Tax Writer Taxwriter Ltd
Columnist
Share this content
iStock_Domino effect_bymuratdeniz
iStock_Domino effect_bymuratdeniz

Delay MTD ITSA to preserve integrity of tax system

by

Leading tax and accountancy bodies called on HM Treasury to delay the mandation of MTD ITSA, and the switch to the tax year basis, both of which are due to take effect on 6 April 2023.  

20th Aug 2021
Tax Writer Taxwriter Ltd
Columnist
Share this content

Five professional accountancy and tax bodies (ICAEW, CIOT, ATT, ICAS and LITRG) have written to Jess Norman MP, financial secretary to the Treasury, asking the government to reconsider the timetable for the change in basis periods to the tax year basis, and the mandation of MTD ITSA, both of which are due to come into effect in April 2023.

The public letter is not just accountants whinging that they won’t have enough time to educate clients about the changes (although this is true), the professional bodies are concerned that the current timetable will put the integrity of the tax system at risk.

The areas of strain on the tax system and the accountancy profession outlined in the letter from the professional bodies include:

MTD for VAT

Although 1.3m businesses were required to start submitting their VAT returns using MTD software from April 2019 (some were deferred to October 2019), only 1.16m are currently signed up to MTD for VAT.

It is a credit to the accountancy profession that this transition has gone so smoothly, HMRC research on the impact of MTD for VAT has shown that 754,000 businesses took advice from their accountant about MTD. Also, 41% of self-employed individuals have increased their use of tax agents since the introduction of MTD.  

The HMRC helpline was put under considerable strain by the introduction of MTD for VAT with average waiting time for a call to be answered doubling from 5 mins 21 secs in March 2019 to 10 mins 48 secs in May 2019. 

Around 750,000 businesses that registered for VAT on a voluntary basis will be required to enter the MTD for VAT regime from April 2022. Some 350,000 businesses that are voluntarily registered are already submitting VAT returns under MTD.

Further pressure will be put on the remaining 140,000 businesses that were mandated to join in 2019, but have not done so. This means that nearly 580,000 businesses will require advice from accountants on MTD for VAT before April 2022.

New penalties for VAT

April 2022 will see the introduction of a completely new penalty system for late filing and late payment of VAT. This will affect 2.5m businesses, but there has been very little HMRC education about this change. 

The new penalties will be based on the number of points a business gathers for non-submission of returns, but each tax will have its own system of points. The business (or tax agent) will have to keep track of multiple points racking up for different tax returns.

Tax year basis

The tax year 2022/23 is the proposed transition year to the switch to the tax year basis from April 2023. As I highlighted in July this change in basis periods will mean that one-third of partnerships and 7% of sole traders will be assessed on more than 12 months of profit in 2022/23, increasing their tax bills unexpectedly when many businesses are struggling to recover from the pandemic.

In total, around 360,000 businesses will be affected by the transition to the tax year basis, all of which will need detailed advice from their accountants.  

In addition, where more than 12 months of income is assessed in 2022/23 this will have a knock-on effect for income-related charges and deductions, so special rules will have to be written to provide adjustments in all these areas:

  • student loan repayments
  • national insurance contributions
  • high-income child benefit charge
  • capital allowances
  • pension allowances
  • relief for losses
  • cash basis limits
  • averaging of profits for farmers and creative artists
  • working and child tax credits
  • tax payments on account.

Is there time to write new rules for all of these areas before the beginning of the transition year on 6 April 2022?

MTD ITSA mandation

As I revealed early this month the change in basis periods will mean a big bang start to MTD ITSA on 6 April 2023, when around 4.3m individuals and businesses will be required to start filing quarterly MTD submissions and to keep digital records. Of these businesses it is expected that 2.8m will require advice from accountants before they start submitting under MTD ITSA.

There has been a very limited MTD ITSA pilot running, which was supposed to be expanded by now to cover the “vast majority of sole traders and landlords”. However, as of August 2021 all of the following are still excluded from the MTD ITSA pilot:

  • partnerships
  • individuals with more than one trade/ profession 
  • UK landlords letting property overseas
  • non-resident landlords letting UK property
  • anyone who has taxable income from sources other than their trade/profession.

There are currently only seven providers of software suitable for use in the MTD ITSA pilot.

