The worm that turned?

Time to do something about the MTD ITSA fiasco

Didn't find your answer?

Enough is enough.

As a profession we have put up with all the stupid initiatives heaped on us over the years, but really MTD ITSA is the final straw.

A firm can have hundreds or thousands of tax returns to file annually and currently has between April and January to get them all done, which is barely manageable, but we are used to it and the system works.  

Now we are expected to file them quarterly.  They are not simply 'updates', they are tax returns.  Don't be fooled into thinking any initial concessions to allow estimates, or rubbish to be filed will last.

This is just not feasible.  It will be January every few months.  

What are we supposed to do?  Quadruple our fees?  Quadruple our staff?  (can any firms even manage to recruit anyone at this time?)  Sack 75% of our clients?  Who else would even have capacity to take them on?

This is going to take a wrecking ball to the entire profession and the taxpaying public. We are sleepwalking into an almighty mess and nobody is doing anything about it.

We have heard this week that the professional bodies have written to the Government expressing their 'support' for the proposals but merely urging 'delay'.  Support? Delay?  This thing needs strangling at birth.

I am loathe to say trade union, but is it now time that some sort of professional accountants association was formed that takes a more confrontational approach and loudly and rudely calls out this BS?

Thoughts?

Replies (436)

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Replying to petersaxton:
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By johnjenkins
02nd Sep 2021 12:55

Finally we agree on something (big fanfare, a sigh of relief from other posters). It's lunchtime and I think this thread has run its course. Well done Jon.

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Replying to johnjenkins:
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By lionofludesch
02nd Sep 2021 12:24

johnjenkins wrote:

Of course you reduce the price if there's no vat involved. Take the hairdresser that's not vat registered, they can charge cheaper than the one that is. Not rocket science.

No "of course" about it. I'm off to Tesco's soon - I'll check the Nesquik prices.

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Replying to johnjenkins:
By petersaxton
02nd Sep 2021 09:42

"Does it matter if someone is on PAYE and has say rental income of £9k or £11k? You totally miss the point."

That's the nature of thresholds. Does that mean you don't agree with personal allowances or CGT annual allowances?

"No VAT changes hands between registered business but I'm pretty sure you knew what I meant"

It's always best to be clear.

"VAT is not supposed to be a tax on business. By having a threshold greater than £0 it does become a tax on business."

It's a "voluntary tax on business". A business can easily avoid this tax by registering for VAT.

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Replying to petersaxton:
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By johnjenkins
02nd Sep 2021 10:14

VAT is totally different from PA, CGT and IHT. VAT is not supposed to be a tax on business therefore there should be no threshold. The threshold is only there for HMRC to get more money. I am already embarking on a mission to persuade all my unregistered clients to be VAT registered. I have already analysed what they would save even taking our extra costs. Some are going to be pleasantly surprised especially as quite a few will be on reverse charge so they will get refunds. All done on VT with not a cloud in sight.

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Replying to petersaxton:
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By Jimess
01st Sep 2021 15:06

Please explain in simple terms how you think it will magically make our work simpler.

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Replying to Jimess:
By petersaxton
01st Sep 2021 15:56

what?

magically? you seem to have your mind made up already.

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Replying to Jimess:
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By lionofludesch
01st Sep 2021 12:50

Jimess wrote:
In most cases the accountant does not have access to the information throughout the quarter to adjust and amend throughout the VAT period.

Most cases ?

I'd say few cases. In my experience, if the client writes up the books, the client submits. If the accountant submits, he'll be the one who'll have wriiten up the books.

Having said that, this thread has been a constant source of surprise in terms of how other accountants work.

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Replying to lionofludesch:
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By Jimess
01st Sep 2021 15:20

We work with clients in various ways - some do maintain their own books and submit their own returns, some work with spreadsheets and send them with their supporting documents at the end of the quarter for us to upload into our software, and some want us to do the bookkeeping for them, but we rarely get the information throughout the month - it is always a week or so after the month end or quarter end when they have gathered in all of the relevant paperwork.

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Replying to Jimess:
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By Winnie Wiggleroom
01st Sep 2021 15:32

Jimess wrote:

We work with clients in various ways - some do maintain their own books and submit their own returns, some work with spreadsheets and send them with their supporting documents at the end of the quarter for us to upload into our software, and some want us to do the bookkeeping for them, but we rarely get the information throughout the month - it is always a week or so after the month end or quarter end when they have gathered in all of the relevant paperwork.

