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Will client be forced into MTD for ITSA

Client is pensioner with uk / overseas income

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 I make reference to the recent article on accounting web by John Hemming  regarding ITD for ITSA this  week. 

My client is a 72-year-old pensioner retired seven years residing in the UK,  (UK  national )and submitting a yearly SA  return to  HMRC via  his accountant. His income gross is approximately £16,000 per year comprising £13, 000 UK  state and company pension income plus £2000 dividend income and £1000 UK interest income. 

All income emanates from UK sources except the £2000 dividend income which is gleaned from UCITS  Mutual funds/bonds resident in a fully HMRC  declared overseas account in Europe (EEA country)  which pay a quarterly dividend. 

My question :  under the currently understood parameters of MTD   for  ITSA,will this single (unmarried) individual be obliged/forced to report his  annual tax return using the new system MTD for ITSA  Or will his circumstances exempt him such that he will be able to continue to submit his once yearly tax return prior to 31st  Dec as  now as a single one off document/ exercise ? Alternatively will he be obliged /forced to submit four  quarterly documents plus a summary return as a fifth document as  is  presaged under MTD  for  ITSA.?

 grateful all input. Thank you 


Replies (7)

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By johnhemming
17th Sep 2019 14:50

This is the article the OP is referring to:

As it currently stands your client could not be handled by ITSA because he has foreign interest as income and the system does not handle that.

Obviously they are intending to go that way. I don't know the timescales.

It is important to note that the theory is that there is a list of transactions that adds up to the amount of interest. For UK banking it is easy enough as a download of bank accounts via Open Banking combined with a flagging of interest gives the total interest net or gross. Each individual bank account is recorded separately via ITSA. I would assume that the same principle will apply for foreign accounts.

I know from the VAT experience that some of my clients now spend less time on tax compliance than they used to (including creating the original records). ITSA is a bigger shift and there remains some issues to be resolved.

Hence I don't think any one can answer your question as yet. They haven't indicated who needs to join when and as I said he couldn't join now anyway. I would be surprised if people with a nil tax liability end up having to make a fully linked digital tax return. However, I don't know.

Although I could ask my contacts at HMRC, I would not propose to ask this question as yet because we probably are so far off the answer being decided that it is almost certainly a question that has no answer.

I am speaking to the onboarding team on Thursday now that I have passed the test for production credentials and I intend to keep my columns on AW updated with current information.

Furthermore quarterly submissions only apply for self employment and property (FHL and other). The submissions for dividend income and savings interest are made on an annual basis. They can be submitted before the end of the year as many times as people wish, but it is merely an update of the annual submission. Hence it can give a guide as say the end of Q1 as to the tax liability if everything has been put in, but obviously if bits are left out the computation won't be entirely accurate.

I am not quite sure what you mean by a summary return. The quarterly returns are for the four quarters of self employment and/or property.

As well as the quarterly returns the system requires other tax information such as savings accounts interest, dividends and losses. (losses is currently not live, but the other two are). At a technical level they are separate submissions, but obviously any MTD software can make a combined submission by the software doing multiple submissions based upon the source date.

For example the way I handle savings accounts is to have the savings account individual information for a number of accounts then the user asks for a single submission from the software, but the software actually does a submission for each savings account.

That is because HMRC wish to record the amount of interest by savings account.

Thanks (1)
Replying to johnhemming:
By itp33asso
17th Sep 2019 15:33

Thank you for full / in depth reply.

I will of course keep eyes peeled for your future input on Accounting Web.

By "Summary return "I refer to what I believed to have been a final necessary document which summarises/corrects the four quarterly submissions which would have been supplied throughout the year – – or have they dropped this requirement now?

Thanks (0)
Replying to itp33asso:
By johnhemming
17th Sep 2019 16:06

What they require at the end of each quarter is that people agree the figures . Unlike VAT it is possible to change submissions, but I don't think there is anything specific that you would say is actually summarising or correcting the quarterly submissions at an annual level. What there is at an annual level is things like AIA, Business Premises Renovation Allowance etc. These are things which would be on SA103F and SA105. (This applies for Self Employment and Property (one for FHL and one for other property {aka nFHL})

In the end HMRC need at least all the information in the SA1xx series of forms. I would not expect them to automate the rarer varieties at least as the start, but there needs to be a way for the computers to pass this information around.

This doesn't necessarily mean that the end user would be aware of the number of API calls.

Thanks (1)
By SteveHa
17th Sep 2019 15:43

Honestly, I'm not even sure why he has to complete an SATR at all based on the figures quoted.

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Replying to SteveHa:
By itp33asso
17th Sep 2019 16:01

Quite simple. Because he took advantage of the Lichtenstein disclosure facility and as a consequence is mandated by HMRC to "be a good boy "and keep them informed of his tax affairs for many years to come regardless of his unprincely yearly income.

Thanks (0)
By David Treitel
17th Sep 2019 18:46

The client took advantage of the LDF. He may have future OIGs to report to HMRC, depending on whether or not the offshore funds have UK reporting status.

Thanks (1)
Replying to David Treitel:
By itp33asso
18th Sep 2019 13:13

What does OIG stand for please? HMRC claim they have never heard of this abbreviation.

As far as Reporting status is concerned all are equity funds governed under UCITS In sterling and US dollars. They are currently domiciled in either Denmark or Luxembourg plus one bond fund which is the only one that generates dividend income or indeed any other income for that matter as all the other funds are rolled up.

Apart from the dividend income therefore which is being reported yearly the only "chargeable event" that I can see pertaining would trigger at a point when all or part of a fund is sold and a capital gain is crystallised. Obviously being a canny operator my client ensures that Any such sale Generates a level of capital gain below the CGT tax threshold of £12,000 per annum.

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