New penalties for ITSA

The same “points means penalties” system that comes into effect for VAT from April 2022 will apply to submissions filed under MTD ITSA from April 2023.

HMRC confirmed there will be no soft landing for this new penalty system although it will be completely novel for taxpayers and accountants to get to grips with. 

What will happen?

There is no guarantee that Treasury ministers will listen to these sensible objections by the professional accountancy and tax bodies, but if they don’t, a period of chaos and disorder in the tax system will certainly be the result.     

Replies (117)

Please login or register to join the discussion.

avatar
By alialdabawi
20th Aug 2021 16:43

Given all that has been said on this, I think we need fewer 'sensible objections' and more bombshell-impact resistance to the existing plans for MTD regime (not limited to it's rollout).

Whether this comes from a cometh-the-hour, cometh-the-wo/man individual with clout taking this bull by the horns and amending compliance requirements to be more efficient-for-all-stakeholders, current MTD rule-making protagonists changing tack, mass non-compliance by agents &/or taxpayers in protest, mass MTU, a post-apocalyptic paper-based world, or any other high-impact change of course - all unlikely in my opinion - I personally think that nothing is likely to change.

Majority of rumblings coming from the accountancy sector in my observation. Is this down to exposure to what lies ahead - where taxpayers themselves are generally ignorant as it stands - or down to another reason?

Do the above - and what about other accountancy bodies not mentioned in the article - PBs truly believe they can change the course of this upcoming paradigm-shift to our profession and to our taxation system, or is this letter merely about the timescale and no other changes which are perhaps more substantial to the endgame of MTD? Is the above just a lip-service to their memberships as a show?

I get that accountants will retire as a direct result of MTDITSA - notwithstanding others who are planning to adapt & continue - surely those in practice have by far the most experience as a group in dealing with said compliances than any other group - PB officebods, taxpayers, software developers, other. Is there no way then that this sector can rally and generate a critical mass of resistance/voice which will have the impact on efficiency for all which currently only this sector - so it seems - can see will not happen?

Also discussed to no end is the value-add of PB membership to the 'small-fry' practitioner. Who will, apparently, be the ones most adversely impacted by MTDITSA in it's current guise. Is there no one from this sub-group who can lead the charge to make MTDITSA into a truly sensible set of rules benefitting all stakeholders. I know my limitations and I am not the right person for this. But anyone who can see this all the way through would have my support and - I'm confident - the support of many others.

MTDVAT showed us that even the House of Lords giving HMRC's rollout a scathing report, accusing HMRC of underestimating the difficulties that will be faced, motivated by increased revenue rather than increased taxpayer efficiency, unconvinced that errors and the tax gap will be reduced - all did nothing to impact the rollout. If my memory serves me correctly, PBs also had their share of concerns. Do HMRC *just*not*care* about ANY stakeholder other than themselves as the collectors of tax? And to extrapolate, how much of the tax gap has been reduced as a direct result of MTDVAT?

I think the HMRC in it's current guise - arrogant, incompetent, incapable, inefficient, accusatory - frankly is unfit for purpose and heads need to roll. Jim Harra or predecessors haven't been on an overseas beach since the conception of MTD - they have been working throughout it's development and rollout and heads need to roll for MTD and frankly for any number of HMRC's long-existing incompetence on basics.

Thanks (37)
Replying to alialdabawi:
avatar
By Jimess
20th Aug 2021 17:59

I have just been thinking about how HMRC dealt with the roll out of self assessment in the late 1990's and how that felt to practitioners. I remember going on visits to HMRC's local offices, meetings with HMRC local project managers explaining the rollout, what they expected to happen, how it would happen - all some 3-4 years or possibly more before SA and current year basis actually hit our desks. There was a lot to be done and the time scale was discussed with practitioners at local levels to get a feel for how things were going. I can remember conversations with the HMRC's local liaison officer calling up to see how we were getting on and how our clients were bearing up. We actually have a much bigger task with MTD as not only do we need to gear our own practices up for the new regime, but we also have to introduce non-IT savvy clients to software, explain the new regime to clients and discuss how the quarterly reporting will be managed. Any communication from HMRC on any of this so far - Nothing! For SA we only had to transition our clients on to current year basis and a new penalty regime and we had a good 3-4 years to do it. MTD is going to be a much bigger ask - getting retiree landlord clients on to quarterly returns on accounting software? persuading clients in the trades that they need to do something more than stick their invoices, fuel receipts and CIS certificates in a box marked "accountant"? moving smaller traders that currently use quite adequately kept account books and have done for years on to software that they may struggle to correlate with what they do now? - some may embrace it, but my guess is that most will not - and we have less than two years to sort it all out, in addition to our usual deadline critical work and the joys of two more self assessment seasons in between ...... It's not going to be any sort of gradual process for anyone with the current deadlines.