Yes and as I have repeatedly suggested if you carry on that way you will have no chance with MTD, in my experience the only way this will work is if you change that and start work in M1

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Replying to Winnie Wiggleroom:
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By Jimess
02nd Sep 2021 09:49

The choice of how clients keep their books is not ours to make - very often clients onboard with an established system that works for their business and who am I to change that? I am not against digital record keeping, I have used electronic software for client work, bookkeeping and payroll work for more years than I care to mention and if it is used diligently and with the correct amount of knowledge and understanding of bookkeeping principles it is absolutely fine. What I do not like is people using software incorrectly with little or no understanding of what they are trying to achieve with it, who do not have the time or the inclination to learn how to use the software properly, nor the resources to employ someone to do that work for them - that causes more work than receiving a bagful of papers at the end of the year to work with. Finally, what I am totally against is change for it's own sake driven by a specific group of people who will be the only ones to benefit and everyone else has to pay the price in order to jump to their tune. I am not a Luddite - I just work with human beings.

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Replying to Jimess:
By petersaxton
02nd Sep 2021 09:59

"The choice of how clients keep their books is not ours to make - very often clients onboard with an established system that works for their business and who am I to change that?"

I totally agree. I also think that accountants should use software that works for them. If a client wants to use software then they should look for an accountant who also wants to use that software. The client shouldn't dictate what software an accountant uses any more than an accountant should dictate what software the client uses. Surely it's a matter to be agreed on? If a client wants to bring in their books on 31 January (or another date) for you to submit their tax return by the 31st January should the accountant agree to that because it's the client's preference?

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Replying to petersaxton:
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By Jimess
02nd Sep 2021 13:47

Accountants do have a choice with the practice software they use and that choice should not prevent them from supporting clients who use a particular brand of software. Most practice software these days supports some form of import facility to enable the transfer of client data, so whether the accountant uses the same brand of software as the client is irrelevant. Under MTD for ITSA that might be a little more tricky if HMRC insist on the registration of software as is currently the position with MTD for VAT.
As for your final point on the date clients provide books - if a client brings the books in on 31 January we have the option to say no if we so wish, we also have the option of accepting the books with the caveat that realistically the return would not be submitted that day. That is a matter to be discussed with the client when it arises. If they leave everything to the deadline day, they risk the penalties. Hardly the same as working with the clients choice of software is it? I am not dictating the deadline - HMRC does that. If clients are insufficiently organised that they provide their tax return information at the last minute, no amount of digital record keeping is going to change that.

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Replying to Jimess:
By petersaxton
02nd Sep 2021 16:04

If a client wants to use different software I am quite ok for them to use it and I will submit the year end accounts and tax. If they are wanting me to do the detailed bookkeeping then I will decide the software I use.

Transfer of client data regularly seems ridiculous.

"Under MTD for ITSA that might be a little more tricky if HMRC insist on the registration of software as is currently the position with MTD for VAT."

What's this "registration of software"? I've not seen any registration requirement. Do you have a link?

Software used and timing of delivery of data are both matters that should be discussed between client and accountant. I don't mind clients using what software they want as long as I can easily run reports from them. If I have 200 clients and they all want different software and expect me to have a detailed understanding I am never going to agree to that.

I will choose brand of software and make sure I understand it well. Clients can attach documents and explain the transactions or ask me to do that. I would tell clients when I need any documentation.

I think that is reasonable.

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By DKB-Sheffield
28th Aug 2021 15:16

I'm sure this only the 100th thread of 1000's that will come up between now and 2023. I don't believe for 1 minute there will be an entire backtracking (or even a delay) by HMRC on what they see as the answer to their problems (albeit not - in many cases - a simplification of problems for their "customers"). It's HMRC's "pet" project and like it or lump it, we're stuck with it.

The biggest surprise to me throughout this thread is those who are suggesting there will be no additional work, no additional inconvenience to clients, and the only additional process is the clicking of a button 4 times per year! I accept, some VAT registered clients will be lower impact (although there will be additional work to do), whereas others - the £10K landlord (<4 hours per annum with 9 months of chasing) will pose a significant increased time burden (likely quadruple) which will be unlikely be matched (or accepted) by increased fees. Furthermore, and even at £3.00 pcm (inc. VAT) for Pandle those clients will not pay! The result, 4x the work, increased software cost, no fee increase, less profit - potentially loss-making in some cases!

However, and notwithstanding the above, I have serious questiond about some of the suggestions on here...

BANK FEEDS
These are helpful for bank reconciliation processes. However, they do not:
1. Prove the substance of a transaction
2. Prove the receipient of goods and services
3 . Confirm the value or rate of a VATable supply
4. Prove that an invoice was actually received by the client

By way of 3 examples:
1. Bank feeds shows purchase from Amazon: Is this personal, is it an asset, is it stationery, does the value include VAT etc.?
2. Bank feeds show electricity/ gas payment: What is the effective VAT rate? I have a number of clients whose usage fluctuates between micro business (5%) and small business (20%).
3. Bank feed shows software purchase from US company: Was UK VAT applied? Was it R/C? The transaction value does not confirm this.

Furthermore, in order to rely on bank feeds, do we not also need every personal and joint account to feed in too? I can't count the number of times clients have provided sales/ purchase invoices that are not showing on the business account! It's an easy mistake - most bank cards are identical and often do not show the business name!

