Will you be using Spreadsheets for MTD ITSA

There's a lot of emphasis on software for MTD ITSA, but isn't a spreadsheet just good enough?

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As part of the AWEB series on tech options for MTD ITSA (outside of the big ledger suppliers), the one noticeable absence is the spreadsheet.

Will you be using with your clients? Is it the default option or the most appropriate option for some situations?

Do you think working with spreadsheets will make you any more/less efficient than working with some of the commercially available software?

IF HMRC ever produce a free product (in their own words "for the very simplest of clients") would this be a suitable and even better alternative?

Would love your comments

Replies (39)

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By ireallyshouldknowthisbut
05th Oct 2022 10:42

If we assume the project is still live, then yes Excel would be the go-to tool for low volume transaction work where the client wants little input. Its generally much quicker to deal with a dozen or so annual transactions in excel than anything else, and you can easily build some macros and backends to shove the data over to HMRC however the bridging works.

Currently for our landlords its download annual bank, couple of sorts and crunch, ready for a chat with client about anything odd and what's not in the bank or on agents statements.

I guess quarterly you just ditch the chat, ditch the cross reference to agents statements, and ditch the "not in the bank" and just file 'as is', and if you don't have the data either assume it was the same as last quarter, or file a blank, and refile it the following quarter if that ends up in the final spec (its bounced around so much its hard to keep track) There is no quality threshold or any use for the data to our client or by HMRC so any old tosh will do.

This is very much "cheap is best" job with an ultra low quality thresholds, so speed & cost will be key. Software wins at getting the download from the client bank account, so if that is an issue software might be a plus for those clients.

There is also a strong commercial argument for accountants not engaging at all with this process and subbing it all out to a 3rd party to just spam some numbers into HMRC's servers to avoid the penalties, and then dealing with it at year end as usual. That way we can concentrate on 'real work' that the client will value vs "busy work" of the quarterly filing which has no function from a client of advisor point of view.

We still use excel for a number of VAT clients in the sub 250 transactions per annum category too where the client is into it.

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Replying to ireallyshouldknowthisbut:
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By Paul Crowley
05th Oct 2022 13:36

+1
Why waste time yet again for a project that serves no practical purpose
Worry about when it happens
And spreadsheets will rule for all the tiny little jobs
My possible MTD list is half of my tax returns, but notably the group that are the cheapest fees and contribute the least to the firms turnover
Pensioners that still do a bit of work, joint owners of maybe 2 let properties,
the very small trader that that has a let property
MTD will result in client shuffle.
Tiny partnerships with wife will become a sole trader, bigger partnerships will go limited company, and small clients will fumble around looking for cheaper accountants because the fees will need to rise
And having told the first accountant that they are off, the fumblers will struggle to find anybody to take them on.
I will not retire because I want to be there to be an involved witness to a real life disaster

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Replying to ireallyshouldknowthisbut:
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By adjadj
09th Oct 2022 19:56

Interesting that you appear to rely on the bank feed. In my buy to let 2 property accounts the bank feed is of limited help as the income is net of agent deductions and many ad-hoc non recurring payments are paid via a credit card. For the last 12 years I have compiled my accounts on the basis of the agent’s monthly statement, a box file of paper invoices and an electronic file containing individual electronic outgoings.

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By Matrix
05th Oct 2022 11:52

Yes I expect we will use spreadsheets for any clients not using cloud software.

Generally, clients who could benefit from cloud software are already using cloud software. Free software would not change this.

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Replying to Matrix:
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By Paul Crowley
05th Oct 2022 13:44

Agree
The tragedy is that those who are capable of getting a benefit from software went ahead and did it without compulsion
Every accountant prefers well kept software over other stuff
But those organised people tend to be running Limited companies

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Replying to Paul Crowley:
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By lh3f9764bg1g
06th Oct 2022 13:50

I agree also . . . . . and it is worth noting that even if the whole stoooopid project is abandoned the software vendors have already benefited by virtue of the fact that many taxpayers have already signed up because of the threat that MTD ITSA is coming. They aren't likely to lose those customers.

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By adam.arca
05th Oct 2022 13:25

Agree with all the above replies. I too will be using spreadsheets at least until MTD-IT settles down (if it even starts) and we know where we're at with it. Much easier to manipulate a spreadsheet than f@nny about with software trying to find a workaround for what you need to enter.