Thanks (38)
Replying to Jimess:
avatar
By Paul Crowley
21st Aug 2021 16:06

Yes I was in the system at the time
All being done with genuine mutual respect between Inland Revenue officers and accountants with their relevant staff
WE were all accountants, not tax agents

Thanks (15)
Replying to Paul Crowley:
By SteveHa
23rd Aug 2021 09:35

As was I, and on first name terms with most of the local accountants, even socialising with them from time to time.

My, how things have changed.

Thanks (12)
Replying to SteveHa:
By SteveHa
23rd Aug 2021 15:02

Oh, hate responding to myself, but this got me thinking. and so just looked up one of the local accountants I knew during my Revenue days to see if I could see how he was, and have just found out he died in 2013.

Such a shame, he was my favourite of the local accountants and someone I would go as far as calling a friend.

Thanks (1)
Replying to Paul Crowley:
avatar
By sammerchant
23rd Aug 2021 12:38

And we were taxpayers, not "customers"!!

Thanks (8)
Replying to Jimess:
Morph
By kevinringer
23rd Aug 2021 13:30

I remember the transition to SA. The transition from PYB to CYB was massive requiring 2 years' accounts prepared in one year, and moving forward a far more detailed Tax Return. Our local tax office appointed a SA Liaison Officer who contacted all us agents and arranged workshops etc. We had that officer's direct dial and could contact her with any SA problem. She would take ownership of the problem, investigate, and phone back with an answer.

Since then all the local tax offices have closed. We don't even have HMRC enquiries any more. So HMRC have no contact with their 'customers'. As a result of HMRC having their ears tickled by the software industry, a huge gulf has emerged between what HMRC's 'customer' expectations are and what we accountants know is achievable. Somehow, HMRC seems to think software will cure all ills, yet HMRC don't seem to realise that you need experience to run software. Look at capital v revenue. HMRC know how long it takes to train their staff and we know how long it takes to train our staff, so why does HMRC think business owners will be able to get it right with no training at all? Capital v revenue is not relevant for MTD VAT, but it is highly relevant for MTD ITSA.

Though HMRC has had its ears tickled by the software industry, HMRC seems to have not noticed how that same industry has failed to deliver. Just look at how few products are MTD ITSA. But it's not just MTD ITSA that the software industry has failed on, look at MTD VAT. VAT has had retail schemes and margin schemes since its introduction since 1973. So the software industry has had plenty of time to automate these into their software. But what mainstream software does automate them? I know that Sage and Quick Books don't and I'm sure many others don't either. If mainstream software doesn't automate these now-mandated tasks, there's no hope for the myriad of ITSA requirements. I have a lot of farming clients. I'm not aware of any mainstream software that can handle some of the farming-specific tax requirements such as herd basis or averaging. But the software industry knows it has got away with inferior products for MTD VAT so will be allowed to get away with inferior products for MTD ITSA and we'll all have to make up for where the software falls short.

Thanks (8)
Replying to kevinringer:
By SteveHa
23rd Aug 2021 14:46

Even when software does support averaging, I find myself double checking it, anyway. (IRIS, I'm looking at you).

Thanks (2)
Replying to alialdabawi:
avatar
By Open all hours
20th Aug 2021 19:51

Your final paragraph is as good a summary of the current position as we are likely to find. Thank you. I only hope it gets in front of Jesse Norman and keeps him awake every night until he gets a grip of the failed organisation for which he has responsibility.

Thanks (13)
Replying to alialdabawi:
avatar
By sammerchant
23rd Aug 2021 12:47

Perhaps a Petition on the Gov.UK website might be the answer? If you count all the 'Agents' and their sole trader clients (assuming that these will be the most affected by the change/s), I am confident that this might muster well over the 100,000 signatures required for a debate in Parliament. Perhaps the spineless opposition parties (all silent so far, I think) might then pick up the item and bring it to the attention of the popular press. I suspect that the readers of the tabloids who might be affected will not be best pleased when this is spelt out in simple terms.

