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ICAEW pushes HMRC to dump quarterly reporting AccountingWEB An illustration of a hand throwing a crumpled ball of paper into a rubbish bin
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MTD: ICAEW pushes HMRC to drop quarterly reporting

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The Institute of Chartered Accountants in England and Wales (ICAEW) has called on HMRC to either drop or postpone quarterly reporting as part of the eventual rollout of Making Tax Digital for income tax self assessment (MTD ITSA), describing the administrative burden of it as “disproportionate”.

11th May 2023
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The main thrust of ICAEW’s call to revamp the MTD ITSA was directed at rethinking quarterly reporting, but it also called for MTD ITSA to be “refocused on what can realistically be delivered in 2026 and on digital record keeping and filing from software”.

ICAEW said that dropping quarterly reporting would “change the narrative” of MTD and also ease problems like multiple agents acting for a single taxpayer. 

ICAEW’s call for HMRC to use the delay to MTD ITSA in December last year as an opportunity for “fresh thinking” on MTD policy was part of a virtual roundtable the Tax Faculty staff had with the HMRC MTD team and 11 ICAEW members in practice in April. 

The burden of quarterly reporting

In a letter addressed to HMRC’s Joanna Rowland and Jonathan Athow, ICAEW’s Frank Haskew said the “administrative burden associated with quarterly updates is disproportionate and needs a rethink”. 

He went on to say that taxpayers maintaining digital records on a regular basis and having to ensure these records are complete and checked by specific quarterly deadlines “adds extra compliance burdens”.

He also took aim at the need for quarterly reporting as part of the mechanics of MTD ITSA. “Quarterly updates provide HMRC with little or no assurance about the quality of the underlying digital records. One of the reasons why quarterly reports are getting all the attention is because they can lead to late submission penalties,” he wrote. 

“Record-keeping penalties are not being reformed despite that being the primary behaviour that needs to change,” he added.

Instead, ICAEW suggests sticking with the annual reporting cycle alongside introducing the requirements to maintain digital records and to submit details of income from self-employment and property directly from software. 

Then quarterly reporting could be considered in the future if annual reporting doesn’t lead to improvement in record keeping or making it optional. “We anticipate, however, that given the increased impetus towards digitalisation, that requiring the use of software and digital records should provide most of the benefits sought.” 

Haskew said decoupling quarterly reporting from the process could go some way to changing the “narrative on MTD ITSA” and it would also show the government is willing to work together with stakeholders. 

“It would allow HMRC to assess the impact of introducing digital record-keeping requirements and the use of software separately from the impact of quarterly reporting. It would change the focus of the discussion from quarterly reports back on to digital records and filing from software.” 

ICAEW noted that dropping or postponing the burden of quarterly reporting would support the delivery of the project by the new start date of April 2026 because it would ease implementation problems such as the issue of multiple agents. 

Opportunity for fresh thinking

The call to rethink MTD policy follows the Treasury announcing a two-year delay to the digital programme in December last year.

As part of that announcement, the government moved the new start date for mandatory digital income tax filing to 6 April 2026 and raised the turnover threshold to £50,000 from £10,000, and then those earning more than £30,000 will join the scheme in 2027. 

The delay in December was the latest bump in the road for the project that was announced back in 2015 and was originally dubbed “making tax simpler”. In the letter, ICAEW said HMRC needs to return to that core principle and message of simplicity. 

Instead, ICAEW said MTD has “become mired in controversy and the credibility of the project and the ‘MTD brand’ has been severely, if not irretrievably, undermined”. 

As part of its intervention, ICAEW said MTD ITSA needs a “rebrand” and to focus on its original aims of delivering “productivity benefits from the adoption of software and digital record keeping and making it simpler for taxpayers to comply with their tax obligations”. 

It added that this “fresh thinking” needs to be applied to all taxpayers and not only those under the £30,000 threshold because both taxpayers above and below the threshold will encounter the same problems: “The introduction of another cliff edge in the tax system is potentially unhelpful.”