Then there is cash! Client runs a cash-based business. £10K turnover per week, £5K paid on expenditure £3K in drawings, £8K paid in to bank account once per month. So bank feed suggests £8K pcm turnover?!

Over-reliance on bank feeds is, to me, a dumbing down of accounting. However, if someone can point me to the legislation that states primary records are no longer required for IT/ VAT (and while I'm at it CT and CA2006), I'll eat my hat!

IT'S THE SAME AS MTDfV
It isn't though is it?
Firstly, MTDfV was, by it's nature aimed at larger businesses (>£85K t/o). Many of those businesses had some processes in place (or if they hadn't - probably needed to). They were already preparing and filing quarterly returns. They already had to keep books up to date. The main difference was that, instead of keeping manual records, they are now mandated to keep records electronically. However the majority were already doing that (using software, spreadsheet etc.). The change to MTDfV was therefore less onerous.

Secondly, MTDfV (and VAT in general) is interested in current quarter VAT transactions only. Accruals, prepayments, wages/ taxes, AR/AP recipts/ payments (ignoring Cash Accounting) are largely irrelevant. I am yet to hear of anyone who has received a VAT penalty because they forgot to accrue holiday pay. Why? It's not a 'box' entry.

To report ITSA accurately, accounting adjustments are surely required?! That will require a full review of accounting records. Whilst I do agree this will save some time at year end, it is not time neutral! Efforts to chase clients, open the file, prepare WPs, reconcile, prepare management/ draft accounts, check figures file the return, feedback to client, and close the file, all take time and won't save an equal amount of time at year end!

THE WORK CAN BE DONE DAILY/ WEEKLY
In the absence of relying entirely on bank feeds (as above), this will require clients to also provide invoices (etc.) daily/ weekly. Aside from the fact this won't happen, there are 365/52 chances for clients to miss items (partucularly those who work with paper sales/purchase invoices, paper fuel receipts etc.). That is effectively 365/52 times I need to chase missing info, and 365/52 times a correction to - or revisiting of - the software is required. 4 times per annum will be bad enough but that does mean a major rush from mid-July 2023 to the filing deadline.

Furthermore, and whilst this may seem callous, if part of every day or (say) a day or two a week, is spent carrying out (unpaid) bookkeeping/ chasing, what about limited company clients, partnerships etc.? These clients still require time spending on them. They still have accounts to file. They nearly all have financial year ends and VAT periods that match tax quarters. They are already more "profitable" per hour than the average sole trader. Moreover, their work will not easily fit around the idea of constantly breaking off to chase and update Jo(e) Sub's diesel receipts.

FILE "RUBBISH" FOR 4 RETURNS AND A CORRECT 5TH
Whether it's professional pride, or a deep rooted suspicion of HMRC, I can't bring myself to do this. In some cases this may be somewhat acceptable (i.e. where income and profit have clear fixed margins), in many cases I suspect inaccurate figures will result in compliance checks.

Take Jo(e) Sub as an example. 6 months of the year (s)he is a labour-only subcontractor. Turnover £25K, profit £20K. Q3 & 4 would hence follow suit (80% profit). Q3 & 4 t/o is £50K (assume and file £40K profit). However Jo(e) didn't mention that the t/o was from building an extension and profit was actually £15K. The final submission shows £25K less profit than the MTD Quarterly submissions. This is a material variance! Surely it will be picked up by HMRC's computer and flagged for a compliance check?!

Finally, and whilst these issues WILL be overcome, I do find suggestions that there will be no extra work, that bank feeds are the answer to everything, and that it will be relatively easy for the taxpayer (represented or otherwise) to adapt (at no extra cost) are somehat out of touch! YES some will have no problem adapting but, my 80-year old client with a handful of residential properties will never get to grips with it and will need considerably more handholding (yes, possibly 4x) than they do now!

Thanks (14)
Replying to DKB-Sheffield:
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By Jo Nokes
28th Aug 2021 15:39

Thanks for that brilliant summary. I agree with every word. Wouldn't it be great to get a response from HMRC addressing our concerns

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Replying to Jo Nokes:
RLI
By lionofludesch
28th Aug 2021 15:43

Jo Nokes wrote:

Thanks for that brilliant summary. I agree with every word. Wouldn't it be great to get a response from HMRC addressing our concerns

It would be along the lines of

"Ach - it'll be grand."

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Replying to lionofludesch:
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By Hugo Fair
28th Aug 2021 17:39

Or,

"Oh … addressing YOUR problems?"

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Replying to Hugo Fair:
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By DKB-Sheffield
28th Aug 2021 17:54

Or...

"We did a survey of 2,000 MTDfV 'customers'* and they told us MTDITSA would work and is what they want!" Pretty much what they already have said!

*Strangely, I don't remember seeing details of how many of those were large corporates - or indeed - companies/ partnerships. Certainly no mention of whether any were £85K to £90K borderline MTDfV mandatory taxpayers.

