream, but wonder if policy-makers realise that it's not uncommon for book-keeping and accounting to be performed in different software by different people ... which is where the 'digital record untouched by human hand' concept starts to look fragile.
Accountant finds error - tells book-keeper to make correction (which must be reported to HMRC and then also to accountant) - accountant can now proceed, until finding of next error!
This concept of correcting 'errors at source' (not locally within a file about to be submitted) is both obviously necessary and yet almost impossible to enforce on the client - especially when a deadline is in the offing.
[I speak with years of experience ~ not restricted to HMRC submissions].

---
I don't agree with your claim "inherently any software will always communicate both ways." It might be true to say it should - and often it's a mystery as to why it hasn't been enabled - but for nearly 10 years I've been requesting that all data submitted via RTI should be reviewable post-submission by the submitter (so that for instance data in the submitted FPS can be easily checked against what HMRC claim to have received). No joy ... and no likelihood of it!
But, as you say, not obviously relevant to the SI. The real issue is the damage done to the confidence of taxpayers when they see missing or incorrect data (held on their records) displayed by HMRC.

---
I know what you mean by garbled wording in drafts (and occasionally in the final version).
However I think I can now see more clearly to what the Year 1 and Year 3 refers (for those not forced to join at the start because they weren't 'eligible' at that date - I nearly said weren't trading, but it's not clear if that is the trigger or merely total earnings).
Particular thanks to NotAnAccountant for this clarification!
On the other hand, the apparent catch-22 over finding and then fixing a digital record error 'out of time' will need a wholesale re-write.

---
When you say "This is the issue really that relates to the ability to put the periodic submissions in on a cash basis, but do business summary adjustments on an accruals basis" ... it's more than mere 'business summary adjustments' that are required if you're working on an accruals basis.
Although it can depend on the accounting policy of a particular business, it's not that unusual in some sectors (including development/sale of software licences plus an annual maintenance fee!) to use your recognition policy to apportion new sales revenues and also to apply deferrals/accruals as the service is part-delivered - possibly via a monthly set of calcs).
In other words, cash-based core records may need actual allocation to relevant account months (and some of these may change during the year) - not just a few summary adjustments or extra figures.

---
As I said, I've yet to tackle the heart of the SI (Quarterly Updates and End of Period Statements plus Corrections & Omissions + Exemptions etc) but will try to do so.

In the meantime, I hope (some of) my comments above help clarify concerns - and potentially any eventual re-writes to the SI!

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Replying to Hugo Fair:
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By johnhemming
24th Sep 2021 12:28

>Thanks, John ... you certainly get up earlier than me.
I have been working on my insomnia which means I have arranged my day to go to bed early, but get up early so that I can sleep well then take my children to school before the market opens. Hence I am normally doing things around 6am.

>I don't agree with your claim "inherently any software will always communicate
>both ways."
This is a technical point. There is data sent and received even if a single directional TCP conversation occurs or even through UDP with error correction.

The fact that sometimes things don't work that well does not mean that there is not data going both ways.

>it's more than mere 'business summary adjustments' that are required if you're >working on an accruals basis.
I was making a reference to these API endpoints
https://developer.service.hmrc.gov.uk/api-documentation/docs/api/service...

which are called "Business Source Adjustable Summary (MTD) API"

I do understand the point you make. It does not change the name of the endpoint, however.

I think the SI does need some work, but that's not difficult.

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Replying to johnhemming:
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By Jo Nokes
24th Sep 2021 17:11

I'm wondering if John knew about the decoupling, as ICAEW put it. Is it really true that there is to be no linkage? I've been pondering how the two mesh together withte EOY for some time, with no answer as far as I can see. Do you have a view on this, Hugo?

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Replying to Hugo Fair:
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By Jo Nokes
24th Sep 2021 13:09

I’ve asked that question in other threads, ie how do we make adjustments with our software after the client or bookkeeper has filed with different software. Isn’t that a very basic problem. Was there an answer, or was this just something to be worked out later on. All fine with common access to cloud accounting, but not something many clients would want to get involved with. Is it really true that when I file year end accounts, they have no digital contact with the quarter updates. That means the updates serve no real purpose

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Replying to Jo Nokes:
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By NotAnAccountant2
24th Sep 2021 13:21

Jo Nokes wrote:

I’ve asked that question in other threads, ie how do we make adjustments with our software after the client or bookkeeper has filed with different software. Isn’t that a very basic problem. Was there an answer, or was this just something to be worked out later on. All fine with common access to cloud accounting, but not something many clients would want to get involved with. Is it really true that when I file year end accounts, they have no digital contact with the quarter updates. That means the updates serve no real purpose

This is an IT problem, not an accounting problem and I'm utterly appalled (and ashamed for my profession) that it appears that this problem hasn't been addressed from day 1.

