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Change your MTD mindset

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Accountants have been growing increasingly frustrated with the forthcoming changes to MTD. Norman Younger advises embracing the process in your firm.

1st Mar 2021
Community Assistant AccountingWEB
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The upcoming shift to MTD for income tax has been a source of vexation for countless accounting professionals. Members of AccountingWEB have been voicing their frustrations on the prospect for some time, with many dubbing MTD a “train crash” waiting to happen.

Getting on the train

“Is this madness still going ahead next year? We can’t even really see clients and the ones who don’t want to know about computers will be even harder,” asked AccountingWEB member 0098087.

“Remember that the train crash will only affect you if you get on the train,” added Tornado.

Spring complaints that the demands of accountancy are becoming too much to endure are common, but the next phase of MTD has become a catalyst that may encourage many practitioners to throw in the towel early.

“The MTD train coming down the track, together with the excessive cost of AML registration already here, has put an end to all of that. Time to move on to things more enjoyable,” said Michael King.

Calling it a day

This stance is increasingly common in Any Answers in the wake of a tumultuous year that has left many practitioners feeling worn out. And more of these accountants are vowing not to be a part of MTD:  “With MTD for IT coming down the tracks in 2023 I have decided that the 2020/21 tax return cycle will be my last,” an anonymous user told AccountingWEB.

“I shall be sorry to call it a day, but the pointless bureaucracy, astounding inefficiency of HMRC and everything else is all getting to be too much of an effort to deal with,” added MG Weemys.

Even for those not yet ready to retire, the prospect of MTD for income tax has still had a damaging effect: “I’m in exactly the same position (except that I’m 42 and fed up with it all),” said adf2410.

“I can’t afford to retire so I will just have to cope,” said Jo Nokes.

“It’s the straw that broke the camel’s back - there’s been so much change in recent years in the profession,” said Maximiti founder and director Norman Younger. “How to interact with HMRC isn’t getting easier, deadlines are getting tighter… For many practitioners, it’s one step too far.”

Embracing MTD

Even though MTD for VAT has now bedded in and the government is set on extending the regime to income tax, some accountants still question whether MTD will be feasible to replace the individual self assessment regime.

“The prospect of MTD for income tax fills me with horror,” said jon_griffey.

“In my opinion MTD [for income tax] is an impossible proposal so I will not be taking it seriously,” said Tornado.

“I stressed about this a few years ago but no longer - it is completely unworkable,” added Southwestbeancounter.

Yet the MTD train continues to roll on regardless of the profession’s resistance. 

“Not sticking is not an option,” warned Younger. “The positives are that for many firms, it means that it whips clients into line.”

If a deadline is imposed by the government, Younger assured practitioners that the majority of clients would prefer to hand over the more complex and technical work to their accountant – which tends to increase their engaged with the compliance process.

Although it might sometimes feel like software is taking over, the MTD transition is an opportunity for accountants to embrace the technology and approach their practice in new ways, he added.

Adapt to MTD

“In terms of adapting, it’s about the roots and branch. Go through your practice - what can you do differently?” advised Younger.

Breaking out of the firm’s habitual cycles will help you make the shift to MTD. With so many practices struggling to adapt, adopting a proactive approach will not only help ease you into the new way of working, but could open the door to new clients left behind by their current advisers.

Shifting your mindset is an important part of adapting. Younger suggested seeking advice from consultants, who can also help you bring employees struggling with the transition to buy into your plans.

“Perhaps host a webinar seminar to fill them in all at once,” Younger suggested.

Up your fees

MTD is likely boost practice fees in several ways. In a recent MTD webinar for AccountingWEB live, tax expert Rebecca Benneyworth reinforced the advice to get your entire team prepared in the run-up to MTD to make the process easier for clients.

Bringing the bookkeeping in-house is a very simple way to increase revenue, and applying the right tools can turn this entry-level service line into a very tidy profit centre that works for both parties.

“If we automate it as much as possible, and take it away from clients so they can’t mess it up, I’ll feel happier and more comfortable,” said Benneyworth.

There is also scope to increase the value of your services through during the transition, as MTD presents a perfect opportunity to talk to clients about fees: “Accountants are not always brave when it comes to charging. But the clients are going to have to pay for it in some way, shape or form.”

Hear Rebecca’s top tips for getting clients on board with MTD in our recent AccountingWEBLive webinar here.

