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MTD Rental Income - easy solution?

What if property managing agents' software filed figures at HMRC quarterly?

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Hi forum lurkers,

A thought came into my mind this morning regarding property income for individuals.

Wouldn't many peoples' lives be made easier by requiring managing agents to make quarterly submissions from their softwares? Some new fields (UTR, NINO, %age split if not already populated) and a tweak of the software capabilities and hey presto - far less faff than current proposals.

Am aware this leaves out those not using an agent - but that is similar to self-employeds not using an accountant - so still a market for the BISHing, BOSSing and BASHing softwares to mop-up.

Or am I over-simplifying? Or indeed, over-complicating?

Replies (33)

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By SteveHa
18th Oct 2021 14:42

No - you are over-complicating rather than over-simplifying. The simplest solution is to forget this MTD nonsense until such time as HMRC have IT systems that are fit for purpose.

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By Laurence52
18th Oct 2021 14:48

The letting agents statements do not include residential property finance costs which many landlords incur so your suggestion wouldn't work.

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Replying to Laurence52:
paddle steamer
By DJKL
18th Oct 2021 17:04

They also often do not deal with buildings insurance and certain building external repairs may often not be included.

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By rmillaree
19th Oct 2021 08:48

I have also never seen rental agent pay the acountants fees either !!

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By johnhemming
18th Oct 2021 14:50

Being a tax agent is (for part of tax accounting), of course, something that could be offered by a property managing agent, but it could only work where they do all the work relating to property for those particular clients.

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By I'msorryIhaven'taclue
18th Oct 2021 15:12

Not everyone wants or benefits from adopting the default cash basis of rent received. Some might prefer to be taxed on rent receivable.

A property agent would surely struggle to provide both options.

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By Paul Crowley
18th Oct 2021 16:03

Does not work
End of period statement and the agreement that the other tax details are correct, reports 5 and 6 make it not work

MTD replaces the the tax return
So letting agent would need to become a proper accountant for the entire return

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By ireallyshouldknowthisbut
18th Oct 2021 17:01

Whilst I agree that stopping the whole madness be the best option.

I don't follow why technically a switched on lettings agents cant offer this service?

It is not as if the Q data is going to be used for anything on a practical basis given its not connected to the new annual tax return so omissions of mortgage interest and repairs paid by the landlord are largely irrelevant. Its "filing any old tosh" not "file a quarterly return suitable to work out your tax bill". Its tick box compliance stuff, essentially self certing that you have done your homework.

The main issue would be for landlords with more than one property as presumably you cant have many to one filing.....

Is there some sort of issue whereby the same agent is needed to file both the quarterly nonsense and the proper annual return? That is going to be an absolutely massive problem if true and many tax returns are split. For example we do the property pages for a number of clients with other interests for whom the main return is filed by a third party. Similarly clients clearly move between accountants and might do their own updates.

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Replying to ireallyshouldknowthisbut:
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By DJKL
18th Oct 2021 17:07

It works if they do a tie up with accountants, a one stop property shop. I have already mentioned the idea to the director of the commercial property agents with which I am still involved.

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By alialdabawi
18th Oct 2021 17:46

No doubt an EOPS and a 6th filing would be needed, but as far as an ongoing quarterly requirement goes perhaps it would be the least resource-consuming method?

Annual work still done once each year by accountant, sum of 4 quarters referenced on HMRC portal so accountant knows what adjustments to make on EOPS.

Probably most unlikely to work given that HMRC's systems are unlikely to show the pre-populated 4 quarters data similar to current pre-populated info they (don't) give us.

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Replying to alialdabawi:
By ireallyshouldknowthisbut
18th Oct 2021 17:55

Accountants don't need to know what happened Q1 to Q4, this has now been unlinked.

ie the data is completely junked. You just put the totals on the EPOS, so the Q reporting is stand-alone now from the annual process. This *should* enable split filing as you propose.

Given accountants will be filing EPOS within their system far removed from the client's bookkeeping systems I don't see this is a technical issues, possibly only an authentication one if clients are unable to appoint two different agents to file different parts of this mess.

There is no need to get hung up on "whats missing" as that is scooped up in the catch all "accounting adjustments" and I think stems from a misunderstanding of what Q reporting is. its just "some data", not a quarterly tax return.