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Replying to DKB-Sheffield:
By petersaxton
28th Aug 2021 18:30

Your problem seems to ignore the solutions.
Tell clients not to use business bank accounts for personal transactions. Explain that if they do it could cost more.
If clients get cash then post it to a cash "bank account". When they bank it treat it as a transfer.
Whether electricity and gas is 5% or 20% it will say on the document which should be attached to the transaction.
I dont think anybody, except HMRC, is saying there wont be extra work. Nobody would ever change anything if they refused because it would involve extra work.
My dishwasher broke down last year. Me and the wife went to Curry's to buy a dishwasher. I didn't say: "I'm not going to buy another because it's extra work!".
Accountants should expect rules and regulations will change.

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Replying to petersaxton:
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By Paul Crowley
28th Aug 2021 18:47

But YOU wanted to wash the clothes
You had the option to ignore the problem
The state does not force you

No business is choosing MTD ITSA that does not already keep 'proper' bookkeeping. If it wanted the claimed benefits, it chose to do so without compulsion.
MTD ITSA is at gunpoint by the state for those happy with their current records

If traders want 'better ' quarterly figures they would volunteer.

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Replying to Paul Crowley:
By petersaxton
28th Aug 2021 19:09

If people thought it was that important they could either reduce their turnover to below £10k or get employment.
Would you have been one of those complaining when taxation was introduced? "Working out profits is so difficult!". "I will need an accountant but I've never had to pay for an accountant before!"

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Replying to petersaxton:
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By lionofludesch
28th Aug 2021 21:36

petersaxton wrote:

If people thought it was that important they could either reduce their turnover to below £10k or get employment.

Get employment? Really?

That might be a viable option in wealthy, cash-bloated London but some folk on this forum might like to know that there's less than full employment in other parts of the country.

I've had plenty of clients over the years who were totally unsuited to business. Yet, unable to get a job for one reason or another, self employment represented the best option to provide for themselves and their families.

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Replying to lionofludesch:
By petersaxton
29th Aug 2021 08:00

I was just reading about pubs having problems with getting staff in Any Answers. There seems to be plenty of jobs about all over the country. The problem seems to be that people don't want to work. I'm not saying that small business people don't want to work - quite the opposite - but if somebody wants a job it's easy to get one.

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Replying to petersaxton:
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By DKB-Sheffield
29th Aug 2021 15:29

petersaxton wrote:

If people thought it was that important they could either reduce their turnover to below £10k or get employment.

Peter

You will agree this is one of the oddest things posted on this thread?!

The suggestion a client reduces their turnover below £10K! Are you suggesting the client does less work? Or are you aware that by saying this, the client does less work "on the books". How many businesses out there have a turnover of £80K-£85K? And how many of those are "on holiday" for 3 months of the year?

As for the suggestion to "find a job", 3 clients come to mind...
1. Grandmother (70) looks after 3 grand kids. She is a gardener in term time to supplement pension. T/o £12K. A job would be less convenient.
2. Part time bricklayer (60). T/o around £15K. Working to supplement private pension prior to State Pension kicking in. Struggles to get part time role due to age.
3. H&W (70), 2 rental properties. Rental income £13K p/a. Income supplementing pension.

All will be adversely affected. Not 1 is comfortable with IT (one doesn't have a phone, computer or tablet). None can afford increased fees. And I'd not dream of suggesting any get a job (in a pub as you suggest), reduce their turnover or sell one of their investment properties!

A client's choice is a client's choice. Suggesting reducing their turnover (or worse - artificially reducing their turnover), or getting a job -it's simply not our call, nor does it suggest a deep understanding of a client's needs.

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Replying to DKB-Sheffield:
By petersaxton
29th Aug 2021 16:07

"As for the suggestion to "find a job", 3 clients come to mind...
1. Grandmother (70) looks after 3 grand kids. She is a gardener in term time to supplement pension. T/o £12K. A job would be less convenient.
2. Part time bricklayer (60). T/o around £15K. Working to supplement private pension prior to State Pension kicking in. Struggles to get part time role due to age.
3. H&W (70), 2 rental properties. Rental income £13K p/a. Income supplementing pension."
1 Reduce income by £2k. No MTD.
2 Get bookkeeping done for them.
3 Rental income £6,500 each. Not in MTD.

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Replying to petersaxton:
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By DKB-Sheffield
29th Aug 2021 17:08

petersaxton wrote:

1 Reduce income by £2k. No MTD.
2 Get bookkeeping done for them.
3 Rental income £6,500 each. Not in MTD.

1. Absolutely NOT going to advise this! £2K less income?
2. A free bookkeeper? Or should they just "get a job".
3. Bad example - I apologise. However, if 1 owner, I'll just tell them to sell one of the houses.