Unfortunately, I suspect the larger players in the accounting software market - the ones who are advising HMRC on how easy it all is - see it as a way of getting lock in and forcing the ordinary taxpayer to buy their software because their accountant uses it.

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Replying to NotAnAccountant2:
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By Jo Nokes
25th Sep 2021 10:06

I am wondering why this decoupling as the ICAEW put it has not made a bigger impact. I haven’t seen any comment on this, so far. Suddenly we can effectively file the year’s totals, with the necessary adjustments, and not be too concerned with what the client filed. Of course, we would be using the client’s data, but no digital link. One point though: if the same basis has to be used for quarter and year end filings, that won’t work because clients probably will be unable to do accrual accounting, and we will want to do accrual accounting. I wonder if John has been taken by surprise on this.
As for calendar basis, I thought this meant we can file to 31 December each year, but now I see it’s just to concede that filing to the 5th is really stupid so use the month end. Still means a lot of filing in a month and none in between.

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Replying to Jo Nokes:
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By johnhemming
25th Sep 2021 11:22

I don't mind commenting on an expressed ICAEW view, but would ask for a source link to what they actually say rather than a third party report of it.

I happened to read Sage's explanation of ITSA which was reasonably good, but confused the business summary adjustments and EOPS.

The EOPS (End of Period Statement) is basically an agreement that for any one business the figures are correct. It is not an additional submission. Any additional submission is an adjustment.

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Replying to johnhemming:
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By Jo Nokes
25th Sep 2021 11:57
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Replying to Jo Nokes:
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By johnhemming
25th Sep 2021 12:40

Thanks for that.

I think they are also confused about the EOPS. (as well as Sage)

This is the specification for EOPS
https://developer.service.hmrc.gov.uk/api-documentation/docs/api/service...

This is the data that is supplied (apart from NINO etc)
{
"typeOfBusiness": "self-employment",
"businessId": "XAIS12345678910",
"accountingPeriod" : {
"startDate": "2021-04-06",
"endDate": "2022-04-05"
},
"finalised": true
}

All it really does is to state that the figures are agreed.

"This endpoint allows the developer to submit a declaration that the submission data for a business is complete. A National Insurance number is required."

What they probably mean is the Business Summary Adjustment which is in fact decoupled and oddly enough does not have a digital records requirement (which I think in a realistic sense it really should have). I think they misunderstand the effect of the EOPS.

I think they have also missed the confusing point about basis period reform. (Where I think the regulations are drafted assuming it is going ahead).

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Replying to johnhemming:
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By NotAnAccountant2
26th Sep 2021 09:13

I'm going to be very bold and speak for the accountants...

They don't care that technically, the EOY adjustments, and confirmation statement are two different endpoints.

I don't know how their current software works but I expect their workflow goes something like 'check everything is correct in their software' then 'submit' and they really don't care what happens under the hood. A few days later they might go back to check that the submission actually went through but they probably don't have time to check more than that, especially near to mass deadlines.

So when you see accounting bodies talking about EOPS of course that includes the adjustments. Separating the two is very much a 'hand holding for non professionals' workflow.

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Replying to NotAnAccountant2:
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By johnhemming
26th Sep 2021 09:24

That is an arguable point

"The end of period statement (EOPS), which is used to finalise the reporting for each income source, is decoupled from the quarterly updates and will be required for accounting periods. The EOPS is the equivalent of the SA103 and SA105 self-employment and property pages on the self assessment tax return."

is what ICAEW say, however. This is not correct.

I do think it is important to be precise where possible, however. If someone wants to adjust the periodic submissions they have to
a) Tell HMRC that they want to do an adjustment (trigger the adjustment)
b) Put in the adjustment itself
Then they can do EOPS.

Now there will be variation between software as to how this is done. I have taken a design decision to make it very clear what is happening on HMRC's systems. Others may take a different view.

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Replying to NotAnAccountant2:
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By johnhemming
26th Sep 2021 09:27

posted twice in error

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Replying to johnhemming:
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By Hugo Fair
25th Sep 2021 13:16

So, as per Jo's kind link to ICAEW ...
"The end of period statement (EOPS), which is used to finalise the reporting for each income source, is decoupled from the quarterly updates and will be required for accounting periods. The EOPS is the equivalent of the SA103 and SA105 self-employment and property pages on the self assessment tax return."