To some extent, I blame the stupid adverts for bookkeeping software on the TV, leading people to believe that one does not need ANY knowledge of the subject in order to get to 'job done'.

Thanks (10)
Replying to sammerchant:
avatar
By Jimess
23rd Aug 2021 14:06

The adverts wouldn't be there if the powers that be had not jumped into bed with the big software providers. The buck for that stops with the person in Government responsible for agreeing to the whole debacle with insufficient public information being put forward. I would have thought that corporation tax would be the easiest platform to start from as there is already the quarterly payment requirement and the transition to MTD could be tested without a huge amount of disruption. But of course the software providers would not make nearly so much money from it. The large companies would weigh in with their objections and it would die a death before it got off the ground.

Thanks (4)
Replying to sammerchant:
Scooby
By gainsborough
23rd Aug 2021 14:39

There have been a few petitions on this - most have attracted around 20-90 signatures and then the 6 month time limit kicks in and it goes nowhere.

The latest one asks for the threshold to be aligned with the VAT threshold and has just 54 signatures https://petition.parliament.uk/petitions/589102. Maybe if all of us and our clients signed it, word would spread?

Thanks (1)
Replying to gainsborough:
avatar
By lh3f9764bg1g
24th Aug 2021 14:55

Well, I'll certainly sign it.

Thanks (0)
Replying to gainsborough:
Morph
By kevinringer
24th Aug 2021 15:06

I've signed it. Most of my clients can't sign it because they're digitally excluded!

Thanks (0)
Replying to gainsborough:
avatar
By Paul Crowley
27th Aug 2021 12:53

Done
And Emailed my MP at great length. Three emails to him now. No replies
He is Lord Chancellor and Sec of State for justice

Thanks (0)
Replying to Paul Crowley:
avatar
By Jo Nokes
27th Aug 2021 13:30

If you do get a reply, it's most likely to contain the usual rubbish as out by the HMRC press office

Thanks (0)
Replying to Paul Crowley:
Tornado
By Tornado
27th Aug 2021 15:09

Send one to Jim Hacker at the Department of Administrative Affairs as well hoping it gets past Sir Humphry who would certainly censor it to protect the interests of the Civil service.

Thanks (1)
Replying to gainsborough:
avatar
By Paul Crowley
27th Aug 2021 14:02

This needs its own thread
It is a bit lost here

I was number 65

Next comment down already has 41 thanks
Geoff56

Thanks (0)
avatar
By Geoff56
20th Aug 2021 17:36

We don't need just a delay. This whole idiotic project should be canned, and the PBs need to be saying this with a very loud voice.

Thanks (42)
Tornado
By Tornado
20th Aug 2021 18:46

"There is no guarantee that Treasury ministers will listen to these sensible objections by the professional accountancy and tax bodies, but if they don’t, a period of chaos and disorder in the tax system will certainly be the result."

In a nutshell ......... MTD for ITSA just it isn't going to happen, not as a mandatory requirement anyway.

Thanks (4)
avatar
By GHarr497688
20th Aug 2021 19:33

What evidence is their that MTD for VAT has worked in so far that the records now on a digital platform are accurate. From what I can tell many are keeping manual records then keying in the 9 boxes through software and the idiots at HMRC don't even realise this yet. The Accountants are now realising that this procedure won't work for MTD ITSA which is panicking them all. What HMRC want is actually physically impossible to comply with .When I started in Accountancy in 1985 Sage was a fully computerised system so why all these years later is MTD only being carried through. Some clients books were crap on SAGE then as they are now - I rest my case.

Thanks (17)
Replying to GHarr497688:
avatar
By Paul Crowley
21st Aug 2021 16:26

MTD being expected to close the tax gap is a joke.
Evaders expected to be "caught" by their own software?
A bit like the Blackadder Skit on how to catch the German spy
Baldricks cunning plan is to ask all patients"are you a spy"

George: Well, have a look through the list of patients and see if there’s
anyone here whose name begins with `von’. Well, it’s almost bound
to be your bloke!

Edmund: I think we may find that he’s using a false name, actually, George.