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Replying to DKB-Sheffield:
By petersaxton
29th Aug 2021 16:09

"nor does it suggest a deep understanding of a client's needs."
A client's needs is to comply with the law. They dont want or need an accountant complaining about it.

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Replying to petersaxton:
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By DKB-Sheffield
29th Aug 2021 17:37

petersaxton wrote:

"nor does it suggest a deep understanding of a client's needs."
A client's needs is to comply with the law. They dont want or need an accountant complaining about it.

Don't think I ever suggested standing in the way of a client doesn't comply with the law. Nor would I ever work in any way that doesn't facilitate a client's obligation to do so.

I'm not complaining the introduction of the legislation per se. I however take a l great deal of issue with any suggestions that this is 'easier', 'more beneficial' and 'more accurate' than we have now. That is not in reply to you, or any others, it is in response to HMRC (et al). What is inaccurate now, will still be inaccurate in the future. Unrepresented taxpayers (and some of those who are) will still file incorrect returns. Tax advisors will not suddenly become better. People who work 'below the radar' will continue to do so - unnoticed. Will it be easier and more beneficial for the taxpayer? In many cases NO! And I, or others on here are asking that, don't you believe a client will also expect those answers... with bells on?!

Fact is, we have VERY different opinions, VERY different client bases and have VERY different expectations (accountant to client and vice versa)

I suggest it will take longer to comply with the changes in legislation, that it will cost more, that there will be more time taken up by chasing clients to ensure they meet deadlines, and ask what the benefit is.

Your view is that it won't take much longer (certainly not double the time), won't cost much extra, and won't take extra chasing time (clients who ignore chasing/ miss deadlines, must pay the penalty), and that there are numerous benefits.

What I do not understand is how checking (daily/ weekly) that clients are coding transactions, the additional cost of cloud software (whoever pays), and the time lost trying to resolve late submissions, penalties and (potentially appeals) fits with this minimal additional time/ cost model.

Unfortunately, we are not going to agree. You will not convert me to being HMRC's Chief of Staff for MTDITSA's PR & Advertising Department. I will not convince you to accept that there may be some (or many) instances where the implementation of ITSA will increase the time and cost burden on clients and their advisors which cannot be solved by moving them onto cloud accounting.

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Replying to DKB-Sheffield:
By petersaxton
29th Aug 2021 18:03

It will be interesting to see how things work out in practice rather than in theory.

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Replying to petersaxton:
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By DKB-Sheffield
29th Aug 2021 19:32

It will have to work. I'm not suggesting it won't. We have a duty to make it work.

I will not however, be making any false promises to clients that there will be little or no impact. Nor will I be forcing them in a direction that does not fit with them - be it "cloud software", "employment" or "reduced turnover".

What will be will be!

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Replying to DKB-Sheffield:
By petersaxton
29th Aug 2021 20:31

"I will not however, be making any false promises to clients that there will be little or no impact. Nor will I be forcing them in a direction that does not fit with them - be it "cloud software", "employment" or "reduced turnover"."
I wont make any false promises. I will explain to them how they can save money if they are willing and capable of doing more work. They wont have to prepare spreadsheets of sales invoices and bank transactions.
I wont be forcing them in any direction. If they dont want to use Xero they can either do it themselves or find another accountant. If they want to get a job or reduce their turnover that will be their decision. My view is it has always been the client's decision.

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Replying to petersaxton:
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By johnjenkins
31st Aug 2021 12:57

You're so right, Peter, especially as the theory hasn't been run past the people that will have to deal with it. You cannot turn "low techies" into "high techies" overnight or even ever. The concept of quarterly updates for SME's is wrong however many laws you make. You just have to look at the problems IR35 is causing to understand what happens when a concept is wrong.

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Replying to petersaxton:
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By Jimess
01st Sep 2021 15:43

Many clients need to earn a living sufficient to put a roof over their heads and to feed their families - and they find it hard going just to do that. Reducing income is simply not an option for many affected by MTD for ITSA. As for just going out there to get a job - why should they give up something they have built up over a lifetime. It takes a lot of hard work and initiative to build up a business, even at the smallest end of the scale - no-one is going to throw that away for "MTD planning"

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Replying to Jimess:
By petersaxton
01st Sep 2021 16:25

So then it's up to the accountant to help them with MTD for ITSA and not just say it's all too difficult especially when it isn't.