Another MTD intervention

The professional bodies have intervened throughout the gestation of MTD ITSA and their urgent calls and pressure alongside that of other stakeholders have often influenced the direction of the project. 

In September last year, for example, the Chartered Institute of Taxation (CIOT) president Susan Ball was calling for a delay to MTD ITSA months before the Treasury bowed to inevitability, and the tax body also raised issues of the pilot not yet being up to speed and the approved software at that time being limited. 

ICAEW’s shot across the bows on quarterly reporting echoes a lot of AccountingWEB readers’ sentiments

It was also something AccountingWEB’s consulting tax editor Rebecca Cave called for after the delay in December. “The justification for quarterly reporting has never been made convincingly,” she said. “If accountants cannot be persuaded that quarterly reporting is necessary, they won’t be able to sell the MTD project to their clients.” 

Replies (53)

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By Justin Bryant
11th May 2023 09:32

Why on earth has it taken them so long to point out the bleedin' obvious? That's what I'd like to know (many people have retried early coz of all this nonsense BS). It reminds me how PBs were all silent re the 2019 Loan Charge - it took an independent action group and a bunch of sensible MPs to get that largely reversed, with basically no help from the PBs (who if anything, quite disgracefully, seemed to support the LC).

Needless to say, per the comment below, it's too little too late and the whole thing needs scrapping (like the LC).

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Replying to Justin Bryant:
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By rmillaree
12th May 2023 10:15

Why on earth has it taken them so long to point out the bleedin' obvious?
Exactly !!

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Replying to Justin Bryant:
By Husbandofstinky
12th May 2023 16:58

Justin Bryant wrote:

many people have retired early coz of all this nonsense BS.

And that is one of the most shameful aspects of this whole fiasco imo.

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By jon_griffey
11th May 2023 09:46

Talk of postponing the quarterly tax return is not enough. It will be an unworkable disaster now or in 10 years time. They should be calling for it to be cancelled.

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Replying to jon_griffey:
Tornado
By Tornado
11th May 2023 13:15

I have reviewed the situation and my opinion is that legislated of not, quarterly reporting is just not gong to happen, and HMRC are so hopelessly broken that they don't have a snowballs chance in hell of enforcing it.

Indeed, trying to enforce MTD in general is still unworkable and sooner or later HMRC will smack into the Wall of Reality and realise this.

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Replying to Tornado:
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By raju m
12th May 2023 09:44

Lets hope it gets scrapped!!!!!!!!!!!!!Raj Mehta

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Replying to raju m:
Tornado
By Tornado
13th May 2023 09:52

Smacked and Scrapped sounds good.

A great headline for some newspapers.

Or as the Liverpool Fans might say ... "You can shove your MTD ................"

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Replying to Tornado:
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By raju m
13th May 2023 14:53

HMRC boss has started singing: You will never walk alone, MTD will always be with you.

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By ireallyshouldknowthisbut
11th May 2023 12:15

Its what the project needs some proper critical evaluation rather than the blind support so as not to rock the boat HMRC has enjoyed so far from the membership bodies (CIOT being the notable exception in recent months)

I still dispute that there is necessarily any benefit from software and digitisation for a sizeable number of small business, especially landlords who may have no more than two dozen transactions a year, and those already summarised by their letting agent. That is to say the fundamental assumption that "software is best for all", is yet to be challenged.

I think the issue there is the most simple of businesses often do not have accountants, and if they do are handled by junior staff so those voices are not reaching decision makers.

It would be better in my opinion to only mandate software over a threshold of transactions, so perhaps 20 a month at which point it will be a benefit for the vast majority. Once you are down at 1 or 2 a month its completely absurd. The absolute size of the numbers is not really relevant, so turnover tests I think are a very blunt tool.

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Tornado
By Tornado
11th May 2023 13:39

The ICAEW Letter is going in the right direction, and I think it has always been the case that most Accountants are in favour of moving towards more use of digital accounting, but this must be an organic process that should be given time to achieve.

Above all, HMRC should not try to introduce any new systems, procedures, applications, until they have been fully trialled and tested in all circumstances.