Replies (46)

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By ireallyshouldknowthisbut
02nd Mar 2021 08:59

I don't think its about "shifting mindsets" and either vague notions.

its about imposing a massive regulatory burden on small businesses for no reason other than (a) quarterly payments on account - which no-one has any real problem with under the existing system and (b) to force more clients into the hands of expensive software houses to do something they don't need doing.

My clients who would benefit from software are already on it. Those that don't need it are not. There is not a cohort of clients who could benefit from it but have irrationally refused to use it which is the implication.

Letting government & HMRC steamroller this issue through unopposed is deeply unprofessional for accountants. HMRC don't know what they are doing. Government does not know what its doing. This will be yet another expensive farce of a software project which fails at its core aim of raising more tax, but does cause a huge amount of extra work for everyone.

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Replying to ireallyshouldknowthisbut:
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By Paul Crowley
02nd Mar 2021 17:22

Yet another version of of roll over and accept.

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By Duggimon
02nd Mar 2021 10:25

We got on the "train" early for MTD for VAT and put a lot of work into getting clients ready for it in the run up to it. Then HMRC failed to put together the systems they had previously specified, created this absolute farce of a digital tax system we now have for VAT and rendered virtually all of our work completely pointless.

Two years on and the MTD for VAT system hasn't changed and remains a long way from what was touted for years in the run up to the change. What they've ended up with is a different interface for filing the same returns. "But there's a digital link now!" you cry, however the system has no way of knowing whether there is or not, it's a stupid system made by stupid people and I feel stupid for all the time and money I wasted getting ready for what we were told was coming, only to later realise they couldn't implement it, not even close.

I have absolutely no doubt that MTD for self assessment will be even less fit for purpose, even further away from what they've said it will be and I'm not getting burned again preparing for something HMRC won't be able to deliver.

Don't prepare your clients early because when it comes it will be a hint of a shadow of what they've said it will be and you'll look like an idiot again, for the second time in five years, for trying to make people adopt systems and processes they don't want or need.

There is no tax gap caused by people who don't want accounting software, the tax gap is from people who lie on their returns, and I'm sure they'll be able to lie digitally just fine.

What could have been recovered by HMRC if the money wasted thus far on the shoddy systems they've put together was spent on internal staffing to allow better service online, over the phones and fund more tax investigations?

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Replying to Duggimon:
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By raybackler
02nd Mar 2021 15:43

I was going to respond on this article, buy I can't put it any better than you have, so thanks!

The article seems to think the resistance is from luddite accountants when most practices use and deal with far more sophisticated software than HMRC can ever dream of seeing.

The fundamental point is that MTD for VAT has failed at the HMRC end and that does not give them much chance of succeeding with MTD for Income Tax, which is potentially far more complex.

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By BryanS1958
02nd Mar 2021 10:25

The government should change its mindset. Accountancy and business representatives should be lobbying to ensure that they do, not encouraging accountants to roll over and 'change their mindset'. If something is sensible then I will be happy to take it onboard, if it isn't then I wouldn't.

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By Peter-S
02nd Mar 2021 10:27

Regardless of whether we see MTD as a good idea the consensus of those in favour seems to be to engage more with your clients, do more for them and charge them more for your services and it will all work out. Lets assume that most of said clients are happy to go along with this, which I am a long way from convinced about, where does all the extra time to do this come from. I certainly haven't got staff sitting around doing nothing much, quite the reverse with everything else that is going on at present. The solutions offered are far too simplistic in my view.

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By tonyaustin
02nd Mar 2021 10:39

Income tax is an annual tax on the annual profits of a trade. Quarterly invoices, receipts and payments are meaningless until adjustment is made for accruals, prepayments, bad debts, stock, work in progress and private use. Then of course there is correction of errors, such as capital expenditure charged to a revenue account or just wrong figures entered. Those adjustments are only needed and made at the year end, so why report other figures quarterly?