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Replying to petersaxton:
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By Jimess
02nd Sep 2021 10:48

I am not saying it is difficult -it is the scale of the workload we face that keeps me awake at night. It is the impact on the other work we carry out. It is the fact that our clients are ultimately going to suffer higher costs as a result of this, be it software and/or the increased amount of time we spend on their tax matters resulting in increased bills. It is the fact that the clients that will suffer the most from this will be the ones who are already struggling to make a living.
Over the 40 years or so I have worked in the accountancy profession, I have embraced many, many changes because I could see a need for them - the introduction of self assessment was challenging, but it was necessary. HMRC worked with the accountancy profession and got us on board, explained their reason for introducing it and gave us and our clients plenty of time - and support, to make it a successful rollout. I cannot see any good reason for the introduction of MTDfor ITSA in it's proposed form and there has been nothing coming from HMRC to support it's rollout. A promise was made some years ago to make tax simpler, less onerous. What we have actually seen is layer upon layer of complexity and absurdity - how many clients have fallen foul of the Child Benefit clawback rules, how many couples understood how they could claim the marriage allowance, or how many times have you had to explain to a client the full tax implications of the fantastic company car benefit they have just been awarded - don't get me started on the Capital Gains on residential property transactions reporting debacle. The once a year self assessment tax return works - it pulls everything together in one place. There are perhaps improvements to be made, but it works. What doesn't work is that HMRC have not yet successfully joined up the PAYE system to the self assessment system so the P800 calculations coming out are often a farce. The capital gains tax reporting system does not interact with the self assessment system in any meaningful way. Part of me worries that this constant disjunction of various parts of the tax system is just going to become so unworkable. There are many things within HMRC that currently require far more urgent attention - "customer" service issues being the most prominent. If HMRC are taking several months just to answer correspondence, if we are lucky, or to process VAT registrations, how on earth do they think they can successfully onboard MTDforITSA within the timescale they have proposed?

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Replying to Jimess:
By petersaxton
02nd Sep 2021 10:59

I agree that HMRC has many problems.

I think the two big advantages of MTD are:
When HMRC eventually insists on cloud accounting software they will be able to do more compliance checks, and
When clients and/or accountants get used to recording transactions when they happen everything will be a lot more efficient than it is now.

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Replying to petersaxton:
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By johnjenkins
02nd Sep 2021 11:13

Peter, the whole purpose of MTD is for HMRC to have tags on all transactions so that they can cross check without having to open enquiries or investigations. The Big Brother scenario. So in saying MTD has two big advantages, be careful what YOU wish for.

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Replying to petersaxton:
RLI
By lionofludesch
28th Aug 2021 19:02

petersaxton wrote:

My dishwasher broke down last year. Me and the wife went to Curry's to buy a dishwasher. I didn't say: "I'm not going to buy another because it's extra work!".
Accountants should expect rules and regulations will change.

I don't really get dishwashers. Apparently, you need to rinse the pots before you put them in the dishwasher. Why do I need a dishwasher to wash pots I've already washed?

I take it there's no bank feed for this cash bank account.

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Replying to lionofludesch:
By petersaxton
28th Aug 2021 19:13

Rinsing and washing are two different things.
"I take it there's no bank feed for this cash bank account."
Your take is wrong.
"Xero Non-VAT Cashbook is for clients who don’t need invoicing or VAT reporting. Get daily bank feeds of client bank transactions in addition to all the features of Xero Ledger. You can let clients code their transactions and view their data and reports."
That's not bad for £72 per year.

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Replying to petersaxton:
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By DKB-Sheffield
29th Aug 2021 13:54

petersaxton wrote:

That's not bad for £72 per year.

Even at that rate...

Say it's £200 for a property and core SATR (price not indicative - just a figure).

2020/21 - 4 hours = £200
2023/24 - 4 x 2 hours = £200 - £72

To make the same money (per hour), that fee has to increase to £472.

Either client or accountant or both lose out.

Is there anyway the client and accountant can pay/ receive the same? Only if the time required to process the quarterly returns (reconciliations, WPs, draft 'accounts', depn, accruals, prepayments, wages journals etc.) is reduced to 40 minutes per quarter!

Is the client entering into software actually going to save more time at all?

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Replying to DKB-Sheffield:
By petersaxton
29th Aug 2021 14:45

I dont see why it should take twice as long. If HMRC want the data electronically then I think it's reasonable for the client to pay for the software. My clients can do any extra work required if they are capable or I will charge them if I need to do any extra work. I think the vast majority of clients can do more if it will save them money. If you baulk at "save them money" I am talking about complying with their new obligations. Accountants help clients to observe the law and get paid for it. They shouldn't have to provide any of their services for free.

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Replying to petersaxton:
avatar
By DKB-Sheffield
29th Aug 2021 16:40

petersaxton wrote:

I dont see why it should take twice as long.

Quite simple.

Client is chased to bring information in, not once, 4 times.

Client brings information in 4 times per year, not once. That's 4 client meetings, not 1. May be less to discuss but, not 1/4 the time.

Client file is retrieved, prior workings are reviewed, reversals posted. Not 1 time per annum. 4 times.

Client data entered 4 times, bank reconciled 4 times, control accounts reconciled 4 times (not once). Admittedly the volume of data is lower but, it doesn't take 4 times as long to enter 4 times the amount of data (due to ability to copy important info from previous lines etc.)

Client accruals, prepayments, prepaid income etc. 4 times per year, not 1. There may be a lower value to prepay but a transaction for £10 does not take 1/4 the time to post as one for £40.