George: Oh, crikey. Well, that’s hardly fair, now, is it…

Baldrick: I, too, have a cunning plan to catch the spy, sir.

Edmund: Do you, Baldrick, do you…

Baldrick: You go round the hostipal and ask everyone, “Are you a German spy?”

Edmund: Yes, I must say, Baldrick, I appreciate your involvement on the
creative side.

Baldrick: If it was me, I’d own up.

Maybe MTD was thought up after reading this plot
Either way expecting MTD to close the tax gap is losing the plot
The "Tax gap" is deliberate evasion, not error.

Thanks (26)
Replying to Paul Crowley:
avatar
By Geoff56
21st Aug 2021 16:48

Brilliant.

Thanks (4)
avatar
By Paul Crowley
20th Aug 2021 21:03

MTD ITSA will fail if HMRC keep doing the ostrich thing
Taxpayers are going to be shocked at the huge increases in fees, that is even if they do keep the records up to date
Statistics stated indicate a chronic failure of MTD VAT if there are still so many still not doing it
All for what?
Computers, AI and autofeeds create more errors than a human with eyes and a brain.
HMRC cannot even plan their own systems to differentiate pennies from pounds
GIGO
Garbage in garbage out
UK HMRC will be the Worlds laughing stock

Thanks (16)
Replying to Paul Crowley:
avatar
By AdamMurphy
20th Aug 2021 22:12

Exactly, all this produces is an electronic version of a bag of screwed up receipts

Thanks (11)
Replying to Paul Crowley:
avatar
By duncanphilpstate
21st Aug 2021 19:30

Correct. I have a new client at present where the previous bookkeeper didn't appear to notice that, for a period, Xero was happily doubling up income by booking it twice: once based on invoices from Woocommerce and again from receipts imported from Stripe. So much for "automation" making records more reliable.

Thanks (15)
Replying to duncanphilpstate:
avatar
By Homeworker
23rd Aug 2021 11:07

duncanphilpstate wrote:

Correct. I have a new client at present where the previous bookkeeper didn't appear to notice that, for a period, Xero was happily doubling up income by booking it twice: once based on invoices from Woocommerce and again from receipts imported from Stripe. So much for "automation" making records more reliable.


Had a similar thing where a client started using Quickbooks without consulting me first. By the time I found out it appeared he had gone over the VAT threshold and he was nearly registered before I discovered he had double counted some of his income. Not obvious because some of the receipts did not match the "invoices" (which turned out to be estimates entered as invoices!).
Thanks (4)
Replying to Paul Crowley:
avatar
By Jimess
23rd Aug 2021 17:13

Clients are already skittish about fees, particularly after the last year and a half with Covid Lockdown measures and the potential for it all to happen again. I just don't know how we are going to deal with this as clients do not see the amount of work that goes into it and will still trot out the - "What! that fee for the little bit we have!" when you have just spent hours sorting out the mess they have made of their books, despite years of explaining that drawings are not wages, personal expenses should not go through the business and cash drawn is not sundries. Or the hours entering the basic transactions because they can't be bothered to do it. Some clients are careless with entries and I have often had to explore why takings are out of kilter only to find that the till was not zero'd down every night and the client was entering the rolling total as the daily takings instead of the Z reading, or a till roll print was missing so the client "guessed" instead of taking the difference between the rolling totals at the end of the previous day and the start of the next day. Another classic is posting credit card funds received in the bank to sales when they have already been included in the daily till readings. Experience teaches us to spot these errors, I am not saying that some clients will not spot them too, but inexperience is an expensive thing when it comes to accounts and taxation. It is going to be a hard job explaining to clients that a lot more is required under MTD, the increased reporting regime - and that their fees will increase accordingly unless they are prepared to gear themselves up to it.

Thanks (2)
Replying to Jimess:
avatar
By Latinaid
23rd Aug 2021 17:31

Jimess wrote:

I am not saying that some clients will not spot them too....

