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Martin-Tregonning

Sole practitioners draw up plans for MTD for ITSA

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Sole practitioner Martin Tregonning considers how he plans on tackling Making Tax Digital and expresses his concerns on client awareness. 

2nd Aug 2021
Editor AccountingWEB
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The countdown to Making Tax Digital for income tax has left many sole practitioners wondering how they’re going to cope. For starters, the practice processes will need to change for the online filing regime. And then there are the client challenges, the big one being client education. 

Like a lot of sole practitioners, Shetland-based Martin Tregonning is hatching his MTD plans this summer ahead of the inevitable client handholding parade. 

Our upcoming MTD Bootcamp webcast series will explore how Tregonning and other practitioners are preparing for the next phase of MTD and the efforts they’ve taken to ensure their clients are MTD-compliant. 

First stop on road to MTD

The first stop on the road to MTD for ITSA is for all VAT-registered to enter the online filing regime in April 2022. Tregonning still has work to be done here, but he has been warning clients since last year and most seem ready for the transition. At least, no one said they want to stick with their journals. However, MTD for ITSA is a different story. 

“A lot of ignorance about what it is and what it means,” he said. One owner of a small business he spoke to assumed that their software already does it. “They had no idea about quarterly reporting,” recounted Tregonning. 

“I am concerned about the lack of knowledge about MTD for ITSA. It would appear that HMRC’s tactic is to leave it to the accountant to deal with.”

Client segmentation and simplification

Tregonning is using these months ahead of the April 2023 transition date to get clients ready. His first step is to get everyone running on cloud software. He’s aware that this switch depends on the MTD income products that become available, but his plan is to run submissions on the solution that Sage delivers.

Like many sole practitioners, Tregonning is grappling with client segmentation and ensuring all the capabilities are in place to deal with the transition. In Any Answers recently one AccountingWEB member shared their plan to manage 100 clients. Their clients generally just leave a bag and some bank statements, so their first step is to make a list of the affected clients and those that can manage their own software.  

Segmenting clients is also a chance to simplify. With MTD in mind, sole practitioners can review their client base for any overly complex structures and decide whether any clients should deregister for VAT. 

Tregonning offered the example of a business that runs four companies, where they need to decide if they need all these companies or or should the partnership be a company. 

Software challenge

This method matches the advice AutoEntry’s Brian Carolan is giving to practices: analyse your clients and assess your tech stack. “There will be some practitioners set in their ways and looking for side exits, but each practice can settle on a couple of pieces of software to manage the bookkeeping software,” he said.

It’s not going to be easy. There will always be struggles to get clients over the line, but Carolan noted that “breaking down your client base and settling on your tech stack will help to get those clients up and running easily. Then you’ll have to get the others on board and handle that data in the best way possible.” 

Software-wise, Tregonning is keeping it simple for clients with one or two apps. “I’d say everybody will fit into my basic stack, the only difference is which features in the software I let them use, while others need things you can turn on or off.” 

While the goal is to get all clients digitalised, Tregonning keen to wield the data and insights to show clients the value in the cloud software beyond sticking to the MTD regime.  

“What I am trying to do is sell people on the idea of quarterly management reports because you need to manage your business better. The benefit is to put that into the same basket as MTD and say there is a benefit that we can bring proper management accounts,” he said. 

While sole practitioners are getting started on their plans, there are likely to be a few road bumps along the way to April 2023, like the recent abolition of the basis period announcement that sets a new framework around how HMRC expects to organise the reporting workload.

The news means that some unincorporated businesses will have bumper tax bills for 2022/23 and create a significant bunching of workload for accountants. But Tregonning doesn’t see this MTD swerve making too much difference.

The big issue for him goes back to that original challenge: getting clients to keep up-to-date data. “Even with cloud software, some are still behind with their inputting. When the rubber hits the ground, they won’t have the data.” 

In a live MTD bootcamp webinar on Wednesday 4 August, in association with Auto Entry, Tregonning will detail the steps he’s taken to get ready for April 2023. Rebecca Cave will also be on the panel to outline the key compliance milestones for the next couple of years for MTD. 

Replies (65)

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By ireallyshouldknowthisbut
03rd Aug 2021 09:09

We are very much in the "wait and see" camp.

I see no reason to rush clients onto unsuitable software just yet. Virtually our clients who would benefit from cloud, are on cloud.