Return prepared, explanatory letter prepared 4 times not once.

Client comes for meeting to approve return 4 times per year, not once.

Return filed 5 times per year, not once.

Clearly there are some corners that could be cut/ rounded off. However, it is a long cry from taking a slightly longer/ equal amount of time!

petersaxton wrote:

My clients can do any extra work required if they are capable or I will charge them if I need to do any extra work.

That is your prerogative. However, I'm not going to turn round to a long standing client and say "You WILL use cloud accounting software. But because you are not computer literate (or in a few cases have learning difficulties), I'll charge you a lot more". The law does not suggest cloud software is obligatory so, I'd hate to be on the end of a discrimination case by penalising clients for not using it.

petersaxton wrote:

I am talking about complying with their new obligations.

You're not really though are you? There is no obligation to use cloud software. Indeed, I am of the understanding that has not been suggested that fully-functioning accounting software will have to be used (i.e.spreadsheets and bridging software). Forcing clients to use (and in your case it seems - pay for) cloud software is not complying with legislation - it is giving you the tools, that you want the client to use, to help them comply with the legislation. That is far from being the same thing!

Many of my clients will not pay extra for cloud software. Many don't have the 'bookkeeping' capacity to use the software properly. Many know enough about the law to be able to read that it is not a legal requirement to use cloud software. Many will continue to use the same recording methods they have always used. I will continue to accept their information and process it compliantly.

However, if one of those clients reads this thread, what they will take from it is that, 'there shouldn't be a great deal if extra work' (i.e. not double/ triple/ quadruple), ' there shouldn't be a significant increase in fees' (although it would seem that precludes software and add-on fees that aren't really an increase in "cost"?!) and 'if bank feeds are in place, that will solve a lot of the problems' (despite my regular protestations to clients that a bank statement IS NOT all I need).

Now, I accept that for SOME clients (by which I mean clients currently using cloud accounting - with add ons - and already receiving a daily/ weekly/ monthly bookkeeping service), MTDITSA will incur little extra work or current cost to the client or accountant. However, for those not in that groove, there WILL be increased costs, there WILL be additional work to do and this may be more than a 'minor' change. Repeated suggestions on this forum are that this will not be the case for most clients. However, in my case, it WILL be the case for most of my ITSA affected clients.

Thanks (3)
Replying to DKB-Sheffield:
By petersaxton
29th Aug 2021 17:11

"Quite simple.

Client is chased to bring information in, not once, 4 times."

I will tell my clients what they have to do and when. I dont need to chase although I will at the beginning. If it's an issue I will set up automatic emails.

"Client brings information in 4 times per year, not once. That's 4 client meetings, not 1. May be less to discuss but, not 1/4 the time."

Some clients will do the work online. If they can't save electronic attachments and I have to scan it for them I will ask for it monthly. It wouldnt be a meeting - an handover at the door only or they put it through the letter box. My wife could even drive around to clients as long as the documents are ready.

"Client file is retrieved, prior workings are reviewed, reversals posted. Not 1 time per annum. 4 times."

Why look at client file or prior workings? I dont do prepayments or accruals unless material.

"Client data entered 4 times, bank reconciled 4 times, control accounts reconciled 4 times (not once). Admittedly the volume of data is lower but, it doesn't take 4 times as long to enter 4 times the amount of data (due to ability to copy important info from previous lines etc.)"

As I said I would do it monthly if client is not doing it daily. Bank reconciled!? With bank feeds you would compare month end bank balance with month end bank statement. What control accounts? I dont do purchase ledger unless material. Both purchase ledger and sales ledger are additions of individual accounts. It's not a paper based system.

"Client accruals, prepayments, prepaid income etc. 4 times per year, not 1. There may be a lower value to prepay but a transaction for £10 does not take 1/4 the time to post as one for £40."

Do you really calculate prepayments or accruals of £40?

"Return prepared, explanatory letter prepared 4 times not once."

The return is already on the software. What explanatory letter? I wont even ask the client for their OK for their quarterly returns.

"Client comes for meeting to approve return 4 times per year, not once."

Not doing that. I dont usually have a meeting with my client. I send them the accounts by email for them to approve.

"Return filed 5 times per year, not once."

Click that button!

"Clearly there are some corners that could be cut/ rounded off. However, it is a long cry from taking a slightly longer/ equal amount of time!"

Maybe more than slightly longer but not twice as long.

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Replying to petersaxton:
avatar
By DKB-Sheffield
29th Aug 2021 19:20

petersaxton wrote:

What explanatory letter? I wont even ask the client for their OK for their quarterly returns.

To confirm, the explanatory letter is a summary of the return, what they need to be aware of (current tax liability etc.) and any further info that may be relevant.

The letter issued is prior to signoff so that all clients understand what they are signing prior to agreement. It may be an email in some cases.