You must have more on-the-ball clients than me then. Of the errors you mentioned, none of my clients would have a scooby what you were even talking about, other than the issue of personal expenses (they understand that one - not that they take any notice, of course! My favourite is the guy whose payments to [***] sites come out of the same account as his business expenses)

Thanks (1)
avatar
By bluebaron
21st Aug 2021 11:28

Mandation should definitely be delayed. It's disgraceful of this tax dictatorship to force a business with under £20K of turnover p/a to submit figures multiple times a year, and suffer additional costs of hundreds of pounds a year for the privilege. I think there will be uproar in the press, but it will be too late for the 2023 commencement, HMRC will still plough ahead with it, and then it will blow up in HMRC's face big time. But, this doesn't help us and our clients as the clock rapidly counts down to 2023.

Thanks (14)
Replying to bluebaron:
avatar
By execprac
23rd Aug 2021 11:10

I posted a gov.com petition to get this ludicrous MTD ITSA £10k threshold changed/lifted but HMRC and the panel are not listening ... I am all for digital records (as applicable) but I fear HMRC are placing massive confidence in the software providers who have no understanding of the real world, when they should be talking to Accountants in business ... entrepreneurs at this level do not focus on software and they do not need a quarterly report from a machine to tell them how much tax they may need to pay (if that were correct Ha Ha!)

Thanks (2)
avatar
By bluebaron
21st Aug 2021 11:32

I'm telling clients to go elsewhere now, I can't just cross my fingers and hope for a delay from 2023.
Yes, I think that maybe a year's delay to 2024 is certainly a possibility, but personally it would be bittersweet.

Thanks (4)
Replying to bluebaron:
avatar
By Geoff56
21st Aug 2021 16:47

This is very much my fear/dilemma. I think it is entirely possible that this will be delayed, or the turnover threshold raised, but I expect any such announcement will come late in the day. For someone contemplating retirement (myself) or having to reconfigure their whole practice, irreversible decisions will have been made by the time any delay or softening of the proposals is announced.

Thanks (10)
Replying to Geoff56:
avatar
By Paul Crowley
21st Aug 2021 17:59

Spot on
HMRC and theit politition masters have no clue how the real world works
Politicians are the worst offenders as they are they to regulte the state but do not understand what it is doing
I will not accept working for free
I did too much of that in the pandemic
I just do not have the time for three weeks a quarter compliance
This adds to, not reduces the other work and timescales
My small clients without computers will be given the option of apply for exemption yourself or £100 if I do it
I suspect some will accuse me of profiteering as I have done so much in the way of free extras in the past, even before Covid
But all clients all at once?

Thanks (13)
avatar
By Hugo Fair
21st Aug 2021 15:48

I doubt it's a coincidence that I'm getting a major increase in enquiries about whether (or at least what and how) bartering your services avoids the need to report it as taxable income.
The interesting (and worrying) thing is that these are nearly all coming from people who have been the backbone of the taxation system (legally-compliant and socially-conscious self-employed).
Their motivation comes not from a desire to avoid tax (that's just a side benefit), but to avoid the reporting burden.
My ex-postie now cleans a LOT of windows, but receives no payments for this - although his flat has been re-wired and re-decorated, his garden is maintained and so on (also without payment)!
Good luck tracking all that through bank feeds or, indeed, any digital records.

Thanks (15)
Replying to Hugo Fair:
paddle steamer
By DJKL
24th Aug 2021 14:30

You are back to my father receiving a cart load of coo dung in exchange for a small piece of legal work for a local farmer (circa 1964/65) , being an upstanding citizen I am sure he would have been more than happy to deliver an appropriate percentage to the then Collector of Taxes.

I believe we also traded our excess eggs to the local butcher in exchange for the odd bit of meat ( we kept 20 chickens in our garden before we moved to Edinburgh in 1965/66), I suspect some of the veg we grew was also swapped (back before the deep freeze people did swap)

My grandfather (rural Wiltshire pre WW1) used to tell us this elaborate story about how you killed half a pig, effectively one smallholder killed one of his, split it with his neighbour then later the neighbour slaughtered one of his and shared, by this means both families enjoyed fresh meat rather than cured for much longer.

Rural trading has always been a fact of life , and still survives, I might buy some of my firewood in Sweden using malt whisky.

By coincidence my father's rural notary's fee back in the 1950s/60s was on occasion a double left behind the bar of the Gordon Arms Hotel.