Also completely agree with IRSK's point about swerving the quarterly grind. That is my plan too. Everyone will be encouraged to file their self-generated rubbish (doubtless using some spreadsheet templates which will undoubtedly have appeared by then) but, if they really insist on us being involved, it's going to cost and I'm not going to be light with the pen.

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Replying to adam.arca:
Richard Sergeant
By Richard Sergeant
05th Oct 2022 13:44

Thanks - and an interesting point about 'swerving quarterly updates' - how would clients do that with a spreadsheet. It looks like they would also need access to bridging software. Is this something that you would have to supply on their behalf?

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Replying to rsergeant:
ghm
By TaxTeddy
05th Oct 2022 13:54

As Her Majesty said to Harry, "You are in or you are out".

If we are handling it then I will provide a template spreadsheet, the client completes it and we take it from there. If the client is filing directly - then they are on their own.

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Replying to TaxTeddy:
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By Paul Crowley
05th Oct 2022 13:59

Same here
Trying to work with DIYers and get them to post correctly all the journals is just not going to happen
I act, at a higher price, or they act. Endex

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Replying to rsergeant:
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By adam.arca
05th Oct 2022 13:57

It's early days and none of us know what this might look like but I'm thinking of a tripartite (or maybe four part) service distinction:

1. Lowest level are the smaller, cost-conscious, generally rubbish books who will be encouraged to DIY (which presumably will mean they need bridging software too). That gets me away from the hassle of tracking / chasing / penalty monitoring etc

2. Slightly larger clients who can track their info OK but are less good with IT, I might offer an execution only upload service using our bridging software. But I'm keen not to be taking on board responsibility for all the peripheral stuff just mentioned above.

3. Some large clients may want us to take on board the whole bookkeeping side of things. I don't really like bookkeeping and haven't historically offered it for a long time now but I am headed towards retirement and might find it worthwhile to take on a FEW jobs with GOOD+ standard clients. It would have to be fairly remunerative, however, and would only work because I have long-standing relationships with lots of my clients.

What I am concerned about is scope for a service between 2 and 3 worming its way in where clients expect us to do all the handholding, complete the quarterly spreadsheets and submit but not have the complete picture that service 3 would give.

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Replying to rsergeant:
By ireallyshouldknowthisbut
05th Oct 2022 14:58

rsergeant wrote:

Thanks - and an interesting point about 'swerving quarterly updates' - how would clients do that with a spreadsheet. It looks like they would also need access to bridging software. Is this something that you would have to supply on their behalf?

my view is the client would just file any old tosh, and I really don't care how they do it so long as I don't get involved, and then we do it properly as is most efficient for year end. So back out their data, put ours in. Its irrelevant to me what they filed, we just back it out and slap in the proper stuff. If that really means refiling the quarters (as mooted before, which I cant see lasting very long in the cold light of day), then we do that but its going to be really rough and ready. What are HMRC going to do about it exactly? They have zero staff competence in bookkeeping and no resources to pursue it, or indeed any reason why they would.

We don't do client bookkeeping as its a low value service so I am not sure why I would start now. Clients are simply not going to value it.

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By Kaylee100
05th Oct 2022 14:12

With VAT MTD we've looked at the client and then advised on the digital solution. Spreadsheets and filing by a bridging solution is one option. I would expect that to be the case with MTD ITSA too and am currently booked on some courses looking into software on this basis.

I would anticipate that especially for landlords only and very small business this will be the best solution if it works well.

I will also probably recommend the majority of landlords and small business adopt it so that their systems are "ready to go" should their turnover increase.

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By Kaylee100
05th Oct 2022 14:17

One slightly off topic comment- I've got a client coming to see us to help them record and file their voluntarily registered VAT digitally because they wrote to HMRC early in 2022 for a digital exclusion and have had no reply.

They've given in and decided to just engage someone to do it for them.

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Replying to Kaylee100:
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By Paul Crowley
05th Oct 2022 15:29

Provided it was delivered to VAT then the Old system should still work until VAT says no.
I have a client that succeeded in opting out, all on his own
And
12 clients that now want me to bridge
One client that we deregistered
One client that left because we wanted a fee for filing VAT
One client that just will not reply. He intended to deregister and lose about £1500 input VAT per year rather than comply, but his wife has always been a bit penny pinching. Trouble is that he still has a van

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Replying to Kaylee100:
Morph
By kevinringer
06th Oct 2022 10:51

I've applied for exemption for 30+ clients. HMRC are about 6 months behind processing the applications. HMRC have just written to me with their first decision: granting exemption. I expect more favourable decisions and have no intention of giving in.

