Member Since: 9th Jan 2020
7th Jan 2022
I would add that most accountants in practice only discover errors when they come to do the end of year accounts some time after the year has finished, if they are providing a compliance only service and not regular management accounts.
Therefore if the accountant only checks the clients data after 4 x quarterly filings have been completed, according to the law he is well within his rights to just make an end of year adjustment, as the legislation says "Where a relevant person discovers an error or omission...".
7th Jan 2022
Yes, I can see that to be technically correct, errors should not be held over to the end of the year, unless one has finished the year already, but rather corrected at the earliest opportunity. However, although that maybe the law, HMRC have said they will take a soft-landing approach to quarterly filings not being correct, for the time being (I would imagine at least a few years in practice). The legislation of course is intended for many years into the future and so hasn't allowed for such soft-landing approaches, that in practice will be taken by HMRC in the early years of ITSA MTD, who is tasked with enforcing the law via penalties and investigations.
This may be a matter of interpretation, but when it is written that the error, if noticed, must be done at the earlier of the next quarterly update, or the end of period statement. With regards the next quarterly update, I don't think it means putting the error on the next quarterly update. Instead, I would take it to mean that at the time of the next quarterly update, the user should make (or have made) an amended quarterly update, for the period that was incorrect. Otherwise, there would never be any need for amended quarterly updates. However, it is worth noting that HMRC doesn't always correctly interpret the law, and equally that the law does not always take into account what HMRC is doing (eg: the historic discrepancy only recently fixed between HMRC requiring director's to file a tax return, when TMA 1970 says only if they have tax to pay). So it may well be that those that wrote the law were not aware of the APIs ability to file amended quarterly returns, and just thought errors should go on the next return, I don't know.
6th Jan 2022
Thanks for your suggest Hugo, what I have written here is a bit all over the place, but I'll do just that.
5th Jan 2022
You could do it that way, to obtain the correct end of year figures. However, technically that is not correct, as any incorrect prior period should be individually adjusted - unless you did the annual adjustment filing. Obviously, that would be a pain if you had just a few adjustments to make, and those fell into different quarters.
What you suggest is fine for VAT, as errors on prior returns are allowed go on a later Return (normally if the resultant difference to box 5 - amount due - is below £10k), but that isn't how it works for MTD ITSA. If you wanted to do it strictly speaking correctly, but with minimal fuss, you'd just file those adjustments via the annual adjustment API, where you can just type the total of each expense category difference into MTD compliant software or bridging software. For a sole trader below the VAT Threshold, and the adjustments all being related to expenses, you'd just add up the missed items and put that single total in a box on the software and click submit. If that was for a property rental business of just a couple of properties, you may well be able to do the same thing: enter a single expense figure and submit it. This is because one good thing to come out of MTD is that property rental expenses can also be consolidated into a single expense figure below the threshold, that was never sanctioned for tax returns as far as I am aware.
Practically speaking, for below the threshold clients, you could just have an extra column in your bookkeeping spreadsheets for expenses noticed later, or have some way of highlighting and adding them. Then just note the total at the bottom of the column, and file that figure manually via the annual adjustment facility once a year.
5th Jan 2022
So to clarify my prior posts there are two ways to change income/expense figures already submitted via ITSA MTD:
1. Re-submit quarterly MTD submissions via the Amend API, which can be done at any time until the following January after the tax year has closed, or;
2. Submit Annual "adjustment" figures, the deltas, where you need to submit the differences for each income/expense category: the differences between the correct annual figures and the totals of what has already been submitted in the 4 x quarterly filings. This is performed by typing figures into software that is not digitally connected to the underlying data, as it is a form of manual adjustment. Equal to 1 above, this needs to be done by January following the closure of the relevant tax year, before filing a final annual confirmation that the data is complete and the tax year should now be closed off (in practice: final calculation checks, button clicks and confirmation tick boxes).
I would imagine that accountants would ask their clients to submit their own quarterly filings with the accountant performing an annual review, or if the accountant does the bookkeeping: just file the quarters on an "as is" basis without much if any alteration, unless the client wanted quarterly management accounts. If the client complained about the quality of data submitted (unlikely they would even know), the accountant would reply to the client: "we can only send HMRC what you give us within the deadlines we give you" and ensure this is adequately covered off in the bookkeeping engagement letter about the tight deadlines and what is practically reasonable to do in a short space of time, plus the fact that you will make the submissions to avoid fines on an "as is" basis.
Then the accountant either does the 1 or 2 above at some point before the following January to arrive at a final position. That way, there isn't too much of a backing up of work for accountants to do every quarter in a short space of time. If the client's don't send in the data where the accountant does the bookkeeping, the accountant just files whatever is in the bookkeeping each quarter, come what may, to avoid fines. I can quite imagine some quarterly submissions might be zeros. Hopefully over time the quarterly data will improve and become more realistic over later years as clients become better trained.
I hope that clarifies anything I have said and provides a practical solution to how MTD ITSA might work in practice for accountants and their clients.
5th Jan 2022
The only facility to actually overwrite income/expense figures, is by re-submitting quarterly submissions (obviously x 4 for a year, but could be done one straight after the other in the following January say, after the tax year has closed), as there is an "Amend" quarterly API for that. These would have to be MTD digital filings just like the original submissions, not total figures typed into software, like the annual submissions.
5th Jan 2022
Not at the moment, but that is something that could be done by us, if enough people were interested.
At the moment, we would expect users to just copy and paste data from an excel download from their online banking, if they wanted to enter income and expenses from bank transactions.
I've worked with bank feeds before, and very often it is actually quicker to download, copy and paste that attempt to deal with some bank feeds that are a pain to set up, and then periodically stop working or have problems with duplicate entries or even missing transactions.
As an accountant who used to work in practice, I used to have read-only access to client bank accounts, so we didn't need to wait for the clients to e-mail us a spreadsheet of bank data. Though of course that was not always easy to set up either come to think of it!
5th Jan 2022
See my new response to Hugo Fair above.
5th Jan 2022
My response about the annual summary for the adjustment of quarterly filed income and expenses (deltas, as you say, just like the RTI EYUs) is not based on conversations or statements from HMRC, but rather based on the API they have developed. There is simply no facility in the API to allow annual figures to overwrite the quarterly submissions: believe me, I have checked, having heard others, like you did, speak as if there was such a facility (not HMRC, but well known accountancy training figures in my instance - perhaps they were misled I don't know) and I have had my opinion confirmed by the software development team at HMRC via e-mail, that there is no such facility to overwrite the quarterly filings via an annual submission in the ITSA MTD API. So I think I can safely say you should ignore what you have heard previously, but I am always open to be proved wrong of course.
PS. I do feel your pain: As an FCA, and CTA myself who used to run an accountancy firm for eight years with staff with a high street office in Surrey, I understand the difficulties facing accountants and business owners recently. I am particularly thinking not about MTD, but about SEISS and Furlough claim work done over the last couple of years, that I can quite imagine clients aren't interested in paying for.
5th Jan 2022
I would say that by ticking a box on our software, to say one is exempt from NI, is in fact the digital record itself, saved on our digital systems and passed to HMRC digitally. As with any prime entry in the bookkeeping, some sort of hand-typed entry is going to be required at some point, if not always at the beginning of the chain, somewhere else, just as that is allowed currently for VAT as per VAT Notice 700/22, so too for ITSA MTD. I would imagine that the final Capital Allowance figure is allowed to be entered manually, as there is often an element of calculation/manipulation required to result in a final Capital Allowances claim figure.