I'm not sure where that sits on any spectrum of your explanation and of Sage's (to which you refer) - and I know that ICAEW's opinion is not necessarily more accurate than GOV.UK guidance - but it's troubling when developers don't agree with each other ... or with PBs ... or the various publications issued by HMRC.

Even with the extension, time is now very tight to not have a clear scope of the processes planned ... not just for developers, but for those who might want to review their offering for clients (and start the slow move to communicate this to them with some sort of educational service)!

BTW, if EOPS is not an additional submission (as additional submissions can only be done via an adjustment) ... then for anyone not using cash accounting, this suggests a minimum of 8 submissions p.a. (with each of the quarterly ones needing its own adjustment submission by/before year-end) + the EOPS?

It also means that all the recognition policy and deferral/accrual impacts will need to be worked out and included in those 4 adjustment submissions - which means performing all these calcs for 4 individual quarters, even though they only affect accounts and tax once p.a!

What have I, hopefully, misunderstood?

EDIT: As per Jo's (natural) interpretation of the description 'de-coupled', I see you now say that "the Business Summary Adjustment .. is in fact decoupled and oddly enough does not have a digital records requirement."
So, at the risk of sounding even more cynical than usual, the taxpayer has to submit quarterly returns (from digital records untrammelled by human hand) - but their accuracy (in accounting or tax terms) is irrelevant, because the accurate Adjustment returns can be created by separate data collection/transformation (i.e. decoupled and not even associated with the digital records)?

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Replying to Hugo Fair:
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By Jo Nokes
25th Sep 2021 13:13

Thanks,Hugo, for clarifying the problem. It's truly pathetic that this is still something that needs to be discussed. Still, over two years to go, plenty of time to work out the details. I don't think HMRC has a clue if this is where we are at

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Replying to Hugo Fair:
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By johnhemming
25th Sep 2021 13:31

I think HMRC have overlooked the need to have a digital audit trail for the business summary adjustment, but if I were you I would not complain about this.

It may sound a bit odd, but I am sitting here sampling a mixture of prosecco from one glass and a nice vintage port from another glass. I am not surprised that different people have different understanding of how MTD ITSA actually works. It happens that I have helped a very small number of people actually make live ITSA submissions. I am, however, pretty certain that neither the authors of the ICEAW release nor Sage's document have simply because neither of those have officially working MTD ITSA software.

It would not surprise me that people who have done something have a better understanding of how it is done than people who have not done something.

It also does not surprise me that people don't always have total agreement. I am not perfect I make errors from time to time and I get things wrong from time to time. That, however, is normal for human beings.

EOPS is a submission in the sense that it submits something to HMRC. Above I have given the details. EOPS basically says "done that".

It is, however, not a submission that has any figures in it. It agrees the figures held by HMRC.

When I get my fan sorted (by getting another computer and they phoned me today to say they were making good progress building it) I will do some demonstration videos of these things.

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Replying to johnhemming:
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By Jo Nokes
25th Sep 2021 13:49

But what would interest us would be if you had helped an accountant deal with the EOY stuff, not having the same cashbook that the client had used. Just getting a user to file seems straight forward

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Replying to Jo Nokes:
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By johnhemming
25th Sep 2021 13:58

I have done all the relevant EOY stuff and final submissions. It is not necessary for taxpayers to have tax agents.

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Replying to johnhemming:
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By Jo Nokes
25th Sep 2021 14:11

Well, we know that. But on this site, it's accountants dealing with taxpayers who don't generally file themselves. I thought you might have appreciated that

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Replying to Jo Nokes:
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By johnhemming
25th Sep 2021 14:17

Obviously I know that. I have a small number of accountants and book keepers as clients.

It is, however, still quite hard to qualify for the ITSA pilot. Hence none of the accountants have done the end of year. However, we have done the end of year.

To be honest I would have thought it would be in theory easier to do the end of year with an experienced tax agent.

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Replying to johnhemming:
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By Hugo Fair
25th Sep 2021 15:10

"To be honest I would have thought it would be in theory easier to do the end of year with an experienced tax agent" ... easier than what?

