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One simple compromise for MTD for ITSA ...........

Smaller businesses will be worst affected by MTD for ITSA : Solution = Raise the Threshold

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The arguments for and against MTD have been well debated on AWEB over the last few weeks but the main concerns seem to be the problems that this will bring to smaller businesses, which I agree with.

The simple solution is to raise the MTD for ITSA threshold to £85,000 (and keep it there indefinitely). In my view this would be an acceptable compromise for many people and avert the certain disaster that a £10,000 threshold was always going to bring.

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By snickersinatwix
31st Aug 2021 12:17

yes please

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By spilly
31st Aug 2021 12:40

And another vote for this.

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By ireallyshouldknowthisbut
31st Aug 2021 12:48

£50k would be grand.

Trouble is this system seems to be "PAYE for fake self employed"

Rather than a genuine attempt to design a new system for tax payments for small businesses.

There is a phenomenal number now of fake self employment with all the delivery drivers etc who I imagine is who HMRC are really after, not proper businesses with stock, or vehicles or other costs for which you cant cash account. They seem to think all self employed folks are just simple income streams you can work out the tax based on the turnover.

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By Paul Crowley
31st Aug 2021 13:10

85 K
VAT limit
They are already in MTD version one and capable of coping

No MTD yet for big business, yet they are the big tax gap evaders shifting profits to the tax countries with low rates
Ireland is one of the favourites

BUT NO
Punish the low income UK tax payers

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By AdamMurphy
31st Aug 2021 13:16

Exactly this, they are already reporting VAT quarterly and it's not much of a step up to report transactional income and expenditure from that.

Going after the smaller non-VAT registered businesses while letting their chums, major corporations, get away with tax avoidance is galling.

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By GHarr497688
31st Aug 2021 13:47

Would it not be more sensible to relax the exemption criteria so that the process took less time for claimant and HMRC. A scale could be devised with the basis on age , turnover , years in business , type of trade , etc. If the exemptions points system came out with a need to join then further information could be declared. If you were 72 in business as an engineer and your turnover was say £150,000 then exemption would be granted. If you were 25 withe 500K turnover in IT and had been in business for 3 year then you would need to report as to why you should be exempt.

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Replying to GHarr497688:
Tornado
By Tornado
31st Aug 2021 13:55

An interesting concept but perhaps a little too complex!

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Replying to GHarr497688:
Stepurhan
By stepurhan
31st Aug 2021 14:39

I really don't think the UK tax system really needs added complexity.

Such a system would be a nightmare to design and almost impossible to police. Type of trade is the obvious weak point, as proven by the flat rate system. That has been subject to major changes in the last couple of years due to abuse, and it still has an upper turnover limit. Do you really think it is a good idea to apply that knowingly flawed system to all taxpayers?

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Replying to stepurhan:
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By Richard Cliff
01st Sep 2021 09:17

stepurhan wrote:

I really don't think the UK tax system really needs added complexity.

Such a system would be a nightmare to design and almost impossible to police. Type of trade is the obvious weak point, as proven by the flat rate system. That has been subject to major changes in the last couple of years due to abuse, and it still has an upper turnover limit. Do you really think it is a good idea to apply that knowingly flawed system to all taxpayers?


I see you mentioned the flat rate system there, that we've already got with VAT. Maybe a flat rate system would be ideal for small traders below the £85,000 turnover limit, where we just work out tax and national insurance on the turnover with just WDA allowed for Capital Allowances and no balancing allowances allowed. Just an idea to throw in the pot!
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Replying to Richard Cliff:
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By Winnie Wiggleroom
01st Sep 2021 09:30

Richard Cliff wrote:

stepurhan wrote:

I see you mentioned the flat rate system there, that we've already got with VAT. Maybe a flat rate system would be ideal for small traders below the £85,000 turnover limit, where we just work out tax and national insurance on the turnover with just WDA allowed for Capital Allowances and no balancing allowances allowed. Just an idea to throw in the pot!

Off topic perhaps, but your idea is a good one - in other countries they have this system and it works well, however I would point out that if it is made optional you will only end up with the same fiasco as FRS VAT where we only advised clients to be on it where it was to their advantage so it was never really about simplification it became about saving money and therefore we now have the limited cost trader nonsense.

