Fee hikes and practice challenges heat up for MTD ITSA
From resourcing, technology, pricing and communication, practitioners have a lot to consider in order to get their practices ready for Making Tax Digital for Income Tax (MTD ITSA).
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MTD is really just the equivalent of a stealth tax on the poor.
That is why the Lower Income Tax Reform Group joined the main Tax and Accounting bodies in the publlic letter to Jess Norman
MTD is an HMRC vanity project that damages the low income tax payer but has no effect at all on the politicians' friends and family in big business.
Hence politicians do not give any care or consideration
I wish Michael Beaver well with his well-considered plans, but there appears to be the danger of some double-counting in his planning:
* "The consequence of additional MTD ITSA fees will be losing clients not willing to pay - but the increase in fees from other clients should balance up the books."
* "It sounds doable but these practice staff are already working 35-40 hours a week on regular accounting duties. Finding time is going to be a challenge."
Evicting low-value/resource-intensive clients is not an exact science and tends to lead to the remaining clients consuming a greater proportion of resources than before (cf Parkinson's Law) ... and that is before you try to find the extra time now needed for them due to MTD!
So revenue may be 'balanced' (although not guaranteed), but resources likely to be out of kilter.
Thanks, Hugo.
You are right in that it's not an exact science, and we'll really only know where everything lands once we get the process started.
I don't doubt we'll lose some clients, and I'm equally sure many will stay on as they'll need our help. But how far along the spectrum between "everyone leaves" and "no one leaves" we fall we can't know in advance. Also, as you quite rightly infer, we don't know which clients will stay - the easy to manage ones, or the more finance/admin-challenged ones that will take up more time?
That's why we're going to start a year in advance of the deadline - gently, of course! - to see what the picture may look like.
The worst case scenario would be that we end up in a middle ground of there being not too many people that leave, but not enough stay that the additional fees could pay for an additional staff member leaving our resources constrained. Then we'd have to make some choices about the client list.
The important thing is that we are, all of us, just starting to think all of this through and no doubt our approach will adapt as we get closer. Even if implementation is delayed by the government, we're still going to have to go through this at some point in the future.
So we are going into MTD ITSA with the view that clients might move round accountancy providers and fees will increase. On the other side it seems that some Accountant may retire or refuse to partake so: less Accountant , clients moving about , four tax filings rather than one and if the Accountants don't get involved then Self-Employed can pop the figures into a computer and press a button , calculate a tax liability and then work out how payments on account affect this calculation , overlap relief changes, personal allowances , capital gains tax , foreign income , holiday or residential letting , national insurance class 2 and 4 , higher rate tax allowances , child allowance , capital allowance , saving rate bands , dividends (need I go on) when HMRC cant even get SEISS grants working properly is going to make life easier and tax bills more accurate. Let wait and see shall we cause one thing I can tell you is that I won't be a party to it - I put with with MTD for Vat and now have plans to be out of MTD ITSA is driven on . And if HMRC think I am going to grovel and prostitute myself for Exemption then they can take a running jump. Very best of luck to the mugs who try to comply.
I'm just not going to be able to get my subcontractors to comply. They dont issue invoices in the first place and have to wait for contractors to send them their reports which of course they lose if they are not on computers... and many arent.
Some in this thread seem to be saying that they will not act for those who dont want (or cant?) comply. If I take this stance what am I going to tell the client who has been with me for years, pays ontime - never any problem but I know wont be able to cope? 'Goodbye.. it was nice whilst it lasted'?
Bank streaming for all seems to be being put forward as the be all and end all however... setting up a separate business bank account (if you can that is... some banks are refusing and I dont mean for those who have bad credit ratings) costs (unless you use Co Op via FSB = free)
Last week I had a very tearful client on the phone who didnt understand/ couldnt work out how to log onto Accountancymanager despite being given instruction and there being a video (I've been trying to get all on e-signing for some time now). So I gave up and will be sending a paper return for signature which I will then submit by Taxfiler.
I've tried to get some clients who I think will be able to cope onto cloud software but I seem to spend hours teaching and amending what rubbish they have entered.. when they remember to do so.
But as others have said - there is no point in moaning. We knew the time would come and we just have to find a way that is best for our business, staff and particular type of client.
The first decision to make is 'who should stay and who should go?' Clients I meant - not staff.
If HMRC want rubbish then so be it - if they investigate blame it on the system they have introduced against advice from Accountants and go for nil penalties. When HMRC look at the computer records produced they won't know where to start !!I idiots .