If a Business Summary Adjustment is required for every previously submitted quarterly return (as per my earlier post), then the experienced tax agent now has much more work to do than prior to MTD:
a) if an Adjustment file has to be submitted for EACH of the quarterly returns, then the agent has to not only calc the appropriate re-allocation/correction figures for the year - but has to do so for every quarter (despite that not being a requirement of accounting or taxation returns);
b) even if you are only required to submit a single Adjustment file (prior to the EOPS), then there's a lot more effort than currently - because you're having to use the wrongly submitted figures as a baseline (rather than treating them as mere scratch/wip figures from the client).

Also, I don't agree with (or in fact understand) your comment that "if I were you I would not complain about this (the need to have a digital audit trail for the business summary adjustment having been overlooked)".
I don't think it's been overlooked - I think it's a deliberate fudge.

They know (as per earlier comments throughout Aweb) that insisting on a digital link (without human intervention) from the core records used by the Quarterlies to the contents of Adjustment submissions is impossible ... if only because without the proper interoperability standards, this equates to mandation of the same software being used for book-keeping and for accounting (which would be unconscionable interference in the market).
[Of course, as NotAnAccountant pointed out above at 13:21 earlier today, the larger players in the accounting software market - the ones who are advising HMRC on how easy it all is - no doubt see it as a way of getting lock in and forcing the ordinary taxpayer to buy their software because their accountant uses it.]

However if they allow a lack of a digital audit trail for the Adjustment files then, as well as the burden heaped on accountants to which I referred at the start of this post, the purpose/value of the Quarterly returns has become obscure to say the least - certainly for the taxpayer, and also as Treasury/ONS feeds.

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Replying to Hugo Fair:
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By johnhemming
25th Sep 2021 16:46

>easier than what?
Easier than without a tax agent.

>If a Business Summary Adjustment is required for every previously submitted
>quarterly return (as per my earlier post), then the experienced tax agent now >has much more work to do than prior to MTD
Only if an adjustment is required which is only the case of the periodic submissions need adjusting.

>a) if an Adjustment file has to be submitted for EACH of the quarterly returns,
It cannot be. It is an annual process.

>b) even if you are only required to submit a single Adjustment file (prior to the
>EOPS), then there's a lot more effort than currently - because you're having to >use the wrongly submitted figures as a baseline (rather than treating them as >mere scratch/wip figures from the client).

I don't see the distinction.

>Also, I don't agree with (or in fact understand) your comment that "if I were you
>I would not complain about this (the need to have a digital audit trail for the
?business summary adjustment having been overlooked)
If you don't like digital links you should not be asking for more. Be careful as to what you ask for as you might get it.

>I don't think it's been overlooked - I think it's a deliberate fudge.

Matter of opinion.

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Replying to Hugo Fair:
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By Jo Nokes
25th Sep 2021 17:08

Thanks again Hugo for telling it like it is. I think John is just coming at this from the opposite end to almost everyone who comments on here.

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Replying to Jo Nokes:
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By johnhemming
25th Sep 2021 17:12

Jo Nokes wrote:

I think John is just coming at this from the opposite end to almost everyone who comments on here.

I think you are probably right about this. I think it is likely that I am the only person posting on this forum who has actually been part of submitting an annual SA tax return via MTD ITSA.

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Replying to johnhemming:
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By Jo Nokes
25th Sep 2021 18:15

Well in that case, I would like to hear how you viewed a client's filed figures, and then proceeded to file amendments to convert cash based numbers to proper accrual numbers. This is what agents are contemplating, and scratching their heads over. You haven't explained or acknowledged any difficulty. That's rather upsetting me

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Replying to Jo Nokes:
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By johnhemming
25th Sep 2021 18:21

If tax accounting is on cash basis and my focus is on the smaller tax payers then there are no accruals that need reporting.

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Replying to johnhemming:
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By Hugo Fair
25th Sep 2021 19:08

I was about to say "and there we have it" ... but realised that it could be taken as triumphalist. Nevertheless, it is where I (and probably Jo and others) part company with your belief system - in that size is not the determinant of the desire or need to use the accrual rather than cash basis.

I can't claim to have the stats (any more than I suspect HMRC do), but it sounds like you're going to be surprised at the %age NOT using the cash basis.

Many taxpayers don't really know the difference (and certainly treat 'cash as king' along with a wilful disregard of personal/business boundaries), but those with any representation are more likely to be using accruals (and a host of other allowance/adjustments available to them) within their final accounts and tax comps - even if the taxpayer doesn't properly understand the policies or impacts.

