Yes it's that time - when HMRC 'big guns' ...

start to panic (aka put the PR machine into overdrive) re MTD ITSA. Another year, another planet?

Didn't find your answer?

More a recap than a question for anyone who still retains any interest in MTD ITSA ... because I noticed the curious 'coincidence' of yesterday's article on here being followed by 3 separate 'notifications' this morning from HMRC (very definitely with a 'message' to sell).

1. https://www.accountingweb.co.uk/tax/hmrc-policy/hmrc-digs-heels-in-and-c...

or "HMRC digs heels in and claims MTD is all on track"

2. https://www.gov.uk/government/publications/extension-of-making-tax-digit...

or "TIIN: Extension of Making Tax Digital for Income Tax Self Assessment to sole traders and landlords with income over £30,000."

3. https://www.gov.uk/government/publications/understanding-how-making-tax-...

or "Understanding how Making Tax Digital could support self-employed individuals on lower incomes (small businesses whose turnover is between £10,000 to £30,000 per year) with their Income Tax obligations"

4. https://www.gov.uk/government/publications/update-notice-for-making-tax-...

or "Update Notice for Making Tax Digital for Income Tax - the information that a relevant person should send to HMRC quarterly using Making Tax Digital-compatible software"

.

I will return once I've explored these missives in greater detail, but this is just to draw attention to them (for those who wish to dive deeper without waiting) - and, as I said at the start, to flag up the (very belated) start of HMRC's 'mission to convince' ... which will no doubt pick up speed and intensity as time runs away from them.

People, and apparently organisations, tend only to get this defensive when they know their proposal is indefensible.

("First you lie to yourself" - books on psychopathy).  But, for those with a literary or philosophical bent, try The Brothers Karamazov by Dostoevsky - specifically: https://www.goodreads.com/quotes/302239-above-all-do-not-lie-to-yourself...

Replies (17)

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By SteveHa
23rd Feb 2024 13:17

Don't forget yesterday's Agent Update, in which HMRC invites agents to take part in the pilot.

Best belly laugh I've had in ages.

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By AlgernonB
23rd Feb 2024 13:24

Perhaps HMRC could hire social media influencers to convince everyone MTD is a good idea.

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By Paul Crowley
23rd Feb 2024 14:46

The bud light experience is waiting

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By AdamJones82
24th Feb 2024 15:09

“Yo yo yo wassup guys? Sign up to my Patreon for early access to MTD”

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By lordofsums
25th Mar 2024 16:45

Smash that like button and don't forget to subscribe!

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By AdamJones82
23rd Feb 2024 14:34

It's on track as much as a runaway train is

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By DKB-Sheffield
23rd Feb 2024 14:58

Comparing MTD with HS2 is too tempting. Neither has any tracks to be on!

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By petercooperuk
23rd Feb 2024 16:01

There is a runaway train called MTD running down the tracks. Ahead on the tracks there are fifty thousand accountants and small business owners tied up, unable to move. MTD is headed straight for them. You are a politician standing next to a lever which, when pulled, will switch the train to a siding which is empty other than for your pride and arrogance. What do you do: do nothing or pull the lever?

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By Dougscott
23rd Feb 2024 17:39

Whoever says they are prepared to pull the lever gets my vote.

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By DKB-Sheffield
23rd Feb 2024 18:01

Dougscott wrote:

Whoever says they are prepared to pull the lever gets my vote.

Pulling the lever would be a significant U-Turn sending the train hurtling back the other way. Beware the second inevitable U-Turn within a week once the Farmer's Union and various motor groups get involved!

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By I'msorryIhaven'taclue
24th Feb 2024 20:51

Lordy, are we down to just one farmer left in the country:) ?

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By FactChecker
24th Feb 2024 19:40

I said I'd return after exploring those HMRC missives in greater detail - which frankly was mostly not worth the effort - but here goes:

"TIIN: Extension of Making Tax Digital for Income Tax Self Assessment to sole traders and landlords with income over £30,000."
For those who weren't aware, a TIIN (Tax Information and Impact Note) must be published for every tax policy change when that policy is final or near final ... and is supposed to "represent a reasonable view of the likely costs, benefits and impacts of the measure."
This one covers the two phases of MTD ITSA to which HMRC are committed - those that come into effect from April 2026, and then from April 2027.