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By DMBAcc
02nd Mar 2021 10:59

This article beggars belief. When you say "your practice" do you mean a large partnership with HR and payroll services and providing book-keeping services. I am a single accountant with 60 clients none of whom would even be considered by larger practices. They keep lovely manual books and understand what they are doing. Not only do they not know their way around a computer they avoid them like the plague. They wouldn't know how to complete the current tax form leave alone the new one. Can we have George Osborne on explaining which button to press. Also what about that British Asian comedian who says all he has to do is to take photos of his invoices. They want to advertise how easy it all is BUT neither would have a clue how to complete MTD - guess what, they would leave it to their accountants. And this is exactly where the divide is and why so many of we small accountants know this is a device to get rid of micro businesses. HMRC at last admitted that MTD would disproportionately adversely affect the smaller businesses. We know most big companies are already set up for all this sort of change. And the attitude overall stinks. One client prefering to set up a small business rather than go on the dole was told by an unthinking HMRC official to go and get a "proper" job as if they fell off trees here in Cornwall. It is simply that there is NO ONE who is speaking up on behalf of small businesses. The attitude of the Tories is nothing short of abysmal. They do NOT support the smaller businesses. They would like to see all the micro businesses go and have us all employed by multi-nationals so HMRC only have to deal with a few "customers". What a laugh they cannot bring themselves to call us taxpayers. What a cloud cuckoo land they all live in.

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By Ben Alligin
02nd Mar 2021 11:03

Yesterday I tried to embrace the new system by registering as an Agent for reporting clients Capital Gains Tax on sale of a residential property. Unfortunately apart from wasting 4 hours of my life, I am not one step further forward. Nowhere on any system that I can log in to, does this mythical 'Ask your client to authorise you for capital gains tax' option exist.
HMRC online help desk (don't laugh) couldn't help, I even tried logging in to my personal tax account to see if I could do it as an individual - registering for reporting a capital gains on a UK residential property and failed there as well.
I then tried to ring HMRC to request a paper submission as per ICAEW advice, and after 47 minutes on hold, my handset battery failed.
It is not through lack of effort but none of their systems or advice works.
PS If anyone has any suggestions as to what I am doing wrong, I would be really grateful for their help.

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Replying to Ben Alligin:
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By JoandToby
02nd Mar 2021 11:32

Hello
I had similar issues but found a good online link which explained it very well and actually worked! I can private message you with info if required

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Replying to JoandToby:
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By Ben Alligin
03rd Mar 2021 15:59

If anyone is interested, I have actually achieved registration of a) the client and b) me as the agent for Capital Tax Gains report on a UK residential property. All success is entirely down to JoandToby - so many many thanks to them.

The secret to all of this is to ignore all guidance by HMRC and Gov.UK! There are two tips you must know before you will ever succeed.

TIP 1 - The client MUST register first, unless one of your client's has registered for this new account, you will never achieve this.

TIP 2 - The only way it works is if you login to your Agent Service Account via a very specific portal. You have to go the the Gov.UK web page and then find the 'Report and Pay Capital Gains Tax on UK Property'. To make it more exciting, there is more than one page with this title and only 1 works!!

The way to the correct page is to follow this link
https://www.att.org.uk/uk-property-reporting-service-users-guide
where you can click on the relevant link and this gets you to the correct portal.

This page allows the client to register using their existing login codes. Beware the nonsense they have to fill in. This new account registration process requires them to use two bits of data to identify them, Passport and Credit Check are the two options given, but you can select other options, which takes you to a different page, where you find you can't select any other options, and when you click 'continue' it takes you back to the page telling you Passport and Credit Check. How we chuckled at that cul de sac.

On this specific Gov UK you can also click the link to your Agent Service Account, and only via this one portal do you login to the pages HMRC advise you on.

I hope that is of some help to anyone trying to achieve this.

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By DaveyJonesLocker
02nd Mar 2021 11:06

I deal with very small businesses whom I see once a year. They keep their records immaculately whether on paper or in Excel. A few were taken in by the Quickbooks adverts but that is overkill for what they need.
Changing to MTD for them won't improve the tax collection. They already pay the right amount because their records are spot on.
The Tories have put up two fingers to such businesses.

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By tedbuck
02nd Mar 2021 11:08

The whole concept of MTD is based on the arrogant ignorance of the HMRC and its software engineers. They have absolutely no iodea of what dealing with the public is like - how could they they don't even man telephone lines and don't answer letters.
The whole charade is based on the HMRC's need not to have trained staff and not to have to deal with the public.
If you are now fortunate enough to actually speak to someone in HMRC (which usually takes about 30 to 45 minutes) then the answer often received is "I'm afraid this is something I cannot help you with can you please ring this number ....)
So HMRC is rubbish and they don't want to have to do anything which involves using their brains so computers are the answer. As for closing the gap they have as much chance as a snowball in hades - the software solutions allow the Mr Average to make a large number of significant mistakes which in terms of VAT alone can mean thousands of pounds lost to HMRC - but it's digital so must be OK. They are complete morons and like many of your other correspondents I am looking to retire before the 1st April 2023 and sit on the sidelines watching the chaos begin.
I don't know why HMG bother anyway as they seem to be intent on raising money by way of GDPR fines and the like which is much easier that taxing people. Bring in more regulations and fine people for breaches then they can look virtuous and not have to put up the taxes. One could really feel quite upset about it all

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By lordburnside
02nd Mar 2021 11:10

Seeing my clients 4 times a year will be fun! I suppose I am preparing their accounts in 4 quarters sessionsinstead of one.