This is what is fuelling the fear (to put it mildly) of many agents ... who have no interest in providing a day-to-day book-keeping service and know that (even if despite past experiences some of the figures aren't just plain wrong) they will have to do every bit as much as before in order to create a set of draft accounts ... for clients whom the adverts say have already done most of the work.

And my other point: that you either didn't understand or underestimate its impact ... that having to use the wrongly submitted figures as a baseline (rather than treating them as mere scratch/wip figures from the client) takes more effort.
Seriously?

Whether using the medium of pieces of paper or whiteboards or software, it's always easier to solve a maths problem if you start unencumbered with incorrect data (especially if you don't initially know which data is 'bad' and which 'good').
If you start with raw data then the human brain is more adept than software at spotting outliers and potential anomalies ... which it can do in parallel to making the correct postings.
This may eventually change with advent of proper AI (but that's decades away) ... or someone could commission now really expensive specialist software (that is only justified for people like NASA - not HMRC and certainly not SME taxpayers).

Basically, I know your "focus is on the smaller tax payers (where) there are no accruals that need reporting" ... and that is fine. But do you believe that HMRC have any real idea as to the requirements of the (unquantified) market majority?

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Replying to Jo Nokes:
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By Hugo Fair
25th Sep 2021 19:21

In my new role as UN envoy for peace through taxation (I jest) ... here's a thought.

If Jo is willing to volunteer a client (for instance one who does their own book-keeping but has accounts prepared on an accrual basis within different software) - then maybe John could volunteer to provide the client with software, and then listen to practical feedback from Jo during the course of the year (and particularly at year-end)?

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Replying to Hugo Fair:
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By johnhemming
25th Sep 2021 21:29

I have no problem with this proposal.

I have made a commercial decision to concentrate on taxpayers who wish to use the cash basis and have under 500 transactions in a period. I could change this approach, but am happy with the current situation.

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Replying to johnhemming:
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By Jo Nokes
25th Sep 2021 23:25

That’s fine, but you are simply ignoring the concerns of a large number of taxpayers and agents who don’t fit your preferred category, so in a sense you are wasting our time. We’re worried about making the kind of adjustments that won’t arise in your narrowly defined sector. Cash basis for tax has many drawbacks, but you either don’t care, or aren’t aware. I will have to give up on this thread, sorry Hugo

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Replying to johnhemming:
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By AdamMurphy
25th Sep 2021 19:43

That's not what he meant, as you well know.

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Replying to Hugo Fair:
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By NotAnAccountant2
24th Sep 2021 07:05

It doesn't matter how many times I read that ... I end up none the wiser as to what it means. Can you explain the terms Year 1 and Year 3 in that sentence?

Assuming you're not caught by MTD right at the start, the first year you "qualify" for MTD (turnover >10K) is Y1. Once you've reached that trigger in Y1 you're required to actually do MTD in Y3.

FWIW, regulation 22 appears to let you escape from hotel california after three years of turnover <10K.

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Replying to NotAnAccountant2:
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By Hugo Fair
24th Sep 2021 12:25

Thanks for that ... it certainly begins to make a bit more sense now (although the delay does seem unduly generous - and could lead to the shenanigans that you mentioned earlier where the 'business' is swapped around every so often)!

I'll probably stumble across it later (assuming that it appears later in the SI) - but could you let me know in which section the definition/explanation appears?

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Replying to Hugo Fair:
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By NotAnAccountant2
24th Sep 2021 12:44

Hugo Fair wrote:

Thanks for that ... it certainly begins to make a bit more sense now (although the delay does seem unduly generous - and could lead to the shenanigans that you mentioned earlier where the 'business' is swapped around every so often)!

I'll probably stumble across it later (assuming that it appears later in the SI) - but could you let me know in which section the definition/explanation appears?

I think the delay is required. If you reach the trigger in Y1 then you won't know until you're already in Y2 (as obviously you won't have a single bit of record keeping done if you're not in MTD) and therefore the first year you can be forced to do MTD is Y3.

(You can opt in in Y2 if you want, it's the compulsion that is Y3)

https://www.legislation.gov.uk/uksi/2021/1076/regulation/4/made

(3) and (4) seem to be the bits that say when you're going to be in MTD. With the 22/23 tax year being Y1 - so anyone with a 10K turnover in 22/23 will be in MTD in 24/25.

https://www.legislation.gov.uk/uksi/2021/1076/regulation/21/made

Is the part that allows people <10K to opt out.

I think the statue is basically that "everbody is in MTD but these people can opt out" rather than "these people are in MTD"

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