Thanks (2)
avatar
By ClaireR75
21st Aug 2021 22:02

Book keeper of over 25+ years and I just can't face this change...not taken on any new clients and looking to offload... . How too fit in all the extra work.... Educate clients.... Whilst doing my own returns 4/5 times a year...had enough and the last 18 months of furlough, seiss etc..... Feel like our sector has been overlooked and under valued and just renewed my £300 money laundering (another tax/fee) not quite sure why I've just paid this but hey ho...... Disillusioned....

Thanks (28)
Replying to ClaireR75:
avatar
By Amber21
24th Aug 2021 08:06

I can so agree with these comments - I'm in the same position. Very, very few of my clients maintain records of any description. They rely on passing over all their paperwork to me to maintain - which is what I have always enjoyed, frankly, but doing this on a quarterly basis for over 100 clients will probably be a step too far. Clients have no desire to spend their time keeping records, they just want to earn money through their business! I am actively seeking someone to take over from me in a couple of years time - although I wonder if I will have many clients left when they find out that accountancy services are likely to double (at least) in a year or two's time.

Thanks (2)
Replying to Amber21:
avatar
By ClaireR75
24th Aug 2021 17:35

Yes so agree my little client base... Give me a pile of papers once a year and I put together a set of accounts and submit to Revenue... Most clients (non vat) just want to run there businesses and have contact with HMRC once a year via me... I Think they should raise the threshold for compliance with this MTD ITSA...
Three of my clients don't even own a computer :(...

Thanks (1)
avatar
By Crouchy
22nd Aug 2021 10:18

I still say if we had this system in place already, we'd be looking to change to a simpler system, 1 tax return a year for example.....we already have that so why change.

Where are the office of tax simplification on this, surely they can see what a mess it will become

HMRC say is not about quarterly tax payments, but it will be, so just tweek the the current system to make POA's quarterly or even monthly, if anything most our our clients would appreciate that

MTD for VAT is easier, filling in 9 standard boxes, Tax is different, varying entries dependent upon the business and what it does, standardisation of codes wont cut it for many, whichever way you look at it MTD for tax is complicated and unltimately unworkable

Sadly any resistance now won't change a thing, MTD is coming, the powers that be have invested too much into to scrap it now, just like HS2, the world and his wife can see its not worth it, but those that think they've laid the golden egg will never see it

Thanks (19)
avatar
By SXGuy
23rd Aug 2021 09:02

I wouldn't be offloading clients just yet.

First id be offering aditional fees based on the level of work the client wants to take on their selves, the more tidy the lower the fee etc.

You will lose some clients who can't justify the fee increase and will attempt to diy. Which in turn you may find you make up the lost fees in the additional charges you get from those who remain.

It may end up being that you have more time for compliance, similar or more grf, and less clients.

That's my hope anyway.

Thanks (3)
Replying to SXGuy:
avatar
By Paul Crowley
23rd Aug 2021 09:45

My thoughts entirely
If clients can figure out the onloading, and dealing with first four then I am back doing one annual thing, hopefully.
Still need to give then the journal to fix the issue though.

Totally convinced most clients will not be able
It then comes to, do penalties cost more than getting it done on time?
No idea how the system will work as those outside of mandation and those permitted to be out though old age etc will need the tax return system

Thanks (5)
Replying to Paul Crowley:
avatar
By GHarr497688
23rd Aug 2021 09:53

The more comments I read about this MTDITSA the more unworkable the new system appears. Everything I read really means that their are four tax returns a year - all records are digital. Taxpayers and Accountants will be unable to deliver this system which is doomed to failure for many. If filings are made then I would be reasonable to expect many filing to be totally inaccurate with claims for drawings against tax , new cars entered into Motor Expenses , personal household fuel bills as light & heat , VAT paid as VAT Inputs tax - how scary these would be as the mess would never be unravelled. The question is why has HMRC consulted the software companies and left the Accountants out when it's the Accountant that deals direct with the client.

Thanks (18)
Replying to GHarr497688:
avatar
By duncanphilpstate
23rd Aug 2021 12:01

As to why HMRC consulted the software companies and not the accountants, i had a strong suspicion when MTD VAT came in that it was being driven the other way round. That is, the software companies lobbied HMRC saying "our software could do X and so now you can mandate everyone to make frequent returns because they can always use our software to support and submit it". And HMRC having no interest beyond grabbing tax and no belief other than that every small business person is out to cheat them, thought "What a good idea" and went ahead.