The non-vat brigade are easy accounts to prepare but to do them in quarters within one month of the quarter end is not possible if you want perfection! I think I will be helping the better clients and charging them well and getting rid of the hopeless guys for someone else to look after. I will have to take on staff to help but is this all worthwhile? What does the Government get out of it? The client gets more hassle. Accountants get more hassle. Government finds out how much you made earlier - so what?

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By Crouchy
02nd Mar 2021 11:11

selling extra services, such bringing bookkeeping in house won't cut it. we already do that for clients that want it, those who do their own bookkeeping, do so becuase they want to and they dont want the extra cost, us suddenly flogging that service again won't make them use us for that service, no matter how much we stress the benefits, it will just switch them off

Those clients will still try and do their own bookkeeping, some will do it well, I suspect a lot won't

Its only worth a client using software themselves, if they are willing and able to learn how to use it, far to many are not and just jump headlong in to the software - result - garbage in = garbage out

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By killer33
02nd Mar 2021 11:13

This car crash of a policy is scheduled to be implemented shortly before the next general election.

The Conservatives have long since given up being the champion of small businesses.

Will Labour take up the mantle?

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By lordburnside
02nd Mar 2021 11:20

Sorry to reply again but might it be a good compromise to have 6 monthly accounts submitted within 3 months of the half year end. We could prepare better accounts and take our time and may in fact be helpful. Why not campaign for that?

The 4 times a year idea seems crazy - What's next monthly accounts or real time accounts? I am nearing retirement fortunately.

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By lordburnside
02nd Mar 2021 11:20

Sorry to reply again but might it be a good compromise to have 6 monthly accounts submitted within 3 months of the half year end. We could prepare better accounts and take our time and may in fact be helpful. Why not campaign for that?

The 4 times a year idea seems crazy - What's next monthly accounts or real time accounts? I am nearing retirement fortunately.

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By agknight
02nd Mar 2021 11:20

I think the point that this article is missing is that we are thinking of the clients. For ourselves it is possible to see profit in the chaos.

I took on a client using Free Agent for three years. He went Vat registered as his turnover rose above the threshold, and the programme went backwards and claimed all of the Vat since beginning of trade. He got an £18k refund.In his way he checked with HMRC and they said yes fine have your refund. Two years later I come along and look at his figures. Basically he had to liquidate because he couldn't afford to pay back £18k.

All that is going to happen is that some will be driven to errors like my client, lots will just give up, because becoming a self employed plumber for example suddenly means you have to be good at bookkeeping, or pay x3 the old fee, which is disproportionate.

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By lordburnside
02nd Mar 2021 11:20

Sorry to reply again but might it be a good compromise to have 6 monthly accounts submitted within 3 months of the half year end. We could prepare better accounts and take our time and may in fact be helpful. Why not campaign for that?

The 4 times a year idea seems crazy - What's next monthly accounts or real time accounts? I am nearing retirement fortunately.

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By johnjenkins
02nd Mar 2021 11:41

Norman, what part of HMRC is unfit for purpose would you like explaining.

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Replying to johnjenkins:
Norman Younger
By Norman Younger
14th Mar 2021 14:35

Sorry for delay , just seen it now

Why does our tax system leak like a collander ? If you can't get to grips with basics then not fit for purpose

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By Charlie Carne
02nd Mar 2021 12:48

There are a number of different issues here that seem to be conflated and lead to misunderstandings of either the purpose of MTD (eg "if HMRC are still getting the same limited data under MTD as they did before, then what is the point?") or the difficulty of implementation (eg "my clients don't use technology") or both.

The first thing to note is that MTD is NOT about filing accurate accounts four times a year. It is about ensuring that all taxpayers (at least those trading or or with property income) are using a digital system in real time. My understanding is that the reason that HMRC want four filings a year is so that they can see that a digital system is indeed being used throughout (and not just after) the year. If they only required one filing some months after the year-end, that would be no different from now, where non-digital records are collated by an accountant long after the y/e and submitted electronically, which would entirely defeat the real-time nature of MTD.