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Replying to Winnie Wiggleroom:
Stepurhan
By stepurhan
01st Sep 2021 11:59

Winnie Wiggleroom wrote:

Off topic perhaps, but your idea is a good one - in other countries they have this system and it works well.


Do you happen to know any specific countries? I would be interested to see how they make such a system work.

As you say, if it was optional it would not serve its purpose. They would have to have a much finer classification than the VAT flat rate scheme to make it palatable as a compulsory scheme.

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Replying to stepurhan:
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By Winnie Wiggleroom
01st Sep 2021 13:17

stepurhan wrote:

Winnie Wiggleroom wrote:

Off topic perhaps, but your idea is a good one - in other countries they have this system and it works well.

Do you happen to know any specific countries? I would be interested to see how they make such a system work.

As you say, if it was optional it would not serve its purpose. They would have to have a much finer classification than the VAT flat rate scheme to make it palatable as a compulsory scheme.

France - two different rates depending on whether you buy and sell goods or offer services

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Replying to GHarr497688:
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By spilly
31st Aug 2021 15:02

This is too complex, but how about all new businesses are started on MTD from the off? The numbers of those in the system will build gradually, giving HMRC time to iron out the inevitable glitches encountered by real users (not just keen volunteers).

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Replying to spilly:
paddle steamer
By DJKL
31st Aug 2021 15:22

Somewhat anti competitive that new market entrants have such a barrier erected.

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Replying to DJKL:
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By spilly
31st Aug 2021 23:54

I was working from the supposition that new entrants are likely to be younger and therefore happier to engage with the tech requirements. Or to put it another way, they are less likely to have entrenched working practices that may make them resistant to MTD.

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By ireallyshouldknowthisbut
31st Aug 2021 13:58

Another simple answer

Anyone with less than 20 transactions a month.

Folks with more than that would tend to benefit from software anyhow....

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By Paul Crowley
31st Aug 2021 14:27

"Scooby
By gainsborough
23rd Aug 2021 14:39
There have been a few petitions on this - most have attracted around 20-90 signatures and then the 6 month time limit kicks in and it goes nowhere.

The latest one asks for the threshold to be aligned with the VAT threshold and has just 54 signatures https://petition.parliament.uk/petitions/589102. Maybe if all of us and our clients signed it, word would spread?"

I was number 64
Only 68 as of today

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Replying to Paul Crowley:
Tornado
By Tornado
31st Aug 2021 14:49

There are too many Petitions these days and their effectiveness has been diluted (see link below) so I do not support them any more myself,and I think others feel the same. In addition, the Petition is about something that only a relatively small number of people know about (or care about) at the moment, so this widespread ignorance is making it look as though people are not interested.

Ironically, this ignorance of MTD for ITSA will only increase the potential failure of this Project and a Petition will not be required to help with this.

https://petition.parliament.uk/archived/petitions/115895

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Replying to Tornado:
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By snickersinatwix
31st Aug 2021 14:53

signed

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Replying to Tornado:
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By David Ex
31st Aug 2021 15:59

Tornado wrote:

"https://petition.parliament.uk/archived/petitions/115895" rel="nofollow">https://petition.parliament.uk/archived/petitions/115895

Good grief! What a load of gobbledegook and lies.

“Many taxpayers have told HMRC that they want more certainty over their tax bill, and don’t want to wait until the end of the year, or even longer, before knowing where they stand with their taxes.” I bet they haven’t and, even if they had, they certainly wouldn’t have wanted MTD!!

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Replying to Tornado:
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By Cathy Milligan
03rd Sep 2021 10:15

Signed - 94 now

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By cbp99
31st Aug 2021 15:04

Agreed. The idea of MTD is supposedly to reduce loss of tax revenue arising from errors. Presumably (although HMRC's analysis of the causes of the supposed loss is opaque), the larger losses can be attributed to the larger businesses.

The other major cause of tax revenue loss is from those who simply evade their filing obligations, and who will continue to do so.

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By Winnie Wiggleroom
31st Aug 2021 19:06

While I agree that people with one or two BTLs and very small businesses should be excluded I am totally confused by people that say raise the threshold to 85k - if your business is over 85k you are already in MTD for VAT anyway!

So if you raise it to 85k for MTD IT no one will be in it that is not in it already - am I missing something here?

