How MTD ITSA and self assessment interact
How is MTD ITSA reporting going to overlap or replace the filing of self assessment tax returns? Rebecca Cave has some answers, but it’s not going to be simple.
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This again essentially demonstrates the pointlessness of the quarterly submissions.
HMRC ought to remember its role is the collection of taxes.
They ought not be mandating hugely complex bureaucratic systems which have no purpose in the collection of taxes.
Thanks Rebecca. So, we currently have a self-assessment tax return, but in future we will have a tax return, an EOPS, a year-end finalisation, plus all the lovely quarterly updates. Totally crazy and pointless, especially for the smallest clients. Good luck HMRC getting all this to work!
"Good luck HMRC getting all this to work!"
It clearly is not going to work, so I think HMRC will need a lot more than Good Luck with this project.
Thanks Rebecca for another of your well prepared articles.
Thankful to Rebecca, but I can't waste any more time planning for this.
I don't want to think how many hours I've wasted doing so ever since the first announcement only for the can to be kicked down the road time and time again.
MTD for VAT only went ahead so somebody could say to their superiors "look, it works"
Great so we waste time getting clients Digital increasing the risks or error and then file the garbage four times a year. We then scrap all the garbage and then do the usual Self Assessment. Not one aim of MTD is met. Error risk increase, cost increase , tax burden worse. This will become one of the biggest scandals in the history of HMRC if they push on with it. HMRC are not telling the taxpayers and expecting the Accountants to deliver. It's time Accounting Web - Software Houses - Accountants - Taxpayers - Accountancy bodies spelt out in a united way how this just won't work. Best do it so HMRC can save face by not forcing the mandation on the basis they understand taxpayer concerns. It' not too late to fix the problem.
"HMRC are not telling the taxpayers and expecting the Accountants to deliver"
As I have said many times already, it is not our responsibility to deliver MTD, it is solely the responsibility of HMRC, so they need to seriously decide if they can really do this and if not, then they need to knock it on the head now whilst they can still save face.
No good talking to the software houses, they're coining it in. I think HMRC know full well it won't work but they can't or won't back down.
RIGHT, THAT'S IT!
Time to lay in a stock of sets of two pencils ... then practice inserting them (one in each nostril - so all that covid testing was a useful practice run for something) and, after donning underpants as headgear, mumbling in a loud voice whenever HMRC are mentioned (all together now):
Wibble! Wibble Wibble! Wibble Wubble Wibble!
What happened to Wobble?
He got shot for desertion.
The shooting may have stopped, but the desertion will continue.....
Orwell could write a book on this.
The very good reason why HMRC have chosen the start date as 6 April is that they have done everything in their power to avoid linking MTD with All Fools Day.
Thanks Rebecca, as ever you have brought this sharply into focus. As you say, how we will ever explain this to the clients is anyone's guess.
But it strikes me that if this was an article about some emerging nation attempting to put a modern tax system into place we would look down our noses at them and pity the inadequacies of their civil service.
Regardless of whatever "crisis" is in the national press this week (and my goodness aren't there a lot of them) surely this is clear evidence that we have become that third world nation.
And according to HMRC policy paper on impact to businesses, it will cost just £3 to file an MTD return and just 6 mins to check, so not sure what all the fuss is about........................
Where on earth do they get the ludicrous figure of £3 to file an MTD return?? If you use bridging software it's £9, otherwise the client is paying monthly for cloud software that they potentially wouldn't have needed before, but the costs involved are much more than £3
Started reading the article and started losing the will to live.
I for one will not touch a sole trader or landlord. And retire fully before this nonsense starts for companies.
What an idiotic scheme they have dreamt up. Are they on drugs?
Have they run this past the Office of Tax Simplification ?
Probably not, it might be a bit too complex for them to understand.
For crying out loud, don't let the OTS have a say. It's complicated enough without them adding their thruppeny bit.
I have a question.
Having read the article, what's to stop taxpayers keeping their traditional bookkeeping systems and supplying these for preparation of their accounts as they always have done, but (either us or them) submitting the quarterly returns with "estimates"?
I'm sure that's what will happen - but then will come the quarterly payments on account for everyone. Its just a ploy to get their hands on our money sooner.
You may well be right eventually, but then one could presumably just submit zero estimates.
The critical piece of information appears to be:-
"The requirement to submit an EOPS is also not connected to the requirement to submit quarterly updates."
So the quarterly returns would appear to have no bearing on a client's actual tax liability.
If they just made 4 payments on account based on the current system that would be ok as long as it is always paid after the earnings period by a fair gap to allow sales/fees to be paid. Benefits HMG and easy to do.
That confirms it for me then. As soon as possible after 5 April 2024 I'm retiring from accountancy, if I don't do it sooner.
HMRC used to have a duty of Care and Management under Section 1 TMA 1970. It's now a case of couldn't care less and managing to dig deeper holes when they are already in the S###
Thanks Rebecca.