All the rest (the vast majority) are on spreadsheets which are fully MTD compliant as far as we are aware.

Until the timetable (and I think you need to be pretty naïve to believe the current one) and crucially the penalty timetable, is genuinely set in stone, we are priming clients with the basics of "ensure all the transactions go through a dedicated bank account", which for many small clients it not a given - for example the landlord with one property. Just simple relaxations such as "businesses under the VAT threshold get another 12 months" would take over 200 clients out of this for us. Ditto "business under £25,000 are exempt" would take 100 out.

I see no reason to burden clients with unsuitable software this early on, given the softness of the landing here is going to have to be extremely soft, and if we can gain a couple of years then great. The keen types can break their businesses on this if they want to, and hopefully pave the way for everyone else.

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Replying to ireallyshouldknowthisbut:
David Ross
By davidross
03rd Aug 2021 10:11

Good luck with this approach

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By DMBAcc
03rd Aug 2021 11:04

Hi David I would like to know the context in which you run your business and whether you can help those of us struggling to cope with how to get this to work. I don't use accountancy software. If needed my clients use a simple spreadsheet which lists all their transactions and analyses income and expenditure very simply. I do any "topping" and "tailing" at year end. I can spread the work over 10 months so I have a life in between. Trying to get 60 quarterly returns done in a 22 day period 4 times a year does not appear physically possible even if it were desirable. Yet NO ONE talks to HMRC about this. Please can someone get an honest civil servant to explain just how quarterly returns are going to be made?

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Replying to DMBAcc:
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By Beef curtains
03rd Aug 2021 14:43

Agreed! Our profession's behaviour and response to each new idiotic goverment initiative is deplorable. Remember "accounting for inflation" when government should have been doing something to eliminate it?

Instead of resisting the mindless stupidity of the civil service we pander do it, making sure that the trains to the camps run on time.

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Replying to DMBAcc:
By petersaxton
09th Aug 2021 10:43

DMBAcc wrote:

Trying to get 60 quarterly returns done in a 22 day period 4 times a year does not appear physically possible even if it were desirable.


Why wait until the end of the quarter before starting?
I will do the work daily or weekly.
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Replying to ireallyshouldknowthisbut:
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By Paul Crowley
03rd Aug 2021 10:28

Same here
Numerous OAPs with rent income who will never sort it on their own
Add in the change of basis period and All clients needing to file the same quarters in less time than VAT filing and it is unworkable
Penalties could even be cheaper than the extra fees I would need to charge

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Replying to ireallyshouldknowthisbut:
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By johnjenkins
03rd Aug 2021 10:28

All our clients are on digital in some way shape or form. Most of our smaller clients are on VT cashbook, which is free. The digital side of things hasn't been much of a problem, it's the quarterly updates that is going to cause mayhem. I honestly can't see it happening and my own view is that we should put up a bold front come April 2022 and say NO to quarterly updates. If enough business say NO then HMRC WILL have to take NOtice.

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By Paul Crowley
03rd Aug 2021 10:30

Agree
clients who are not sorted can just ignore the system for a year to see what happens.

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By DMBAcc
03rd Aug 2021 10:52

Thanks Paul. I still have sleepless nights over this nightmare (maybe it is the cheese). Let's put all this in context before getting into detail. How would any of us respond if suddenly DVLC said each car owner had to do his own MOT and keep the records digitally? There would be hell up. And yet HMRC are essentially telling sole traders to become accountants/bookkeepers and run accounting software all by themselves as if it is the simplest thing in the world. We have all lain down and accepted this dictat from a bunch of civil servants who couldn't run a SAGE package or the infamous Quickbooks (that actor really thinks it is that simple to run it from your phone !!) to save their lives. I can only think that someone wants small businesses gone to allow the big corporates to run everything from holiday accommodation to small manufacturing. This government - supporters of small businesses - REALLY? Trying to get a tory MP to see the carnage that is coming has been as successful as using a chocolate teapot. So as others have indicated HMRC set the rules then expect sole trading accountants like us to find the solutions (note we have to provide this service FREE). No consultation with us and apart from some lukewarm support from the Lords no representation for those who will have to break their backs to sort this. Still no one will answer my question - we are only dealing here with self employment and rentals. How will all the rest of our income be submitted to HMRC? Are we still going to have to go online to submit what we already do after each 5th April? All I am asking for is some HONESTY and some REAL dialogue to help the small accountants who have scores of computer illiterate clients, but who can keep genuinely accurate manual books at minimal cost. Why do I need a costly software package to record 12 monthly receipts from my one and only let property? Have we really all rolled over and accepted this MADNESS?