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Glenn Martin
By Glenn Martin
05th Oct 2022 16:17

we only have a few sole traders so not a big thing for us but keeping an eye on the opportunity. Most firms local seem to be dropping ST like hot cakes as few seem to fancy MTD.

Personally the way to tackle it would be at scale and highly systemised which would rule out a spreadsheet from me.

I guess there will be some low cost apps due soon for industry specific types like landlords at relatively low cost.

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By Paul Crowley
05th Oct 2022 21:04

'As part of the AWEB series on tech options for MTD ITSA (outside of the big ledger suppliers), the one noticeable absence is the spreadsheet.'

Reason is that Mr Spreadsheet does not contribute advertisement material

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Replying to Paul Crowley:
Richard Sergeant
By Richard Sergeant
06th Oct 2022 11:37

Well as the writer of said series, I confess this was not the case. It was merely to tease and delight until this moment.

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By LFM
06th Oct 2022 09:27

We will be using spreadsheets as most of our clients are micro businesses and won't pay for software as they have no benefit for them.

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Replying to LFM:
Morph
By kevinringer
06th Oct 2022 10:48

But they will be paying you for quarterly tax returns that have no benefit for them. It's the whole MTD ITSA regime that is no benefit to them. The cost of software is tiny compared to the cost of time.

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Replying to kevinringer:
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By Paul Crowley
06th Oct 2022 10:55

Agree
Time is the issue that will cause the pile up

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By JD
06th Oct 2022 09:30

Spreadsheet, with a bank feed add-in, would be most helpful

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Replying to JD:
123 Sheets
By 123Sheets
06th Oct 2022 11:05

We should have that sorted over the next 12 months, as an Excel Add-in.

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Replying to 123Sheets:
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By JD
07th Oct 2022 17:31

Interesting, 123sheets

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By North East Accountant
06th Oct 2022 09:35

Per HMRC Latest Guidance
"If you notice an error in your digital records
You should update your records as soon as possible if you notice that you:
made a mistake when creating a previous digital record, such as accidentally duplicating a transaction
forgot to record an expense or a sales receipt
This will either be when you send your next quarterly update or when you confirm an end of period statement.

To update your records, you should change, delete or create a record, so the transaction is recorded correctly in the quarterly period in which it took place.

Your software will ask you to re-send the relevant quarterly update. When you have sent it, the new quarterly update will overwrite the previous one."

Down the line penalties will start and when HMRC asks you to reconcile the initial submitted QU with the amended QU, you are dead in the water if you've used a spreadsheet.

IMHO a full audit trail is absolutely essential, so no we won't be using a spreadsheet.

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Replying to North East Accountant:
Morph
By kevinringer
06th Oct 2022 10:36

I agree that a full audit trail is essential, but most software doesn't even offer that. I like Sage 50 because we have the full audit trail. Contrast with QBO where we don't. The audit trail means that when we start the following year's accounts and find the client has done something to ruin the opening balances, we can find it quickly in Sage but struggle in QBO.

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Replying to kevinringer:
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By North East Accountant
06th Oct 2022 11:03

Sage Business Cloud Accounting does.....and Sage 50.

Let's not start that whole Sage v QBO V Xero argument though........

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Replying to North East Accountant:
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By richard thomas
07th Oct 2022 16:15

I do not think this is correct.

To start with the HMRC "Guidance" is self-contradictory.

First it says you update your records as soon as possible after you find the error - fine, that's the law (but when is "as soon as possible"?)

Then it says *this* will either be when you send the next QU or the EOPS. *This* can only mean your updating, so when do you update - ASAP or at the next QU/EOPS date? There's probably whole chunk of text missing, or (heaven forbid) HMRC don't understand or even read the law.

And in any case who is going to be doing the finding of errors in the QUs? Probably not the taxpayer, and if this forum is anything to go by, not the accountant. Several have said they will ignore the QUs and prepare the EOPS from the records as always. Wise of them I think.