But the first weasel words appear early on:
"The government remains committed to the future introduction of MTD for ITSA to partnerships" ... for which there is no evidence, and has no relevance to this TIIN.

Probably no surprise, but the stated Policy Objectives have not been altered one jot - and are still based on the (unproven hope) that: "MTD will exploit the opportunities offered by digitalisation to make it easier for everyone to get tax right."
And still claim that "it will bring customer benefits by:
- reducing the risk of unintentional customer errors
- saving them time when they come to submit their end-of-year tax return
- supporting wider productivity and less time managing paperwork through use of digital tools"
None of which have ever been demonstrated in practice - except for non-comparable situations (i.e. if you eradicate paper and rely on digital tools then, duh, you will indeed spend less time managing paperwork ... but not necessarily less time overall on managing your records & accounts or increasing your core productivity).

In the same vein, passing reference is made to:
"This tax information and impact note supersedes the previous MTD for ITSA tax information and impact note that was published in September 2021" - but of course without retaining the option to see the original version - or highlighting the changes!

The more interesting bit is what they don't say ... when summarising the new MTD for ITSA regulations as:
- require a relevant person to keep and preserve their tax records electronically and to submit reports to HMRC using approved software;
- a report of the business’s trading or property income, allowable expenditure and claims for allowances or reliefs against such income must be submitted in relation to each tax year;
- interim cumulative reports must be submitted quarterly on fixed dates that are set out in the regulations.

So it sounds like 'nothing has changed' - except the emphasis certainly has so, as always, the devil will be in the detail (that has yet to be published):
* no reference anymore to the need for a non-human transfer from 'the keeping and preserving of tax records electronically' to what is 'submitted via reports to HMRC'?
* the emphasis, or at least priority, seems to have reverted to the annual submission (albeit now for a rigid tax year irrespective of a person/business accounting year)?
* those pesky QU submissions (which they really don't want to admit are pointless) are now 'cumulative reports' - which is more practical but ensures that any claimed benefit is now eradicated?

The quantified financial impact assessments have the look, as with all TIINs, of figures plucked from the air. They certainly aren't explained, but some casual throwaway remarks give an insight to their 'thinking':
"Those already operating MTD for VAT .. may incur relatively little cost" - REALLY?!?

But the (wholly expected on past 'performance') killer assumption is:
"HMRC estimates that those within the £30,000 to £50,000 threshold may incur an estimated average transitional cost of £350 and an average annual additional cost of £110.
Those in the above £50,000 threshold may incur an estimated average transitional cost of £285 and an average annual additional cost of £115."
BTW these include "additional accountancy or agents’ costs" (as well as hardware, software, training, etc)!

I'll leave you to swallow that (hopefully without choking and after checking your blood pressure), and exit with just one more quote:
"HMRC has worked extensively with stakeholders from the accountancy, business and software communities to update its assumptions underpinning the cost estimates, to ensure they are robust and a realistic representation." Yeah, sure!

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By DKB-Sheffield
24th Feb 2024 20:38

Thanks FactChecker.

I'll be honest, I've not even attempted a look at (latest) the TIIN so, thank you for the summary.

On current costs of software... £110/ £115 wouldn't ever cover that alone (unless HMRC are sponsored by Pandle/ TAP - maybe they are the limit of HMRC's extensive stakeholder research). Interested to know how the transition for £30K to £50K clients will be more costly than >£50K ones though?!

They do seem to be suggesting QE won't be worth the database they're submitted on though... so why not ditch them entirely?

Interesting point about digital links. Maybe they've now realised there are huge numbers 'flaunting' the VAT Digital Link requirement. Moreover, maybe HMRC have decided they have no idea how to utilise the potential benefit that digital links could offer (many at HMRC were sold a tale that VAT inspections would juat be a case of drilling down into the return and seeing a copy of the invoice - from pre-MTD conversations with inpsectors).

The rest seems to be the same old drivel! Waffle and air... but realistic...?My [***]!