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By 0098087
03rd Aug 2021 11:01

I still have a client refusing to accept invoices by email. Wants everything faxed. Some suppliers refuse to deal with them as they won't use email

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Replying to DMBAcc:
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By 0098087
03rd Aug 2021 11:01

I still have a client refusing to accept invoices by email. Wants everything faxed. Some suppliers refuse to deal with them as they won't use email

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Replying to DMBAcc:
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By johnjenkins
03rd Aug 2021 12:20

HMRC have been trying to get rid of the small business (including us)since the days of Gordon Brown.

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By johnjenkins
03rd Aug 2021 12:32

Cameron got in on the back of a referendum. Boris got in on the back of Brexit. He's done well with the vaccine roll out, but these things are short lived. He and Rishi need to sort out HMRC otherwise the Tories could well get a shock at the next general election even though Labour haven't got much to offer. The electorate are now quite used to not voting for the main parties when they want to make a point.

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By Beef curtains
03rd Aug 2021 14:47

For very many years HMRC has needed to have its chain pulled, and HARD.

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By David MacBean
03rd Aug 2021 10:29

The last update I read on proposals for MTD ITSA had everybody moving to the fiscal year end for tax but not necessarily for accounts. How is that going to work for the likes of farmers where stock is a big issue in determining taxable profits & 31/3 or 5/4 isn’t a good time of year for valuing it.
HMRC also haven’t said what they’re proposing for partnerships.
To me all the focus seems to be on simple sole traders on the cash basis - please can someone who engages professionally with HMRC tell them life isn’t that straight forward!

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By 0098087
03rd Aug 2021 10:37

So many of ours don't use computers and wouldn't be able to cope. How are we supposed to get them switched over. Who has the time to do this. We are still doing 20-30 furlough claims. Yes it ends next month but then we'll be in October. I can't see this happening in 2023. Insane and no need for it.

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Replying to 0098087:
By petersaxton
09th Aug 2021 10:48

0098087 wrote:

So many of ours don't use computers and wouldn't be able to cope. How are we supposed to get them switched over. Who has the time to do this.


Accountants can do it all for them - for a price.
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By Catherine Newman
03rd Aug 2021 10:58

I am enjoying the extra time not holding meetings with my clients due to Covid. MTD will mean more meetings.

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By DMBAcc
03rd Aug 2021 11:08

Me too Catherine - time I don't have. The little I do have is spent on my precious grandchildren so I won't be giving that up for numties like George Osborne and his crony friends nor the bureaucratic civil servants - who quite honestly do not behave like servants but rather our Lords and Masters - unaccountable too.

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Replying to DMBAcc:
paddle steamer
By DJKL
03rd Aug 2021 12:11

George Osborne???

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By Latinaid
03rd Aug 2021 12:50

DJKL wrote:

George Osborne???


I still rejoice in the glorious booing he received at a Paralympics medal ceremony - proud to have been part of that.
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Replying to Latinaid:
paddle steamer
By DJKL
03rd Aug 2021 13:13

What has he now got to do with MTD re IT ?

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By bosclibby
03rd Aug 2021 14:41

Lots....he was the one who set the ball rolling and announced the "end of the Tax Return"

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By DMBAcc
03rd Aug 2021 19:36

DJKL wrote:

George Osborne???


Yep - that's where all this started and that coward has run for the hills as have his advisors leaving another generation of unskilled numties in HMRC to try to make this work without losing face. So yes if I was asked to lead an investigation I would start with George Osborne. I would haul him back into the public arena to defend his role in this unholy mess. How dare he dismiss the years of study and experience we have and infer that an App on a smart phone can replace skilled accountants.
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Replying to DJKL:
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By DMBAcc
03rd Aug 2021 19:37

DJKL wrote:

George Osborne???