Note also that if the taxpayer, or more likely the accountant, doesn't notice an error and update it before the EOPS is filed, there is no need to inform HMRC of the change - reg 17(2). The reason would seem to be that by then it is a bit pointless giving HMRC the opportunity to send out a spurious guess at the tax liability so far if you've sent the return in with a tax calculation. (And spurious guesses at the liability are the sole "benefit" of MTD ITSA for the taxpayer - HMRC recognise this by making receipt voluntary).

Whether the taxpayer or their accountant actually do the updating and reporting as HMRC require or ignore it is entirely up to them - there are no sanctions for not doing it or doing it late. HMRC are certainly not going to spend time querying the initial QUs and updates to see if they reconcile, and cannot impose penalties if they don't. So no one will be dead in the water.

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By Tomazaan
06th Oct 2022 09:38

It seems to me that using spreadsheets is creating extra work in having to deal with the quarterly reports. I am insisting that my clients use a cloud based package with bank feeds. The quarterly reports then become a matter of a five minute "press the button to submit" (as it is for the MTD VAT reports) and I get the advantage of real time input from their business dedicated bank accounts. I appreciate that there is a cost of using an accounting package but it is cheaper than me spending time dealing with their bookkeeping on a spreadsheet or similar.
I have told my clients that if they are not prepared to switch to a dedicated business/ rental bank account, I shall stop acting for them.

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Replying to Tomazaan:
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By Paul Crowley
06th Oct 2022 10:09

'I have told my clients that if they are not prepared to switch to a dedicated business/ rental bank account, I shall stop acting for them.'

I think you are not the only firm taking that approach
Result will be a lot of small clients with nowhere to go

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Replying to Paul Crowley:
Richard Sergeant
By Richard Sergeant
06th Oct 2022 11:17

The move to a dedicated bank account is a very good point, would you also advocate an 'account' for each trade or income source. For example Trade 1, and one for Rental property 1 ?

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Replying to Paul Crowley:
By ireallyshouldknowthisbut
06th Oct 2022 12:14

Paul Crowley wrote:

'I have told my clients that if they are not prepared to switch to a dedicated business/ rental bank account, I shall stop acting for them.'

I think you are not the only firm taking that approach
Result will be a lot of small clients with nowhere to go

Quite. This is the problem sector which is not being addressed and is where 90% of the issues are.

its all very well commercially say "we wont deal with these clients too small for software", but someone is doing 'em.

We picked up a lot of clients from the "my way or the highway" local firms who pushed them out some years ago when MTD was first mooted.

Decent clients but just didn't want to use software.

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Replying to ireallyshouldknowthisbut:
Morph
By kevinringer
06th Oct 2022 12:27

It's ok if the clients are prepared to pay someone such as you to do the input for them, but most of these small clients either won't have the resources, or won't have the inclination, to pay someone. These businesses will either find someone who is prepared to submit rubbish, or the businesses will submit rubbish themselves, or they will just leave the tax club. I recall reading something on AWeb in the early days of MTD (about 6 years ago) where it was reported that HMRC's own figures confirm MTD will result in an increase in those leaving the tax club.

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Replying to Paul Crowley:
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By legerman
06th Oct 2022 19:11

Paul Crowley wrote:

'I have told my clients that if they are not prepared to switch to a dedicated business/ rental bank account, I shall stop acting for them.'

I think you are not the only firm taking that approach
Result will be a lot of small clients with nowhere to go

No, that's going to be my motto as well, certainly for the sole traders. I only have one rental, which I can manage without a bank account, and a couple of FHL's I'm undecided on yet. I should add that if they don't want to use software I'm still happy to do their books on my own software, as I do at present.

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Morph
By kevinringer
06th Oct 2022 10:33

VAT is a transactional tax and none of my clients have CGS implications. Most of my clients used to use a manual VAT book: one page listed inputs and another outputs. Each page was totalled and the figures copied direct into the VAT return. I built an Excel template that basically did the same. I optimised the template to work with Absolute VAT Filer's Link Import Sheet function so it was very easy to link up. I then gave that template free of charge to all my clients who did their own VATs manually. It has worked well.

MTD ITSA is a different beast.

1. Unlike VAT, ITSA requires transactions categorising into different categories of income, expenses. That adds complications and I know from trials with clients, is beyond their ability and makes the spreadsheet too complex for them. Most of my clients are farmers and require transactions that can be accounted for a single item for VAT, to be sub analysed for ITSA.