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Replying to ireallyshouldknowthisbut:
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By Hugo Fair
18th Oct 2021 18:36

"a misunderstanding of what Q reporting is. its just "some data", not a quarterly tax return."
And that's the nub of one of my core (unresolved) questions around what gets reported when.

If John is to be believed (and I have no reason not to do on matters of fact rather than opinion) then:
* EOPS (after if necessary submitting an Update to the 4 quarterly returns) is when you unilaterally confirm that those (book-keeping) entries are correct.
* You then are allowed to submit a series of other (not fully defined) returns that 'build' on those confirmed values by entering 'adjustment' figures such as allowances, accrual apportionments, etc etc ... supposedly akin to SATR
* And finally you have to submit a Completion declaration (basically saying that you've now sent everything).

So ... the contents of the Quarterly returns DO matter (although for now they've been decoupled from any sense of forecasting tax liability) - because, *before* you can submit the EOPS, you need to know what incorrect and/or missing figures (from the Quarterlies) need to be sent as an Update.
Only then do you have an 'approved' set of books - and thus can set off down the path for which we are paid ... preparing the accounts and tax comps.

This (I believe) is the immediate reality of MTD ... it takes nothing away from what had to be submitted under SA, but it adds as a pre-cursor the need to maintain (and submit highlights of) a set of books that were not previously visible to HMRC without an inspection.
Of course this transparency/accessibility of the taxpayer's books may be only the first step (see what they're doing in Portugal at the transactional level), but for now this is the bit on which HMRC's hopes/dreams depend ... and is the bit causing all the angst for taxpayers and agents alike.

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Replying to Hugo Fair:
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By johnhemming
18th Oct 2021 19:54

The EOPS is after any adjustments AFAIK.

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By alialdabawi
18th Oct 2021 20:21

EOPS is after adjustments, that pretty much has to be so and not any other way.

But is EOPS ONLY adjustments to the 4 quarters' totals, as Hugo understands, or is it a brand new set of workings for an annual set of numbers, as IRSKTB understands?

Because if it is ONLY adjustments, surely the simplest solution all round would be to have managing agents file their figures - for all taxpayers, see next paragraph, and accountant then includes others - insurance and others mentioned above.

It also - though I am not IT - must be relatively straightforward to write code into managing agents' softwares to have the software work out and file accrual based figures.

Which then only leaves landlords/ladies not using an agent to find softwares to populate.

Indeed, if EOPS is annual figures - including other items - and not linked to quarterly figures, then surely the managing agents doing the filing becomes an even more simplistic way forward for all involved - except maybe the lettings agents themselves?

In response to the point regarding multiple properties managed by multiple agents, consider each separate filing similar to someone who is already on multiple PAYE RTIs each month - HMRC's systems do accept that so surely can extrapolate to accommodate this.
Imagine the impact on dynamic coding! D1 for all and then new portals to reclaim within 30 days the overpaid tax, which is then paid back after 17 months, 5 letters, and an email to the local MP.

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Replying to alialdabawi:
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By johnhemming
19th Oct 2021 09:46

The adjustments are variances to the previously provided figures. What workings there are to them is a separate question.

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By Hugo Fair
18th Oct 2021 21:16

I'll admit my head is starting to spin (trying to keep up with your interpretations alongside those from ICAEW and from HMRC and from ...)!

But I thought you'd previously said that EOPS contained no values - because it is 'just' a confirmation that the book-keeping figures (aka the 4 quarterly returns) are correct ... which by definition might therefore need to be preceded by what I thought you called an Update submission (corrections to the book-keeping 4 sets of quarterly figures already submitted).

And (logically at least) you wouldn't start your accounting/tax comp work until that point (i.e. the book-keeping is now 'frozen') ... after which you'll be in a position to submit the figures that would otherwise have been termed an SATR - and only after that (no idea why as a separate submission) a Final Declaration stating that what used to be an SATR is complete and true.

Have I mis-described any of that? Or indeed mis-attributed 'your' definitions?