Yep - that's where all this started and that coward has run for the hills as have his advisors leaving another generation of unskilled numties in HMRC to try to make this work without losing face. So yes if I was asked to lead an investigation I would start with George Osborne. I would haul him back into the public arena to defend his role in this unholy mess. How dare he dismiss the years of study and experience we have and infer that an App on a smart phone can replace skilled accountants.
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Replying to DJKL:
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By DMBAcc
03rd Aug 2021 19:37

DJKL wrote:

George Osborne???


Yep - that's where all this started and that coward has run for the hills as have his advisors leaving another generation of unskilled numties in HMRC to try to make this work without losing face. So yes if I was asked to lead an investigation I would start with George Osborne. I would haul him back into the public arena to defend his role in this unholy mess. How dare he dismiss the years of study and experience we have and infer that an App on a smart phone can replace skilled accountants.
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By ireallyshouldknowthisbut
03rd Aug 2021 11:28

Do we know what the exemption list will be?

Its presumably
(1) anyone over retirement age as you can claim digital exclusion
(2) anyone without a UK passport (as you cant do the digital handshake without an personal tax account, which you cant get if non-resident or don't hold a UK passport)

Any more?

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Replying to ireallyshouldknowthisbut:
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By Latinaid
03rd Aug 2021 11:46

ireallyshouldknowthisbut wrote:

Do we know what the exemption list will be?

Its presumably
(1) anyone over retirement age as you can claim digital exclusion
(2) anyone without a UK passport (as you cant do the digital handshake without an personal tax account, which you cant get if non-resident or don't hold a UK passport)

Any more?

I think you can have a PTA without a UK passport? I have one client who had to use Gov.Verify (is that the right name) to verify her identity because she doesn't have a UK passport and couldn't answer the credit report questions correctly.

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Replying to ireallyshouldknowthisbut:
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By memyself-eye
03rd Aug 2021 13:14

Anyone over retirement age?
great, that's me
I like this MTD stuff now, think it's gonna work just fine.

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Replying to ireallyshouldknowthisbut:
By petersaxton
09th Aug 2021 10:50

ireallyshouldknowthisbut wrote:

Do we know what the exemption list will be?

Its presumably
(1) anyone over retirement age as you can claim digital exclusion
(2) anyone without a UK passport (as you cant do the digital handshake without an personal tax account, which you cant get if non-resident or don't hold a UK passport)

Any more?


Both of your presumptions are wrong.
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By Geoff56
03rd Aug 2021 11:52

It is in situations like this that I would expect our professional institutes to really stand up for us and strenuously push back against what is proposed. As far as I can see, they are all just lamely rolling over and accepting it. They seem to be more concerned with not ruffling feathers at HMRC, than with protecting and defending their members.

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Replying to Geoff56:
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By 0098087
03rd Aug 2021 12:02

Try writing to our little gutter snipe suck up MP's. They are all a waste of space

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By cbp99
03rd Aug 2021 12:58

I cannot speak for your MP, but whenever I, or clients, have written to our local MP, there has been an immediate response. On two occasions an HMRC logjam of several months' duration was resolved within two days.

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By Latinaid
03rd Aug 2021 11:52

DMBAcc wrote:

Still no one will answer my question - we are only dealing here with self employment and rentals. How will all the rest of our income be submitted to HMRC? Are we still going to have to go online to submit what we already do after each 5th April?

I was recently invited to do some user testing for part of the MTD system - not the quarterly reports bit for S/E and property, but the rest of the tax return. I didn't get to see much of it, and in any case it's all confidential so I can't give details, but it certainly looks as if at the moment the plan is to have a separate filing for other income, pensions, dividends etc. I thought it was an unholy mess, and told them so in no uncertain terms - well, they did ask me to give them negative as well as positive comments, and I took full advantage. I told them I thought the whole idea was a mess, with absolutely no benefit whatsoever for the 'customers', and in any case, why on earth is HMRC considering such a major change when it literally can't even cope with opening its post in a timely manner. I don't think they know what hit them!

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Replying to Latinaid:
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By DMBAcc
03rd Aug 2021 12:21

Latinaid wrote:

DMBAcc wrote:

Still no one will answer my question - we are only dealing here with self employment and rentals. How will all the rest of our income be submitted to HMRC? Are we still going to have to go online to submit what we already do after each 5th April?