Had a lot of issues with clients trying to log onto accountancy manager. Had one who set up a 1 month trial by mistake. The companies all seem to think clients will be easy to convert to MTD. Not a chance in hell. I just don't know what we are going to do, I really don't. Most of the software is awful anyway
Likewise, our subcontractor clients are the ones I worry about the most. Partly because their job means they are always out and about and not near technology unless it's a phone. And usually they're as good at admin as I am at ballet. The added issue is that many of them are interconnected and are also subcontractors to larger clients whose custom is important to us.
We haven't quite figured out what our approach to them is going to be yet.
MTD is an opportunity not a challenge.
Yes fees will increase.
Yes this will involve more time being spent.
We are here to advise people and for that advice we charge a fee based on the time spent and the complexity of the work.
The desire is for most practices is to seek out new clients to increase turnover many spend significant amounts on marketing
We are all being given the chance to increase fees without the need to market just educate existing clients
It is much easier to sell a new service to an existing client
Yes some individuals will be unable to comply and possibly unwilling or unable to pay higher fees but the necessity to file does not go away
We are just the messengers we are not making the rules we just have to work within them and advise our clients to the best of our abilities
Hmmm, I can see the irony in this post but I'm struggling to find any humour.
Surely it is not meant to be straight faced and serious?
Sophocles and Plutarch both wrote wise words about the consequences of being the messenger who brings bad news and I doubt whether their messengers were also trying to up their fees.
When this all descends into shambles and chaos , WHICH IT WILL WITHOUT DOUBT, don't forget that HMRC will say it is the "customer's" fault and charge them penalties accordingly !!!
I might be slow on the uptake, but it has just dawned on me that in 2023/24 we will still have to do all the regular accounts and tax returns for 2022/23 as well as setting up and managing everybody on MTD for ITSA.
Doom ! (said with a Scottish accent)
I'm liking the idea of lorry driving more and more - they will soon be earning more per hour than we could ever charge !
Yes, indeed! And the worst part will be January 2024, when the previous year's tax returns are due, and the Q3 quarterly MTD reports will all be due as well!
I just don't know how I can get the work done. If everyone is on monthly accounting (seems the only way) and I have to get their previous years accounts done too I am going to have to work 80 hours a week for the first year at least or get some extra staff and train them.
My clients don't want to keep books and I will be doing their bookkeeping for them somehow. So I am afraid they will have to have one bank account and everything will need to go through it. I would expect £200 more per client per year but no more than double fees. I will be using spreadsheets for quite a few - its easier than the software available.
And furthermore. It would be sensible if they allowed us 3 months to send in each quarter at least for the first year - we could spread the workload a little better.
Its going to be January and worse 4 times a year until we get everyone bedded in.
I am not really against clients keeping better records its the impossible time limit they have given us.
A good batch of clients will however be fooled by those delightful adverts, take a few pics, analysis everything very carefully and automatically to sundries, including their own drawings, tax payments and cat food, file the lot quarterly under MTD, from their phone, and then come in at the year end asking how much cheaper it will be this year...because they have done it all.
To add insult to injury, the software will tell them they have no tax to pay and when you tell them the real figure, you will be faced with a series of comments defining how competent you are.
CHALLENGE Six
Anticipate and Prepare for future MTD demands
CHALLENGE Seven
prepare for staff leaving the business
and on it goes
I don't have staff..it's just me. Can I leave? What's the six numbers tonight? What are the score draws this week?
I feel the same. I would love to be able to hand in my notice to someone and ask for my P45, but I have my clients, my fantastically loyal employee and my small office to take care of.
I keep coming back to the same basic question: just what will all this achieve, apart from stress, worry, angst, frustration, overload etc., etc.?
I no longer do VAT Returns (just one, for which, after much difficulty, I got MTD exemption), and I don't miss it at all. I totally refuse to get involved in MTDfIT, and look forward to more free time, but I really resent the fact that HMRC have effectively forced this on me, and I will be sorry to lose some clients. I am warning clients now about what is coming in 2023, and will recommend suitable alternative accountants to each client.
I feel very angry about the whole MTD project, especially the expansion into Income Tax, HMRC's stubborn attitude and refusal to listen to our concerns about the threshold, implementation period, and filing of quarterly figures.
Does anyone know the name of the Minister in charge of this? I can send him an email to put him right on a few things.
Is is Stephen Barclay? Someone needs to tell them politely but directly what a
problem this is for accountants.