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Replying to Hugo Fair:
By ireallyshouldknowthisbut
19th Oct 2021 09:00

'Hugo, what I read was the end of year statement was the full values, as with RTI or the current SA.

it was not "adjustment to earlier values"

See Rebecca's article on the 1st October:

https://www.accountingweb.co.uk/tax/hmrc-policy/how-mtd-itsa-and-self-as...

it would be very hard to be the adjustment to earlier figures given this is just "junk cashflow data" and may have very little to do with the final figures. You could easily have several hundred adjustments from the client data on a typical sole trader who is poor at record keeping and posts any old rubbish to any account. Remember you have just 6 minutes to obtain the file from the client, check it and file it according to HMRC which means we are clearly not expected to do any sort of meaningful adjustments or corrections quarterly.

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Replying to ireallyshouldknowthisbut:
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By johnhemming
19th Oct 2021 09:49

The adjustment are to the totals. (not the individual transactions which in any event are not reported).

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Replying to ireallyshouldknowthisbut:
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By Hugo Fair
19th Oct 2021 14:45

I'm not defending any particular position (let alone the overarching point of MTD in the first place) ... but Rebecca's article (in terms of her paragraph on EOPS) is almost entirely the opposite of what John Hemmings says it is.
I don't particularly care who is right or wrong ... indeed maybe both are wrong - who knows?
But I'm trying to find out the 'truth' (supposing of course that HMRC have actually arrived at consistent definitions and plans) ... partly for my sanity, but mostly because such a divergence of opinion between respected experts and software developers doesn't bode well!

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Replying to Hugo Fair:
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By johnhemming
19th Oct 2021 09:48

The way EOPS (the endpoint) works is
a) HMRC tell you what figures are on their server.
b) You send EOPS to say those figures are right.

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Replying to johnhemming:
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By Hugo Fair
19th Oct 2021 14:37

Shouldn't there be a step between your a) and b) ... for an Update submission (corrections to the book-keeping 4 sets of quarterly figures already submitted) if you can't initially "send EOPS to say those figures are right"?

As you say in another post ... the Update submission is to adjust "the totals (not the individual transactions which in any event are not reported)." But given that the EOPS confirmation precedes any other submissions (of SA-like values), it is presumably your last chance to change these book-keeping reported values?

As I asked in my earlier post, of 18th Oct 2021 at 21:16, have I mis-described any of that (the submissions & processes)? Or indeed mis-attributed 'your' definitions?

In particular, do you agree with @ireallyshouldknowthisbut's assertion that the "earlier (quarterly) figures (are) just "junk cashflow data" and may have very little to do with the final figures"?

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Replying to Hugo Fair:
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By johnhemming
19th Oct 2021 15:13

Hugo Fair wrote:

Shouldn't there be a step between your a) and b) ... for an Update submission (corrections to the book-keeping 4 sets of quarterly figures already submitted) if you can't initially "send EOPS to say those figures are right"?


Strictly no. If you need to do adjustments this needs to happen before the two steps above because you will get adjusted Business Summary figures.

Hugo Fair wrote:

As you say in another post ... the Update submission is to adjust "the totals (not the individual transactions which in any event are not reported)." But given that the EOPS confirmation precedes any other submissions (of SA-like values), it is presumably your last chance to change these book-keeping reported values?


The EOPS confirmation says the values are right. I don't know if you can change them after that.

Hugo Fair wrote:

In particular, do you agree with @ireallyshouldknowthisbut's assertion that the "earlier (quarterly) figures (are) just "junk cashflow data" and may have very little to do with the final figures"?


It depends really on the tax payer. The ones we have done have been correct. It is possible that you have just cash data. How much it is accurate to describe that as being "junk" is
a) A matter of opinion
b) Going to vary from time to time.
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Replying to johnhemming:
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By Hugo Fair
19th Oct 2021 17:07

@Hugo Fair wrote:
Shouldn't there be a step between your a) and b) ... for an Update submission (corrections to the book-keeping 4 sets of quarterly figures already submitted) if you can't initially "send EOPS to say those figures are right"?
@johnhemming wrote:
Strictly no. If you need to do adjustments this needs to happen before the two steps above because you will get adjusted Business Summary figures.

Sorry? How can you determine whether an Update submission (or whatever it ends up being called) is needed, let alone which Business Summary figures need to be adjusted, if you've not first been through step a) ... where HMRC tell you what figures are on their server?
Logically of course there may be several iterations between your step a) and my inbetween-a)-and-b) step - before your step b) can be completed.

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Replying to Hugo Fair:
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By johnhemming
19th Oct 2021 17:32

I am pretty certain that I have posted the details of this somewhere, but I am trying out some Greek lager (bought in Birmingham) and would prefer to revert to some Rioja than search through my posts to find what I said.