I was recently invited to do some user testing for part of the MTD system - not the quarterly reports bit for S/E and property, but the rest of the tax return. I didn't get to see much of it, and in any case it's all confidential so I can't give details, but it certainly looks as if at the moment the plan is to have a separate filing for other income, pensions, dividends etc. I thought it was an unholy mess, and told them so in no uncertain terms - well, they did ask me to give them negative as well as positive comments, and I took full advantage. I told them I thought the whole idea was a mess, with absolutely no benefit whatsoever for the 'customers', and in any case, why on earth is HMRC considering such a major change when it literally can't even cope with opening its post in a timely manner. I don't think they know what hit them!

Thanks for this - will you be invited back by HMRC ;-) ?

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Replying to DMBAcc:
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By Latinaid
03rd Aug 2021 15:01

DMBAcc wrote:

Thanks for this - will you be invited back by HMRC ;-) ?

Oh, that would be wonderful - I didn't have time to give them more than a tiny piece of my mind - I'd love the chance to really let rip.

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Replying to Latinaid:
By ireallyshouldknowthisbut
03rd Aug 2021 15:42

'Latinaid, this seems to be the issue if you engage in the new system - you cant then file a normal quick tax return but will be drawn into all sort of small "silo" filings for all the different taxes which given the sheer complexity of the current system is unlikely to gel together properly and could result in a very high level of keying, and quite possibly a normal return too to mop up the "bits we haven't done yet"

Looking at the 30 day reporting filling which are hugely time consuming and ill thought-out requiring a large number of key strokes and core data being repeated ad-nauseum. if its "more of the same" of this type of filing its hugely difficult to prepare, client review, authorise and file. You are best off well out of it for as long as is possible.

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Replying to ireallyshouldknowthisbut:
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By Latinaid
03rd Aug 2021 16:02

That's certainly the impression I got from the user testing I did - one of the issues was that it wasn't clear whether the tax calculation being shown included the sole trader and/or property income filed separately. Splitting it into separate bits rather than having a single place where you can see all your tax figures (as now) seems lie a massive backward step.

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Replying to Latinaid:
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By Alexerg
10th Aug 2021 23:53

Latinaid wrote:

That's certainly the impression I got from the user testing I did - one of the issues was that it wasn't clear whether the tax calculation being shown included the sole trader and/or property income filed separately. Splitting it into separate bits rather than having a single place where you can see all your tax figures (as now) seems lie a 'massive backward step'.


Might remind some of the 'Great Leap Forward'
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By DMBAcc
03rd Aug 2021 12:19

I thought you might like to hear about an incident I have heard today. A client of mine runs a Ltd company with his friends. No one wants to be treasurer, naturally, so they employed a bookkeeper who got them to upload the bank statements and run the reconciliation programme on QB monthly. Now of course these business folk are more concerned to make a success of their business rather than keep digital accounts. So the reconciliations were left ..... and left ....... so with the 30 Sept deadline looming some work was done in a rush leading to manual entries etc. shall we just say "pig's ear". Bear in mind that the guy I deal with is a graduate and professional surveyor (so nobody's fool). The book keeper, naturally, is stacked out with work this month and most of next AND certainly doesn't want to start unpicking this unholy mess. What do they say? To err is human BUT if you really want to [email protected] things up then use a Computer. Now this is a small Ltd company probably 400 entries per annum. And HMRC think that MTD fIT will be a walk in the park !!!!!!!

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Scooby
By gainsborough
03rd Aug 2021 12:48

According to HMRC's stats, nearly 15% taxpayers missed the 31st Jan 2021 deadline - what on earth makes them think that having to file 5 times a year (4 + final adjustment) isn't just going to lead to complete and utter chaos and garbage being submitted?

Pretty furious with the professional bodies that seem happy to collect our subs but don't put up any decent fight.

My main concern is that small accountants take steps to prepare clients for this madness, but the Government then does a U-turn before the changes actually come in. Really need someone like Martin Lewis or Daily Mail to get this information out into the public domain. Whilst businesses are still recovering from Covid and Brexit, this is the last thing they need.

There have been petitions re MTD in the past. Current one is https://petition.parliament.uk/petitions/589102 but they have been attracting very few signatures.

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Replying to gainsborough:
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By johnjenkins
03rd Aug 2021 13:49

When MTD was first introduced the pitfalls were glowingly aware and a petition signed by the requisite number of people was presented and read out to HOC. Basically the answer was HMRC believe that MTD will reduce errors and make tax payers aware of their liability a lot earlier. Since then the HOL have got involved with more or less the same result from HMRC. So nothing will change their mind unless business ignore it.