HMRC don't care how accurate the in-year filings are (as they will, as now, only review the final year-end submission for accuracy) and so there is no requirement for the accountant to check them beyond the most cursory check that sales are properly recorded and the bank processed (probably reconciled, too). The ICAEW confirmed on a webinar two weeks ago that HMRC will not expect adjustments to have been made for accruals or stock adjustments etc. Rebecca Benneyworth (who has been working with HMRC on this for 5 years, I believe) confirmed on another webinar last week that HMRC will not be conducting in-year compliance checks, so you can just “push the button”.

I see questions from accountants asking what is the point of this if the data is inaccurate. The point is that, once all accounting data is in digital form in real time (not collated and processed months later), it becomes easier for HMRC to conduct compliance checks (asking the taxpayer to spit out a digital report is much easier than asking them to dig out thousands of pieces of paper for the tax man to laboriously sift through). HMRC also claim that there will be a reduction in the 'tax gap' and, whilst that claim is debatable, there will be some businesses (especially those dealing in cash) that are less likely to 'forget' (whether intentionally or accidentally) to include all of their income, if they need to click an app for each sale. I suspect that there is the hope that eventually HMRC won't even need people to conduct these checks as, once it's all digital and online, AI can randomly check all systems.

It seems to me that the only serious problem is for those clients who can't or don't want to use something as basic as an app on their phone or computer. The former are "digitally excluded", so won't be compelled for some years, and the latter need to bite the bullet. It's nothing new to be asked to embrace new technology. For example, there are many (possibly older) people who don't trust debit or credit cards, yet most shops now refuse to accept cheques. Try buying tickets for a concert or cinema without doing so online.

It is right that we, as a profession, continue to hold HMRC's feet to the fire to ensure that the implementation is conducted sensibly and over a long enough time frame as to be reasonable for our more technophobic clients to alter their ways of working. But demanding that MTD be abandoned is pointless; it's here and it's progressing. We either embrace it or retire.

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Replying to charliecarne:
By ireallyshouldknowthisbut
02nd Mar 2021 12:54

@Charlie.

At what point did it become acceptable to demand that clients use cloud software to do their booking? That seems to be a phenomenal overreach of government into a private sphere.

At what point is this "OK" to just roll over and accept a landlord with £1100 rental income a month needs to run a copy of Xero to add up 12 rent payments and half a dozen repair bills? That is not OK.

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Replying to ireallyshouldknowthisbut:
By Charlie Carne
02nd Mar 2021 13:20

But that is the point: they don't need to run Xero or any other complicated or expensive system. Coconut is simple and costs £3.60 pm. The new digital banks (Starling, Monzo, CountingUp etc.) will offer MTD filing as part of their banking app (so no cost beyond the bank charges, which may well be free for some of them).

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Replying to charliecarne:
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By janewanless
02nd Mar 2021 13:54

But if they're already reporting correctly, what is the benefit of them paying £3.60 per month? OK, it's income for Coconut, but it's simply an extra cost for the client. The typical pensioner with a let property usually has a high street account with free banking, and doesn't want to switch to a digital bank.

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Replying to janewanless:
By ireallyshouldknowthisbut
02nd Mar 2021 14:13

it comes back to the "but why?"

Why are government mandating how records are kept? its quite frankly none of their business so long as they are complete & accurate and compute the profits correctly to levy tax.

The "how" should be down to the tax payer.

If government was managing how records were kept in the 1980's (which would still no doubt be in place 25 year later) cloud computing would have been dead on arrival as everyone was tied into old fashioned methodologies.

I should point out I am a keen advocate of cloud. I junked a new clients SAGE recently, and turned their billing around from a 3 day process to a couple of hours. but that is not the same as saying my client who bills 4 invoices a year as a consultant along side his day job and a smattering of expenses should be mandated to use it.

Not everyone has a love affair with their smart phone. Its a peculiar fetish of IT people that everyone else is an idiot as they don't share their obsession.

your own link shows 15% of people are digitally excluded and a further 37% are 'assistant digital'. or in other words for half the population of the country this is not suitable.

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Replying to janewanless:
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By C J EYRE
02nd Mar 2021 16:27

ok Use coconut or whatever at £3.60 plus per month. What about the cost of the smart phone, computer and something to print their records out on. Surely they will need a printed out record.

Many of my clients do not have any these 3 items. Many have mobile phones, simple pay as you go, but not smart phones with £20 per month, 3 year contracts. So the £3.60 sounds OK, but it is the extra add on items that push up the cost.