If you get business summary figures that are wrong you either need to fix the periodic submissions or put in an adjustment hence the possible steps are.
α) You get the summary figures
β) They are wrong so you fix the periodic returns
γ) You get the summary figures
δ) They are wrong so you put in a business adjustment
ε) You get the summary figures
ζ) They are wrong so you buy a bottle of whisky
η) You drink a stiff whisky
θ) You put in some adjustments somewhere on the internet
ι) You fall asleep
κ) You wake up and decide alcohol and MTD don't mix
λ) You get the summary figures
μ) You put in an adjustment.

a) HMRC tell you what figures are on their server and they are now right.
b) You send EOPS to say those figures are right.

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Replying to johnhemming:
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By Hugo Fair
19th Oct 2021 17:51

Best synopsis I've seen so far ... but shame it's only for one small part of the overall process-flow diagram that we need.
I impressed myself by being able to recall the name of the 12 greek letters you used in the instruction list (after a gap of over 50 years since learning the alphabet) ... and agree with the inference that there's nothing about processing MTD that wouldn't be improved by regularly imbibing the alcohol of your choice!

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Replying to Hugo Fair:
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By johnhemming
19th Oct 2021 17:57

I may do an interesting video about the merits of alcohol from the perspective of the GABA - Glutamate balance.

However, as far as MTD goes it falls into the category of "if you are doing computer programming whilst drunk .... STOP"

I think that applies to lots of things that require precision. Coding done whilst drunk needs to be fixed whilst sober and the total time taken is greater.

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By justsotax
19th Oct 2021 15:30

when plain english fails to explain in simple terms what is going to happen (because it just isn't that simple) and acronyms take over you know its no longer something that will benefit the ordinary punter....

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Glenn Martin
By Glenn Martin
19th Oct 2021 17:17

I was shown a property app recently that will manage the properties and do the submissions and was only £20 ish which looked ideal. most of the tools we will be using for this MTD lark will not yet have been invented so don't panic.

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SMH
By ShakingMyHead
20th Oct 2021 11:03

I wouldn't want my property agents anywhere near my tax returns. IT's not their strength and the amount of times I've corrected them. They'll send me a statement - but the money wasn't received. One agent I took to court (and won) as they'd kept the money due to me and tried to tell me that they'd paid me! They didn't realise - I do bookkeeping. I dread to think the amount of people they've ripped off.

Some people use more than one agent. Some manage parts of their portfolio themselves. I think MTD should be for the individual to do as when you start pushing responsibility here and there it's a recipe for disaster. If they want to issue a quarterly statement or something to assist the property owner - that's ok. But to ask them to file on your behalf - no thanks.

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By stephenb48
20th Oct 2021 12:42

I too would not want a property agent reporting income. They do not know the ownership split and do not need to. Granted they know who owns the rental property but in my case there will be 2 people who will be below the MTD threshold and one above (but only because of non rental self employed income) but the ownership is not split in thirds. Also there are some costs you only get final figures annually.
I do not want to pay for software when my excel spreadsheet is perfect.

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By stephenb48
20th Oct 2021 12:42

I too would not want a property agent reporting income. They do not know the ownership split and do not need to. Granted they know who owns the rental property but in my case there will be 2 people who will be below the MTD threshold and one above (but only because of non rental self employed income) but the ownership is not split in thirds. Also there are some costs you only get final figures annually.
I do not want to pay for software when my excel spreadsheet is perfect.

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By Charlie Carne
20th Oct 2021 17:15

I think that you've missed the whole point of MTD. It is not to get data to HMRC on a more frequent basis (they aren't even likely to be looking at the quarterly updates). The stated aim is to "drive up wider digital adoption". This means that the taxpayer (or whoever writes up their books) needs to keep data digitally rather than manually. The purpose of the quarterly filing is to prove to HMRC on a regular basis that they are complying with this mandate. So, having the managing agent file the data does not achieve the aim of getting the taxpayer to adopt digital systems.

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By tonyaustin
21st Oct 2021 15:55

By default, for tax purposes, property income should be declared on a cash basis for the tax year and there are only about 5 headings for analysis of expenses. How difficult is that to keep and report digitally on a quarterly basis? Corrections and tax adjustments only have to be made when producing the SATR.

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