2. Unlike VAT, ITSA requires revenue v capital judgements top be made. Again, trials have revealed that is beyond my clients' abilities. Indeed, some clients employ professional bookkeepers who struggle with this. It adds further complexity to the spreadsheet.

3. VAT requires all an entity's business transactions to be recorded on one VAT return. Most of my clients have more than one activity eg a trade and a property. ITSA requires these to be declared separately. This adds complexity to the spreadsheet which is beyond my Excel ability. My clients don't stand a chance of being able to build this into their own spreadsheets either. This means clients would have to run separate spreadsheets for each activity. But they would need to merge these together for VAT. That's way too complex for me or my clients.

4. HMRC have told us the MTD ITSA staggers for businesses with 31 March/5 April year ends. HMRC have yet to tell us how businesses with a different year end will report under MTD ITSA. I am currently working on a client with 31 January financial year end who is required to report their rental to 5 April. Their VAT stagger is 28 February. So that's 3 different staggers. I have no idea how anyone could build a spreadsheet that (1) can handle 3 different staggers for one lot of listings whilst (2) be simple enough to be used by Joe the Plumber and (3) is robust enough to handle the mistakes Joe is going to make.

4. VAT requires errors/omissions to be reported in the next VAT return. That's currently simple: the client just lists it in the next VAT spreadsheet. ITSA requires that same error/omission to be corrected in the original MTD ITSA period. Can anyone build a spreadsheet that can handle that one transactions correctly for both VAT and ITSA? Are we now in the realms of science fiction?

5. VAT is largely period based. MTD ITSA is turning an annual tax into a transactional tax (which it isn't). HMRC have attempted to do this recently with CGT: converting an annual tax into a transactional tax. We all know the problems that have resulted eg estimating income, losses etc. CGT is a piece of cake compared to ITSA. I act for a lot of farming partnerships. Is it even possible to build a spreadsheet that can handle this, and all the tax issues around farmers such as 5-year and 2-year averaging, herd basis etc? No way.

My conclusion is that apart from the most simple of businesses, spreadsheets won't be able to handle MTD ITSA. So it's going to have to be software. But I struggle to see how software will cope for a typical farming client of mine: a partnership with a farming trade and a property business.

My conclusion is that I don't have the skills to build a MTD ITSA that can handle all that my typical clients require, yet is simple and robust enough to be used by my clients. If I was to create such a behemoth, I would find that all my time is spent supporting clients to use it. No, I don't have the time. My clients don't have the skills either. So, unless the business is very simple, it's going to have to be software. Not that software is great either (will QBO, Xero or Sage be able to handle farmer's averaging when they can't currently automate VAT partial exemption, retail schemes or margin schemes?).

The conclusion of this is not spreadsheet v software. The conclusion is MTD ITSA is way too complex to be dealt with successfully by the typical small business owner. If HMRC find VAT and ITSA so complex they have to keep their VAT systems separate to their ITSA systems, why does HMRC think that Joe the Plumber can merge the two when tax is HMRC's purpose (so they should make the effort to make it work), but tax is not Joe's purpose (so he needs to get on with his job and not waste his life trying to learn to be a bookkeeper). I remain astonished that given how complex tax is, and how long HMRC knows it takes to train their own staff in just one tax, why does HMRC think that buy subscription to QBO or Xero, Joe will become an instant bookkeeper?

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VNF
By vfilipova
06th Oct 2022 15:27

We would probably be using spreadsheets and filing by a bridging solution for our smallest clients ( sole traders, landlords) As from my understanding there will be 6 submissions -4 Quarterly updates, including a summary of business income and expenditure, one End of Period Statement at the end of the fourth quarter, for each source of income and one Final declaration which will replace the current tax return. OMG can't wait to see that mess.....

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Easy MTD VAT
By EasyMTDVAT
10th Oct 2022 12:32

We're waiting on the side lines for MTDITSA to "calm down" and for more assurance from HMRC that it'll actually go ahead before committing to the development of a solution for spreadsheets (similar to our Easy MTD VAT software). Rest assured, due to the complexity of MTDITSA compared to MTDVAT, you won't have as many solutions to pick from as you do for MTDVAT. Not having to wade through a hundred or so offerings for a suitable solution will perhaps be one of the only positives to come out of MTDITSA!

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By Ajtms
21st Oct 2022 12:17

Spreadsheets is the only solution for small landlords and the self-employed. I have designed a template for my client's to complete and make the quarterly submissions.

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