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Replying to Winnie Wiggleroom:
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By DKB-Sheffield
31st Aug 2021 19:38

Winnie Wiggleroom wrote:

So if you raise it to 85k for MTD IT no one will be in it that is not in it already - am I missing something here?

I would say so, "yes".

ITSA will (surely) be a step up from VAT. A gradual step, but a step up all the same.

VAT is concerned with the 9 boxes only. It doesn't relate to profit or income tax. It doesn't include payroll (etc.). It does include asset purchases (including those where AIA is disclaimed).

Add to that the way that many unrepresented businesses (and some represented ones as well) believe the only entries required on a VAT return are those with a VAT liability (ignoring 0%, exempt OOS) and the figures are a bit of a mess.

This results in a VAT return being unusable to calculate a profit - or tax liability.

I have profitable businesses who have a box 6:7 deficit as well as loss-making businesses who have a box 6:7 surplus. I'm sure you do too.

The "beauty" of (at least) starting with VAT registered businesses (which I'd even be generous to HMRC and say "include voluntary registrations") is that any future introduction of MTDITSA to lower turnover businesses will be easier (tried and tested) and will ensure the glitches with MTDfV and RTI (and going back SA Online and YE Payroll P35) will hopefully be resolved BEFORE inflicting this on the smaller unreprepesented (and represented) taxpayer (i.e. those who are unlikely to have, procedures in place, or require, in-house accounting support).

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Replying to DKB-Sheffield:
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By DKB-Sheffield
31st Aug 2021 19:56

Oh, and I missed...

Reverse Charge VAT! Sale and purchase, but not really a sale at all?

Flat Rate VAT! Only capital purchases on the return?

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By bernard michael
01st Sep 2021 09:56

I'll vote for that but at least make the rental income net after expenses rather than gross

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Tornado
By Tornado
01st Sep 2021 10:55

UNIVERSAL SOFTWARE

Whilst in principle the idea of digitising Government (not just taxation of course, but everything) is not a bad idea at first glance, I think the practicality of fully functioning integrated software being created to do this is impossible, and even it was, it would be necessary for the Government to provide the only software/online access for us to use so that everything was standardised.

The main fault with MTD for VAT and ITSA, in my opinion, is that for this to work properly, HMRC would not only have to create the software for their internal systems but also all of the software that we would use to interact with them. This way we would all be using the same software that has been designed to provide HMRC with exactly the information it requires and any ongoing amendments or updates can be applied at any time to everybody's data in the cloud. There would only need to be one training course to understand how to use the software and Accounting and Taxation staff could move from job to job and immediately be able to use the software as it is the same that everyone else is using.

That is the ideal situation to accompany the MTD aspirations of the Government, but this is obviously an impossible dream and based on the Governments past record of software development and application, it will be well beyond their capabilities. Not only that, what about the security of the internet, lost data, limited internet access and all the other numerous problems that we all encounter on a daily basis.

Time after time in the past, the Grand Plans of HMRC have ended up being a mere shadow of the original idea, and often with massive back-peddling near to the implementation dates and in my opinion, MTD for ITSA will be the same.

Of course, MTD will fail because under the present plans there are too many exceptions not least of all the hundreds of different tax and accounting programs of varying quality and ability to use, and whilst they are all supposed to comply with just a limited HMRC specification, a lot do not even do that.

This is mainly why I believe the MTD project will fail all round. In a democracy the kind of ultimate control that the MTD project smacks of is State Control of everything and this just will not happen in this Country. Apart from the fact that, unless they are working for the Government, all tax and accounting software developers will become redundant, and more people will be working for the Government, I believe this is totally unacceptable to most of us.

The Government is elected by us, and works for us, and is not there to impose its will on us but to do what we tell it to do. MTD has a slightly sinister overtone and will not succeed unless we cease to be a democracy.

So MTD is doomed to self-destruction as it does not fit in with our wants and needs as a Nation but various aspects of the idea are acceptable and it is those aspects that should be encouraged by consent and not by imposition.

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Replying to Tornado:
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By bernard michael
01st Sep 2021 11:08

Tornado wrote:

UNIVERSAL SOFTWARE

Whilst in principle the idea of digitising Government (not just taxation of course, but everything) is not a bad idea at first glance, I think the practicality of fully functioning integrated software being created to do this is impossible, and even it was, it would be necessary for the Government to provide the only software/online access for us to use so that everything was standardised.