I seem to remember a few years ago that the Revenue indicated that they were going to produce a FREE programme for MTD. What ever happened to that idea.

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Replying to charliecarne:
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By Jo Nokes
02nd Mar 2021 15:05

I’m not familiar with these new style banks. I can see that for a cash accounting business, it might work in an acceptable fashion. Does it cater for slightly more complicated businesses where sales invoices are issued (just from one’s mobile app!). Once you run a ledger, sales or purchases, that’s when clients get it very wrong

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Replying to charliecarne:
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By johnjenkins
02nd Mar 2021 14:14

Most of us agree that digital accounting in whatever format is easier to work with. So when did RTI for the self-employed become law?
The real point of MTD, which is what many of us said back in 2016, is that HMRC want to tag every transaction so they don't have to open investigations. All the info they require is to hand. It's nothing to do with making the tax payer aware of errors or tax bills and nothing to do with the "tax gap".
Of course digital accounting is here to stay and it's the right way to go (IMV), but not the way HMRC want to do it. They haven't got a clue and will be at the behest of IT charging a fortune each year to tweek this and tweek that.

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Replying to charliecarne:
By Duggimon
03rd Mar 2021 10:59

charliecarne wrote:

The first thing to note is that MTD is NOT about filing accurate accounts four times a year. It is about ensuring that all taxpayers (at least those trading or or with property income) are using a digital system in real time.

That should not be up to the government. It is a simple fact that for many businesses in the UK, a digital system for record keeping leaves them worse off and is therefore an unfair imposition.

charliecarne wrote:

I see questions from accountants asking what is the point of this if the data is inaccurate. The point is that, once all accounting data is in digital form in real time (not collated and processed months later), it becomes easier for HMRC to conduct compliance checks (asking the taxpayer to spit out a digital report is much easier than asking them to dig out thousands of pieces of paper for the tax man to laboriously sift through).

First of all, that is not what HMRC have said, their PR push on this emphasises better accuracy, so if their reasoning for it is as you say, they're being rather duplicitous about it.

Compliance checks are pointless if they're checking records which aren't required to be accurate. If a client of mine has a dog's breakfast of a digital records system that I then prepare accounts and tax returns from, I will not fix their system. I will certainly tell them what's wrong but my adjustments to their figures will not mean the "digital reports they spit out" will now be accurate as they will all be made in my working papers. I am not engaged by my clients to re-do their books as it would mean a doubling or trebling of my fees in some cases.

charliecarne wrote:

HMRC also claim that there will be a reduction in the 'tax gap' and, whilst that claim is debatable, there will be some businesses (especially those dealing in cash) that are less likely to 'forget' (whether intentionally or accidentally) to include all of their income, if they need to click an app for each sale. I suspect that there is the hope that eventually HMRC won't even need people to conduct these checks as, once it's all digital and online, AI can randomly check all systems.

It's more than debatable and as you've said, the reports don't need to be accurate and nobody cares if they are.

If a claim about the tax gap is to be taken seriously, somebody needs to provide some data on the tax loss to HMRC resulting from non-digital bookkeeping errors that would be impossible to make in a digital system, anything else is just waffle.

charliecarne wrote:

It seems to me that the only serious problem is for those clients who can't or don't want to use something as basic as an app on their phone or computer. The former are "digitally excluded", so won't be compelled for some years, and the latter need to bite the bullet.

"For some years" is worrying and I hope that's not based on anything. I have relatively young clients who don't use smartphones or computers, it's not that odd.

The issue is that it is a fundamental imposition on people's right to work for themselves to make them engage with this system. It is not required for them to fulfil their current legal obligations as business owners and taxpayers and is a broadening of those obligations in order to benefit HMRC in ways which don't make sense. I appreciate you trying to explain what the benefits might be, but the fact of the matter is that almost everybody forced to use a digital system by this change in the law will have errors introduced into their records that didn't previously exist, leaving the tax system, the accountancy profession and the businesses themselves worse off.

Until that issue can be addressed, this should not be a mandatory step for small businesses.

charliecarne wrote:

It's nothing new to be asked to embrace new technology. For example, there are many (possibly older) people who don't trust debit or credit cards, yet most shops now refuse to accept cheques. Try buying tickets for a concert or cinema without doing so online.