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By AdamJones82
26th Feb 2024 09:26

I can assure HMRC that if this farce ever comes to pass, my annual fee will be increasing a lot more than £110 to clients!!

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By I'msorryIhaven'taclue
24th Feb 2024 21:12

In the immortal words of J M Barrie, "All of this has happened before, and it will all happen again".

When we first went SA in 1997, the midnight at 31st January deadline was strictly enforced by the caretaker at the Revenue's office who - bang on midnight - wedged a wooden stopper in the make-believe plastic postbox at the main tax office nearby; not dissimilar to the wooden stopper that postmen stuff into postboxes whenever they go on strike.

One of our number - there were at least half-a-dozen of us stood around with last-minute tax returns to "post" - lived nearby, and went home to get a cutting tool with which to remove the wooden stopper. The caretaker had b*ggered off by then, the plastic faux postbox was duly unblocked, and all of us who had been dutifully queueing since five to midnight got to post their last-minute returns "on time" at around 12.30 am.

The odd thing was the pub opposite the Revenue's offices stayed open beyond midnight that night, and was filled by us chuckling accountants. HMRC had an agent slogan of "working together" at the time, and the general feeling was that we had epitomised that sentiment in spades!

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By FactChecker
25th Feb 2024 00:55

And then moving on to "Understanding how Making Tax Digital could support self-employed individuals on lower incomes (small businesses whose turnover is between £10,000 to £30,000 per year) with their Income Tax obligations".

In order for HMRC to review how MTD ITSA "can be shaped to meet the needs of smaller businesses and the best way for them to fulfil their Income Tax obligations", they commissioned 40 qualitative interviews with sole traders whose income was between £10,000 and £30,000 ... conducted via telephone and video conferencing.

So no holding back on effort or budget to understand this vast segment of businesses!

The report doesn't start well - with the key finding ("that there was a great deal of variation in the types of self-employment individuals were undertaking at this turnover level") appearing to come as an unwelcome surprise to the authors.
Whilst it contains some faintly interesting snapshots of some of the interviewees, these add nothing to the supposed objectives of providing HMRC with any insights relating to the applicability or otherwise of MTD ITSA to these taxpayers.

Nevertheless, a few key findings:
* Not surprisingly, "MTD ITSA tended to be seen as being for HMRC’s benefit, rather than participants. .. across the sample participants felt that the requirements of MTD ITSA would create more work for individuals (compared to the current system) than be of benefit to them."
* Also, "a requirement to purchase software was seen as unreasonable and a barrier to meeting their tax obligations."
* And "participants felt that quarterly summaries had the potential to quadruple the burden of accounts management."
* Finally, "participants felt HMRC could consider relaxing the requirements with regard to the quarterly summaries .. which were seen to be excessive administration. In addition, participants spontaneously suggested HMRC could relax compliance penalties for this audience."

So lots of positives there to build on?

Arguably the most worrying finding (although not seen that way by HMRC)?
"The option to receive tax forecasts was the most highly appreciated element of MTD ITSA. Participants viewed tax forecasting as a supportive tool that would help them in their financial budgeting and planning."
Can't see any room for potential disappointment there then?

So, with an interesting if obvious conclusion that "Participants viewed the record keeping and accounting element of their self-employment as a separate obligation and not part of their day-to-day work" ... the research was concluded.

And after all that? The government merely confirmed that they would "keep under review" the decision on further mandation of businesses and landlords with income below £30,000.

In the absence of hearing what they wanted (but surely didn't expect) to hear, we are shown HMRC's decisiveness and clarity leading the way once again.
Maybe it should be re-titled 'How I Learned to Stop Worrying and Love the Bomb'?

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By FactChecker
27th Feb 2024 02:06

For those still following any of this (come on, wake up there in the back row, being bored is a respite from stress) ... I promised/threatened to return to each of the three HMRC missives above, with some comments.

Having done that for the first two, I realised this thread is getting top heavy with my maunderings ... so you'll find the third one summarised on a new thread instead at https://www.accountingweb.co.uk/any-answers/update-notice-on-mtd-for-inc...

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