The main fault with MTD for VAT and ITSA, in my opinion, is that for this to work properly, HMRC would not only have to create the software for their internal systems but also all of the software that we would use to interact with them. This way we would all be using the same software that has been designed to provide HMRC with exactly the information it requires and any ongoing amendments or updates can be applied at any time to everybody's data in the cloud. There would only need to be one training course to understand how to use the software and Accounting and Taxation staff could move from job to job and immediately be able to use the software as it is the same that everyone else is using.

That is the ideal situation to accompany the MTD aspirations of the Government, but this is obviously an impossible dream and based on the Governments past record of software development and application, it will be well beyond their capabilities. Not only that, what about the security of the internet, lost data, limited internet access and all the other numerous problems that we all encounter on a daily basis.

Time after time in the past, the Grand Plans of HMRC have ended up being a mere shadow of the original idea, and often with massive back-peddling near to the implementation dates and in my opinion, MTD for ITSA will be the same.

Of course, MTD will fail because under the present plans there are too many exceptions not least of all the hundreds of different tax and accounting programs of varying quality and ability to use, and whilst they are all supposed to comply with just a limited HMRC specification, a lot do not even do that.

This is mainly why I believe the MTD project will fail all round. In a democracy the kind of ultimate control that the MTD project smacks of is State Control of everything and this just will not happen in this Country. Apart from the fact that, unless they are working for the Government, all tax and accounting software developers will become redundant, and more people will be working for the Government, I believe this is totally unacceptable to most of us.

The Government is elected by us, and works for us, and is not there to impose its will on us but to do what we tell it to do. MTD has a slightly sinister overtone and will not succeed unless we cease to be a democracy.

So MTD is doomed to self-destruction as it does not fit in with our wants and needs as a Nation but various aspects of the idea are acceptable and it is those aspects that should be encouraged by consent and not by imposition.


...... and in the meantime until it self implodes we are left with a dogs dinner to sort out that is meaningless to HMRC who don't really understand it any more than we do because nobody explains exactly what is required
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By Brodders
03rd Sep 2021 09:57

I said this in a meeting with HMRC 6-7 years ago when this madness was first thought of - they didn't seem to understand then. And don't seem to understand now.

It is utter madness such a low threshold. It won't work (because what it is doing is utterly pointless).

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By North East Accountant
03rd Sep 2021 10:23

Simple solution indeed....... and make it one return for both VAT and IT .

Next steps;
1) no VAT between VAT registered entities.
2) reduce VAT limit by £15K per annum on 01.04 each year.
3) align VAT limit after 5 years with Personal Allowance.
4) Once a business is VAT registered (when they also join MTDfVAT) it gets a min of 6 months, max of 18 months before it has to join MTDfIT after that on the next 06.04.
5) MTDfIT Year 6 - bring in Landlords assuming technical issues on joint properties etc are worked out well in advance.
6) At some point in the process, say 01/10/23, introduce mandatory E-invoicing where VAT registered (exc Retail, Hospitality, etc) for all work undertaken, services provided, etc punishable by either £1K fine per month (£12K per annum) or 1 month in jail for each month of failure to do so.

So nicely phased in over 6 years and at the same time remove the VAT limit disincentive to grow your business, and a huge incentive to ensure that all income is invoiced and recorded properly.

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Replying to North East Accountant:
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By bernard michael
03rd Sep 2021 10:33

North East Accountant wrote:

Simple solution indeed....... and make it one return for both VAT and IT .

Next steps;
1) no VAT between VAT registered entities.
2) reduce VAT limit by £15K per annum on 01.04 each year.
3) align VAT limit after 5 years with Personal Allowance.
4) Once a business is VAT registered (when they also join MTDfVAT) it gets a min of 6 months, max of 18 months before it has to join MTDfIT after that on the next 06.04.
5) MTDfIT Year 6 - bring in Landlords assuming technical issues on joint properties etc are worked out well in advance.
6) At some point in the process, say 01/10/23, introduce mandatory E-invoicing where VAT registered (exc Retail, Hospitality, etc) for all work undertaken, services provided, etc punishable by either £1K fine per month (£12K per annum) or 1 month in jail for each month of failure to do so.

So nicely phased in over 6 years and at the same time remove the VAT limit disincentive to grow your business, and a huge incentive to ensure that all income is invoiced and recorded properly.