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By GHarr497688
03rd Aug 2021 12:51

My lady who is 61 does part-time cleaning and brings in a little book market "in and out" around November each year is in for a great shock when MTD for ITSA comes in to play and she has to fill in a spreadsheet or pay Xero for software and files six filings online when she hasn't got a computer. Well done HMRC another triumph for you making peoples lives a complete misery so you can say how good you are.

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Replying to GHarr497688:
A Putey FACA
By Arthur Putey
04th Aug 2021 12:21

Many people like that will just retreat into the black economy, until such time as the government abolishes cash.

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By bluebaron
03rd Aug 2021 12:55

The software part of it is bad enough for me, but the real nightmare is the multiple submissions a year, with just a few weeks at the end of each quarter to do this for every sole trader client. Each time I inform a client about it, the hassle, the extra costs involved, they can't believe it. I believe that HMRC will still blunder ahead with this, 2024 at the latest. I don't want all the extra stress, and for me personally, I won't be acting for my sole trader clients very much longer; it's a shame, but the lesser of two evils.

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Replying to bluebaron:
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By GHarr497688
03rd Aug 2021 13:25

I feel the same. HMRC are forcing me to retire early. On the positive side their will be less Accountants around and those left will have more to do. This will lead to lower standards , bigger mistakes , less tax revenue and more pressure on HMRC. And what will the Robin do then poor thing.

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By Ian McTernan CTA
03rd Aug 2021 13:39

My plan is to find the cheapest software (or free) that enables MTD submissions and get everyone who has one or two properties or very small self employed income onto this.

Then enter one figure for turnover and one for expenses each quarter, based on last year's figures.

Then submit actual figures on the '5th submission' when we've actually had time to prepare accounts and make the usual adjustments for capital allowances, etc

'wakes up'.

Of course that's not the reality- the reality will be a lot worse, persuading people to pay for software and my doubled fee to ensure they report that one property's rental income every quarter- with all the extra interactions that will entail!

And of course the extra fun of 'open banking' which needs links refreshed every couple of months so the first chasing email will be 'please restore the link' then chase that then finish all the reports by the 22nd...

Not to mention getting them all to open a separate bank account just to make everyone's life easier for reporting...

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Replying to Ian McTernan CTA:
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By Latinaid
03rd Aug 2021 14:03

Ian McTernan CTA wrote:

Then submit actual figures on the '5th submission' when we've actually had time to prepare accounts and make the usual adjustments for capital allowances, etc

1. Do we know anything about when that 5th submission will be due? Will the deadline still be 31st January, do we think?

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Replying to Ian McTernan CTA:
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By GHarr497688
03rd Aug 2021 14:29

Thats all well and good but how do you reverse the original figures entered and are you complying with the law that digital records keeping is required without an exemption. What you suggest might end up with clients getting a penalty - I am not sure. I think HMRC expect accounts each quarter with the year end journals on the fifth submission and the other information on the the sixth submission all done in real time with a full audit trail. This will be for landlords and or self employed over £10000 p.a. I just can't see how this can work unless each taxpayer employs a competent book-keeper with computer skills who never has time off or goes on holiday.

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Replying to GHarr497688:
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By Latinaid
03rd Aug 2021 14:51

GHarr497688 wrote:

. I just can't see how this can work unless each taxpayer employs a competent book-keeper with computer skills who never has time off or goes on holiday.

Exactly this. I consider myself a competent book-keeper with computer skills, but don't want to go through quarterly stress and I definitely want to have holidays.

I have about 60 sole trader clients. If even a quarter of those leave things to the last minute (and knowing my clients, it will be considerably more than that), that means an extremely stressful workload all arriving at once. At the moment, I've got them all well-trained to spread things out throughout the year, since I only have to apply pressure once a year to get them to sort out their paperwork. I really don't want to have to nag people 4 times a year. And I know the idea is that they use the software themselves - well, I'm not looking forward to explaining that to those clients who can barely find the date on a receipt. And I don't want to come across as judgemental about that - why should they know how to do book-keeping? I don't know how to teach yoga, lay a patio or hang wallpaper. Many of my clients are dyslexic - they really can't do this stuff, which is why they employ me.

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