Those examples just show the craziness of it.
How are we supposed to track these with different EOPS deadlines, SA returns for some and not others. Could they make it anymore complex with so many variances and deadlines.
I suppose all rental clients will be as per example 1.
Great article Rebecca but you don't appear to have included the basis period changes into example 3 eg wouldn't SA 2024-25 would include an apportionment of y/e 30/09/2025?
Thanks Rebecca. I thought the announcement was the same as MTD: postponed. That's what I understood from https://questions-statements.parliament.uk/written-statements/detail/202.... Given that MTD has been postponed multiple times I would say it's as (un)certain as the basis period changes and is just as likely, which is why I feel it would be helpful to see example 3 with the basis period changes.
Rebecca, can you suggest to HMRC that they actually team up with a few small or sole practitioner accountants and pay said accountants to run this on a trial basis for their clients. Pick both tech savvy and non-tech savvy accountants and clients- especially considering the £10k turnover so include landlords with one property, small self employed, etc.
Then they might actually see what a complicated mess they have dreamed up, plus how much extra time and resources will be spent filing utterly pointless quarterly reports after first having to take the time to prepare them.
Rather then them talking to software houses and the big accountancy firms who have entire departments etc and other self interested parties.
I've explained all this directly to my Local MP , HMRC and Software houses. Apparently I need to go to night school to brush up on Computer use !!
Our Tory MP here in County Durham was elected 2 years ago, and all he has done since is let his gob go. My wife got a leaflet from him the other day claiming he had done all sorts about traffic on the main road through the village. Most of it was porkies.
Perhaps the only solution is to block the M25. Better still block the fuel distribution centres. Only problem with that is that we would incur the wrath of people. We already have the people on our side. There must be a way of getting around this "blind spot" our politicians have got otherwise we shall just have to wait for it to go t's up
We accountants won't have much sympathy from the public: why should they worry if fatcat accountants (as we can be perceived) have more work to do? The sympathy will be for Joe the Plumber who gets nothing from this at all but more wasted time and costs. As for getting this message across to our politicians, the ideal way would be to enrol them all into the pilot so they can see just how much work is required. But that wouldn't work because MPs are exempt from online SA filing (and therefore, I assume, MTD). It's easy to vote something through it you don't have to comply.
HMRC have still not said exactly what information has to be provided quarterly. Is it cash book items, bought ledger items, sales ledger items, nominal ledger items, total of unpaid sales invoices, unpaid purchases and expenses invoices, accruals, prepayments, stock and wip? A small business may only keep a cash book and leave it to the accountants at the year end to add on balance sheet items if they do not adopt the cash basis.
+It really shows just how incompetent HMRC actually is. They have been sold this by the software companies and are just too stupid to see that it won't work, will cost taxpayers a huge amount of time and money and thus shrink the economy which will mean taxing companies more to pay for all the people on the dole because small businesses just think "Bu***r off" and retire to accept cash only instead. Guess what - the tax gap will expand, Jim Harra will get a promotion to Head of the Treasury and we will become the Third World Country which HMRC obviously hope for.
If you read it in a Sci-fi book you would say 'totally unbelievable' but HMRC lives in cloud cuckoo land these days so they believe it.
Get the Media onto it and expose HMRC for the idiots they are and tell Jo Public what he/she is in for.
Perhaps Guy Fawkes could be resurrected to dispose of wherever these morons operate from.
I feel more relaxed about it all now. HMRC have given me an extra year to disengage sole trader and rental clients. I won’t be taking any new ones on from now on. The mortgage is paid and from now on only vat registered companies.
If this isn’t going to be simple for accountants what is going to happen to the millions of unrepresented taxpayers?
Some will go on PAYE. Some will go under the radar, some will go mental and some will go on the dole (UC). All in all not what HMRC will want.
Two things struck me before losing the will to read further (no offence or reflection on Rebecca):
"These new regulations are quite different to the previous draft MTD regulations released on the developer hub, which software producers had been working to. " = recipe for disaster in itself
"All sole-traders and individual landlords who are in business on 5 April 2023 will have to comply with the MTD regulations from 6 April 2024, if their gross turnover (trading and property income) exceeds the MTD entry threshold of £10,000." = lol at this rate (fuel costs, labour costs, etc) I wonder what the value of £10,000 is going to be come 2024...
It's stupid having a turnover limit anyway. Business could go up and down every year making it not worthwhile to go above £10k.
It's stupid having a turnover limit anyway. Business could go up and down every year making it not worthwhile to go above £10k.
I am still confused/bemused/angry/dismayed/shocked at how many basic principles have not been taken into account in HMRC's stab at MTD. Many things that are obvious to us seem to have been completely missed by HMRC and they are so surprised when they come across these problems and have to delay again.