The OP said SIMPLE

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By JustforDavid
03rd Sep 2021 10:24

Plus the fact that in the entertainment business one year can be self employed( sometimes under, other times over £10k) , another year may be employed , with frequent switching between the 2 depending on contracts obtained, other years mixtures of E & SE. How on earth do you try & comply , & to boot suffer extra costs & disruption needlessly for part of the time ?

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Replying to JustforDavid:
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By KateR
03rd Sep 2021 10:44

And if using an agent to find work then income arriving in bank will be net of agent's fees and possibly pension contributions. Use a bank feed and gross income will be misleading. Suppose income via bank feed totals £75k over a year - true turnover might easily be over VAT threshold. How is the software going to cope with this?

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By bernard michael
03rd Sep 2021 10:26

As I said on the main MTD posting why won't HMRC publicise MTD via a fact sheet sent to the self employed and landlords ??

The reason is they are scared of the negative feed back that will occur so they leave it to us instead and we get the flack

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Tornado
By Tornado
03rd Sep 2021 10:51

As I have said before on several occasions, it is not our responsibility to make MTD for anything to work, that is fairly and squarely the responsibility of HMRC, and they have been given £billions to fulfil that responsibility whereas we have been given nothing.

When it comes to deciding if a client is going to earn you something or perhaps cost you something (actual cost or opportunity cost) then in the case of the latter the obvious solution is to refer them to HMRC for assistance as they are the entity with the funds to deal with the situation.

Whilst there is clearly both a legal and moral obligation to assist clients that you take on, there is no such obligation if they are only prospective clients or those that you no longer wish to act for.

So I am assuming that HMRC have the funds to publicise the upcoming changes and will soon be advertising these and providing the helplines that people can ring to find out all about their own individual situations.

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Replying to Tornado:
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By bernard michael
03rd Sep 2021 11:02

Tornado wrote:

As I have said before on several occasions, it is not our responsibility to make MTD for anything to work, that is fairly and squarely the responsibility of HMRC, and they have been given £billions to fulfil that responsibility whereas we have been given nothing.

When it comes to deciding if a client is going to earn you something or perhaps cost you something (actual cost or opportunity cost) then in the case of the latter the obvious solution is to refer them to HMRC for assistance as they are the entity with the funds to deal with the situation.

Whilst there is clearly both a legal and moral obligation to assist clients that you take on, there is no such obligation if they are only prospective clients or those that you no longer wish to act for.

So I am assuming that HMRC have the funds to publicise the upcoming changes and will soon be advertising these and providing the helplines that people can ring to find out all about their own individual situations.


Your assumption butters no parsnips. HMRC won't do it
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Replying to bernard michael:
Tornado
By Tornado
03rd Sep 2021 11:24

'Your assumption butters no parsnips. HMRC won't do it'

Of course they won't, and that is just one of the reasons why this project will not work.

The multitude of other good reasons that have been raised by AWEB contributors as to why this project will not work are increasing daily and place the lack of HMRC interaction with customers well down the list of priorities.

What a bunch of clowns they are.

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By Nebs
03rd Sep 2021 14:53

Take 3 MPs, lock them in 3 rooms with a laptop and identical carrier bags of 3 months records for a hypothetical corner shop, and tell them to make their first submission. If it is supposed to remove errors then they should all make identical submissions, and if it is as simple as HMRC make out then they will be out in time for lunch.

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Replying to Nebs:
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By bernard michael
03rd Sep 2021 15:02

Nebs wrote:

Take 3 MPs, lock them in 3 rooms with a laptop and identical carrier bags of 3 months records for a hypothetical corner shop, and tell them to make their first submission. If it is supposed to remove errors then they should all make identical submissions, and if it is as simple as HMRC make out then they will be out in time for lunch.


Or if it is as simple as the average MP they'll be there until Christmas
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By Arbitrary
03rd Sep 2021 21:54

I remember proposing this a very long time ago and no-one appeared to be interested. So much for common sense.

I, too, am convinced this low limit is basically an attack on small self employment. Why else would HMRC be so keen on it? The property income part of it, which is clearly absurd, is just cover. Alternatively HMRC is/are just idiots. Or both, which is distinctly worrying.

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By swimmer
09th Oct 2021 23:58

Please note there is a petition to raise the MTD threshold from £10,000 to £85,000:
https://petition.parliament.uk/petitions/589102

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