You can literally buy tickets to anything over the phone.

charliecarne wrote:

It is right that we, as a profession, continue to hold HMRC's feet to the fire to ensure that the implementation is conducted sensibly and over a long enough time frame as to be reasonable for our more technophobic clients to alter their ways of working. But demanding that MTD be abandoned is pointless; it's here and it's progressing. We either embrace it or retire.

I agree wholeheartedly that we should move towards better digital systems, that there is a clear benefit in doing so and that an end to end integrated digital tax system is of potentially huge benefit to the country, HMRC and to many businesses and accountants.

My two main issues with it are:

1: It should not be mandatory because it makes things unequivocally worse for many people, and my average client base happens to align with these groups strongly.

2: HMRC should not be allowed to implement it because they have shown multiple times that they are incapable of doing so. At the start of your post you rebuffed the complaints saying "what's the point if they just get the same information" but a big part of the reason I brought that up is that the MTC for VAT system that just delivers the same information was not what was intended from the inception of the system right up until a few months before it became mandatory and the specifications were changed.

HMRC were unable to deliver the system they wanted and touted, are still unable to do so and are moving on to a new more complex system they will also be unable to deliver.

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Replying to charliecarne:
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By BryanS1958
03rd Mar 2021 13:44

At the moment it is not here, and professional bodies should be lobbying hard to ensure it is never here, not embracing it and tweaking at the edges.

The last thing taxpayers and accountants need is up to 20 more deadlines a year and, no doubt, up to 20 times more penalties for late filings.

As far as I can see, the ICAEW is putting more money and effort into positive discrimination initiatives such as the Charter for Black Talent and #10000blackinterns (what about everyone who isn't Black?) than it is putting into saying NO to MTD and reducing the administrative burden for taxpayers and accountants.

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By North East Accountant
02nd Mar 2021 14:20

Remember Business Records Checks (BRC), dropped quietly by HMRC.

Before BRC's the only way to check a businesses records was to open an enquiry which cost too much and took too long.

Beginning with the end in mind. HMRC want more tax collected in the easiest way possible.

HMRC know from their BRC's that lots of books weren't always up to date or that great (before accountants tidied them up at the year end) but it was tedious having to leave their comfy offices...... especially if it was raining and sometimes HMRC inspectors even had to work past 2.30pm rather than shooting off home on flexy.

So HMRC brings in MTD, builds the algorithm once and lets their Connect computer system do all the hard work, raking in tons of fines, and extra tax once all transactions can be examined in the blink of an eye.

The fact it's of no benefit to their customers (taxpayers to you and me) is of no concern to HMRC as it will make HMRC's life much easier, and ensure that no HMRC officer has to work past 2.30pm again.... and never has to go out in the rain again.

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ghm
By TaxTeddy
02nd Mar 2021 15:17

I am not in the market for using MTD as an excuse for profiteering at my clients' expense. I respect them too much.

So, a measured response to MTD is called for.

An example - I have significant number of clients who are landlords of UK properties but are expats scattered all around the world. They will all fall within MTD for income tax. Some keep a spreadsheet of sorts (usually not fit for purpose), some collect monthly statements. None have any use for bookkeeping software.

Some use UK rental agents, some not - but we all know how estate agents struggle with detail (they are salesmen - what can I say?) so I'm not expecting much data to be available from the agents.

In another thread some commentators mentioned just filing 'broad brush' figures and I see that as being the only viable option. An expat client making a hectic living in banking in New York or as a futures trader in Hong Kong just doesn't have the time for this.

As the time approaches I will outline the broad brush strategy to the clients - and if they agree I'll file the quarterly reports based on 'best information', at my discretion and at a later date file the proper return at the normal time.

In this thread Duggimon says this is "a stupid system made by stupid people" and he's dead right. So applying the principle of "ask a stupid question, get a stupid answer" the MTD quarterly reports will be a rather stupid response to a stupid concept.

And the killer is that HMRC will never know.

Charlie Carne suggests HMRC aren't concerned about accuracy. In fact they have no choice in the matter - they will be completely in the dark unless they launch a compliance check. So even if HMRC were sticklers for accuracy they still couldn't do anything about it. And the digital trail......... in the expat clients I have mentioned it will start and end with my spreadsheet.

It's a joke - treat it like one and relax.

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Replying to TaxTeddy:
By ireallyshouldknowthisbut
02nd Mar 2021 16:42

@TT I have been saying for some years, if HMRC was a load of unfiltered raw sewage raw of a data dump, I can defecate for them into some data files and spread it over their building like an aggrieved farmer angry with their bank with access to a muck spreader. But its not going to do anyone any good.