I will, of course get full client signoff and approval before submission. This may be handwritten or e-signed depending on the client. To my mind, this is no different to the requirement to obtain signed VAT, SA or CT returns.

Thanks (1)
Replying to DKB-Sheffield:
By petersaxton
29th Aug 2021 20:26

"To my mind, this is no different to the requirement to obtain signed VAT, SA or CT returns."
The above result in a payment. There's no payment related to quarterly returns. If a client disagrees with the amounts relating to the year end figures then an investigation would take place. I would think the supporting transactions would justify the figures.

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Replying to DKB-Sheffield:
By petersaxton
29th Aug 2021 17:15

"That is your prerogative. However, I'm not going to turn round to a long standing client and say "You WILL use cloud accounting software. But because you are not computer literate (or in a few cases have learning difficulties), I'll charge you a lot more". The law does not suggest cloud software is obligatory so, I'd hate to be on the end of a discrimination case by penalising clients for not using it."
Similarly, it is your prerogative to provide free services.
If a client wants me to be their accountant then I have the right to tell them what I require.
I suggest you dont understand the law if you bring up "a discrimination case".

Thanks (0)
Replying to DKB-Sheffield:
By petersaxton
29th Aug 2021 17:29

"You're not really though are you? There is no obligation to use cloud software. Indeed, I am of the understanding that has not been suggested that fully-functioning accounting software will have to be used (i.e.spreadsheets and bridging software). Forcing clients to use (and in your case it seems - pay for) cloud software is not complying with legislation - it is giving you the tools, that you want the client to use, to help them comply with the legislation. That is far from being the same thing!"
You seem to think that accountants should use whatever software a client wants to use and understand them all. Presently, legislation doesnt preclude every self employed client from bringing their accounting records to you on 31 January every year. Will you just do all their tax returns in time or do you tell them you want the records earlier?

"Many of my clients will not pay extra for cloud software. Many don't have the 'bookkeeping' capacity to use the software properly. Many know enough about the law to be able to read that it is not a legal requirement to use cloud software. Many will continue to use the same recording methods they have always used. I will continue to accept their information and process it compliantly."

If they dont want to pay for the software to use they can find another accountant. Just because they buy the software they dont have to do everything on it. If they want me to do bookkeeping/accounting on the software I will.

"However, if one of those clients reads this thread, what they will take from it is that, 'there shouldn't be a great deal if extra work' (i.e. not double/ triple/ quadruple), ' there shouldn't be a significant increase in fees' (although it would seem that precludes software and add-on fees that aren't really an increase in "cost"?!) and 'if bank feeds are in place, that will solve a lot of the problems' (despite my regular protestations to clients that a bank statement IS NOT all I need)."

Bank feeds will make things easier. That doesn't mean documents shouldnt be attached.

"Now, I accept that for SOME clients (by which I mean clients currently using cloud accounting - with add ons - and already receiving a daily/ weekly/ monthly bookkeeping service), MTDITSA will incur little extra work or current cost to the client or accountant. However, for those not in that groove, there WILL be increased costs, there WILL be additional work to do and this may be more than a 'minor' change. Repeated suggestions on this forum are that this will not be the case for most clients. However, in my case, it WILL be the case for most of my ITSA affected clients."

I dont think anybody is saying that there wont be increased costs. Certainly not me. I think you will be surprised at what can be done with the right attitude on both sides.

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Replying to petersaxton:
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By Jimess
01st Sep 2021 16:01

So as Lion said - there is no "bank feed" available for cash transactions so you - or the client are back to posting numerous daily cash takings entries - manually! I know what some of my clients will say - I am doing that already in my Simplex Book, analysed cash book or whatever it is they use, and have done so for years - and balanced up the cash and bank accounts every week/month - so why should I pay £72 per year to put it on a computer when I can buy a book for £20 or less. VT also have a cash book version of their software that is MTD for VAT ready - and it is FREE. Some of my clients use it and a lot use the full version of the software, but I have not been able to entice the die hard manual books clients on to VT, free or not, - it is simply what they are comfortable working with.

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Replying to Jimess:
By petersaxton
01st Sep 2021 17:11

"So as Lion said - there is no "bank feed" available for cash transactions so you - or the client are back to posting numerous daily cash takings entries - manually!"
You can post one entry per day.
"so why should I pay £72 per year to put it on a computer when I can buy a book for £20 or less."
Xero has a "Ledger" which doesnt use bank feeds for £2 per month.
I remember a time when there was no colour TVs and no mobile phones.
"But we were 'appy then!"

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Replying to petersaxton:
avatar
By BIGWAL
28th Aug 2021 19:40

Oh dear !
"tell clients not to use bank accounts for personal transactions...,,,"
It's a message l repeat adnauseum to around 25% of clients - which they ignore to at least some extent. either because the business card is the first one easily to hand or because they think they might get away with putting this particular purchase through the business.

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