So the real beneficiaries are the software companies who have made it so easy to prepare your accounts that all you have to do is take a photo of a receipt on your phone and the job is done. At least until the investigation comes in.

Thanks (7)
Replying to GHarr497688:
By Paul D Utherone
23rd Aug 2021 16:36

GHarr497688 wrote:

The question is why has HMRC consulted the software companies and left the Accountants out when it's the Accountant that deals direct with the client.


The answer is (according to HMRC, politicians & TV ads for accounting software) because tax is simple as ene fule kno (c) N Molesworth MP (Sec for Stoopid Idears)
Thanks (1)
Replying to Paul Crowley:
avatar
By duncanphilpstate
24th Aug 2021 12:16

"Still need to give then the journal to fix the issue though."
But is it reasonable to assume that having had 4 sets of figures during the year, HMRC will require additional documentation over and above what's sensible, in order to allow an adjustment to fix the issue? Because the software must have been right in the first place, no?

Thanks (0)
avatar
By Barkster
23rd Aug 2021 10:00

I'm not sure if this is commonly known, but MTD for ITSA requires just 3 line accounts. Business Income, Business Expenses, Profit.
So that's all that needs recording. What's going to happen when a mortgage co or bank want to see someones accounts ? Are they going to accept 3-liners ? Are we going to have to retrospectively then do their accounts again to come up with the detail ?
I think the tax gap will increase as those who decide to do this themselves will not be splitting up fuel receipts between diesel and lager and cigarettes and chocolate bars - and we won't have the time, inclination nor the receipts to look at to do it any differently anyway - it will all just go down as "Business Expense".
I have many clients who will be incapable of operating any software and who flatly refuse to have online banking (and especially won't wish to connect their bank to some strange software they've never heard of) and, even if they do, do all the business transactions go through the bank ? No, of course not. Market traders, window cleaners, gardeners, all who get paid in cash aren't about to trot off to the bank every day to bank all their takings. Then there are people with deductions from their income before it hits the bank, especially CIS. And the software can't assume this is 20% (or 30%) as there may be materials, so how is the CIS figure getting into the system ? that would be manual entry. Will they get that right ? Don't be silly.
And don't forget the bank feeds need re-authenticating every 90 days - how many clients will be capable of doing that and will actually remember to do so ? We will come do look at their transactions in the one month we have to do this, will discover the bank feeds have expired and will then have to get the client to renew them which will take them days to get around to.
It will be carnage.

Thanks (17)
By ireallyshouldknowthisbut
23rd Aug 2021 10:07

There is a very simple way to make this work.

£500 to each client first year adoption (ie 23/34)
£400 second year (for 23/24 adopters + 24/25 adopters)
£300 third year
£200 4th years
£100 5th years
£500 fine, 6th year

Huge compliance inside of 2 years. I would bring in about 30%-40% of clients in on the first year, the same in the second year, and the rump as and when I can.

It worked for the huge changes to PAYE, it would work again now. HMRC want it done, pay us to do it and build the systems that are needed. HMRC should not expect the tax payer to foot the bill for this massive change.

£1,500 over 5 years would be enough incentive to do it, and do it early and file the extra 20 odd returns.

Thanks (2)
Replying to ireallyshouldknowthisbut:
avatar
By Jimess
23rd Aug 2021 12:26

They did this when self assessment was introduced and it was great but not really successful. Compliant taxpayers were benefitting from a reduction in their tax payable for a couple of years as a carrot to lure them onto self assessment, but their taxes were accelerated anyway due to the introduction of current year basis so it was a drop in the ocean for many. For the die hard non compliant it was not enough to persuade them and it did nothing to help increase compliance figures. The only thing that increased the tax take was the temporary escalation of the tax take due to moving from prior year basis to current year basis, just as moving from current year basis to actual year basis will for MTD.

Thanks (2)
avatar
By North East Accountant
23rd Aug 2021 10:06

iXBRL tagging- HMRC have had this for 11 years, what do they do with it...virtually nothing.

What are HMRC actually trying to achieve with MTD?

HMRC should spell this out and we can all work towards this is a planned and controlled manner, over a sensible period of time.

The way HMRC are going about it will make the Afghan exit look orderly.

And the letter from the Professional bodies is so weak I expect the response from HMRC to be an easy brush off.

Thanks (12)

Pages