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Replying to ireallyshouldknowthisbut:
ghm
By TaxTeddy
03rd Mar 2021 09:55

Agreed - that's it in a nutshell - nobody takes a benefit away from this whole process.

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Replying to TaxTeddy:
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By North East Accountant
03rd Mar 2021 16:40

Accountants can't be saying to a client ignore the legislation and file any old rubbish because HMRC will never know.

I agree MTD is a crazy idea but HMRC will get to know the misfiled information as once they get full transactional data (only a matter of time) adjustments will clearly show up as errors will need to be adjusted at the transactional level.

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Morph
By kevinringer
02nd Mar 2021 17:19

I'm no Luddite. I have been filing 100% digital tax returns since 1998: way before HMRC even dreamed up (nightmare?) MTD. I've been an early adopter of all things digital. But only if there is a benefit to me or my clients. I have put several clients onto software because there are commercial benefits to their business. But for the vast majority MTD is just a burden which will give them nothing but larger accountancy bills.

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Replying to kevinringer:
ghm
By TaxTeddy
03rd Mar 2021 09:53

This morning I am trying to walk a client through the process for me to report a capital gain - the poor woman is in meltdown. I can only assume the MTD for income tax processes will be a similar Kafkaesque nightmare.

Can't wait.

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Replying to TaxTeddy:
Morph
By kevinringer
03rd Mar 2021 13:56

Re CGT, I've just been doing the paper return, every time. I'm hoping that HMRC will then realise that not everyone is an IT wiz. I know HMRC helpline staff do understand. I spoke to a technician on the CGT helpline 2 weeks ago. He said before the 30-day reporting he used to handle 6 support calls an hour. Now it is 1.5 because of all the extra time needed to talk taxpayers through the process of just registering for CGT. But the difference with MTD is HMRC supply to CGT 'service' so HMRC have to supply the support, whereas third parties supply MTD software so they have to supply the support.

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Morph
By kevinringer
02nd Mar 2021 17:22

I have been arguing with HMRC that MTD is a real cost to businesses. HMRC have been arguing the cost to businesses of MTD is virtually nothing, but look at the quotes from the above article:

'MTD is likely boost practice fees in several ways. '

'Bringing the bookkeeping in-house is a very simple way to increase revenue, and applying the right tools can turn this entry-level service line into a very tidy profit centre that works for both parties.'

This confirms what many of us have been saying: it will cost businesses.

I suspect HMRC thinks that accountants are complaining because accountants will loose work because businesses will do their own books. But in reality we know we will have more work than ever: work that clients won't benefit from because it's only being done to keep HMRC happy.

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Morph
By kevinringer
02nd Mar 2021 17:26

Since MTD for VAT has started, I have not had a single VAT visit. This got me thinking, has HMRC checked the quality of VAT return data since MTD started? From what I can figure out, the MTD pilot only checked the transmission of data, and not the data itself. Are HMRC even remotely interested whether the VAT return is accurate? Or are HMRC naively assuming that because it's on computer, it's bound to be right?

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Replying to kevinringer:
ghm
By TaxTeddy
03rd Mar 2021 09:49

One of our clients had one. They had a request to send documents by email - 5 largest receipts for expenses with VAT + top 20% of invoices issued. I sent them by email and HMRC came back the same day and said, "Thanks, enquiry closed".

Scratching the surface, I think.

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Replying to TaxTeddy:
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By johnjenkins
03rd Mar 2021 10:26

We used to get a few of these with HMRC. they called them "aspect enquiries". Normally once they were happy with the info they closed the enquiry.

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By BryanS1958
03rd Mar 2021 16:02

There have been taxes since at least 3000BC, they didn't need MTD then and we don't need it now.

Just because we 'can' do something doesn't mean we 'should'.

Just say NO to MTD.

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Replying to BryanS1958:
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By Peter-S
04th Mar 2021 11:29

This is a gripe that I have with 'today'. Digital everything seems to be taken for granted as an improvement on what went before but it doesn't necessarily follow. I remember a meeting with a Yell rep a while back - took me seconds to find time for a follow up looking in my desk diary while she was still logging in to her on line diary, entering passwords and searching. I appreciate that the online version worked for her as it is accessible remotely by colleagues but for me in a small office the old fashioned desk diary does the job better. Trying to force a single system on all regardless does not necessarily get the best results and like me and my diary there should be a choice.

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