TAXCALC MTD WEBINAR: WHAT WE LEARNED ABOUT MTD FOR INCOME TAX TODAY
On Monday 9 August, TaxCalc ran the first in a series of MTD Q&A Webinars covering everything accountants need to know about MTD for Income Tax but were afraid to ask.
Adeptly hosted by Andy North, TaxCalc’s new Chief Marketing Officer and accounting industry veteran (Andy spent 20 years running AccountingWeb both in the UK and the US prior to joining TaxCalc), with technical expertise being provided by Chartered Tax Adviser and accountant of 25 years, Dean Shepherd.
The premise of this webinar, and all future ones in the series, was to keep the presentational content light and allow the attendees to engage and steer the direction of conversation based on what they wanted to know, which they duly did with aplomb. Over 120 questions were asked during the session, hence the 45 minute overrun, but such was the informative and engaging style of the presenters, the majority of attendees stayed the course.
As you’d expect, the key topics surrounding MTD for Income Tax were covered, such as:
- What MTD for Income Tax will mean for you and your practice
- Who your highest risk clients are and how you will manage them
- Key dates, deadlines and penalties
- What tools you will need to support you; and
- How MTD may be an opportunity, not a threat
There were some interesting polls run during the session which gave some insight into the preparedness of accountants for the changes that are forthcoming:
- 85% of respondents admitted to either being complete rookies, with no knowledge of MTD for income tax, or at least acknowledged that they had significant gaps in their understanding. Only one respondent considered themselves a borderline expert.
- More worryingly for the profession, 35% of respondents indicated they were anxious about the introduction of MTD for Income Tax from April 2023, stating that they would struggle to cope.
- A further 35% expressed concern that MTD offered no benefit to either their practice or their clients. Encouragingly, 12% saw MTD as an opportunity that would be good for their business, perhaps this subset includes those comfortable charging their clients appropriately for the additional work this will entail.
In the final poll, there was acknowledgement that educating clients on the forthcoming changes will be paramount to a successful roll-out. Tools to help automate client communications across the practice, and tie those into workflows, will certainly offer some benefit to this challenge.
As the questions came in thick and fast, they highlighted the complexities around identifying exactly who will fall within the MTD for Income Tax regime and from when.
We learned that it applies to individuals and partnerships with either a trade or a rental property but we can ignore, for now, companies, charities, trusts and limited liability partnerships. Their time will come later.
Turnover for those individuals and partnerships must exceed £10,000 per annum and the tax year – two years prior – will determine whether that threshold has been breached. This does of course mean that, for the newly self-employed, there is a two-year delay to them joining MTD for Income Tax; which begs the question of whether we will ever see an end to the tax return form as we know it, or whether that will continue in perpetuity.
A recurring theme throughout was the ambiguity and uncertainty around many aspects of MTD for Income Tax only 18 months away from launch. Basis period reform, touted as a tax simplification measure, seeks to abolish the current year basis of taxation and replace it with a tax year basis. This hurriedly drafted legislation, drawn up to assist HMRC’s inability to handle basis periods within it’s MTD plans, seems to generate more questions than answers; with accountants and software developers alike, being in the uncomfortable position of having to advise their customers based on unconfirmed legislation that may or may not see the light of day. Confusion reigns indeed.