I could say a lot more, but it has already been said on AWEB a thousand times before.

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By Hugo Fair
11th May 2023 15:33

Whilst the headlines (in the accounting press) are naturally all about the need to question whether there any benefits (to anyone) of QUs ... the ICAEW actually lead with:

"The review gives an opportunity for fresh thinking on MTD ITSA policy. (And) this fresh thinking needs to be applied to all taxpayers, not just those with turnover below £30,000."

Or in blunter terms than a PB likes to say in public ... 'if it's wrong for one group, it's wrong for everyone - so back to the drawing-board and bring some blank sheets of paper with you'!

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By GHarr497688
11th May 2023 17:43

Easy MTD is a choice and if you file digitally you get a £500 credit to your tax account each year for two years . Job done . End of the saga . For me 10 years of hell .

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Replying to GHarr497688:
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By steve 12321
11th Jun 2023 21:48

pointless still and a waste of £500 x 2

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By AdamJones82
11th May 2023 21:30

HMRC can't even provide an adequate annual system. Why did they think they could deal with things quarterly?!

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Replying to AdamJones82:
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By snickersinatwix
12th May 2023 13:49

They can't even answer the phone at the moment!!!

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Replying to snickersinatwix:
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By bendybod
25th May 2023 10:07

Even less so a letter.

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By HLB
12th May 2023 09:37

Attended a consultation session with HMRC in 2016 and questioned all their assumptions about the costs and benefits to the taxpayer. Told them that in my opinion their cost figures to the taxpayer for software and providing quarterly figures were nonsense and the burden on the taxpayer would increase enormously. One HMRC person questioned why I was complaining when I would be getting so much extra work!
I am very disappointed that ICAEW has taken this long to come to the conclusion that many of its members did years ago, to the point that I am one of those who retired earlier than I could have done with a major reason being I was fed up with the uncertainty and the lack of professionalism from both HMRC and the major professional bodies.
I can happily sit on the sidelines now and say ‘I told you so’.

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Replying to HLB:
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By Geoff56
12th May 2023 12:01

I travelled to London to attend one of those sessions with HMRC, back in 2016. It was truly one of the most infuriating, frustrating and depressing afternoons of my long professional life.

Regardless of the latest postponement, I intend to head for door marked 'exit' within the next year, also.

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Replying to Geoff56:
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By raju m
12th May 2023 12:36

All the best!!!!!

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Replying to HLB:
By Nick Graves
12th May 2023 12:08

HLB wrote:

Attended a consultation session with HMRC in 2016 and questioned all their assumptions about the costs and benefits to the taxpayer. Told them that in my opinion their cost figures to the taxpayer for software and providing quarterly figures were nonsense and the burden on the taxpayer would increase enormously. One HMRC person questioned why I was complaining when I would be getting so much extra work!
I am very disappointed that ICAEW has taken this long to come to the conclusion that many of its members did years ago, to the point that I am one of those who retired earlier than I could have done with a major reason being I was fed up with the uncertainty and the lack of professionalism from both HMRC and the major professional bodies.
I can happily sit on the sidelines now and say ‘I told you so’.

Just goes to show how disconnected civil serpents are from economic reality - I hope you pointed out that it will be HE who would ultimately be paying for all your extra work.

If you are a retired Chartered, any mileage in slapping the pros, er, institute upside the head for failing in their fiduciary duty to you and causing loss on income due to retirement? Legally speaking, it's a stretch but the thought of losing them ££££s might ruffle a few feathers...

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By Marlinman
12th May 2023 09:57

Just scrap MTD altogether and admit you got it wrong. The current system works fine and we are all well into the swing of it. Those who want to evade tax will always do so under any system.

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Replying to Marlinman:
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By raju m
12th May 2023 12:41

Spot on!! Some HMRC staff are after big bonuses and big pay rises.
They are assuming the above from penalty receipts from tax payers.

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By robertmmatthews
12th May 2023 10:18

Delay is not the answer - it has to be scrapped. There is absolutely no benefit to the tax payer and would be an added burden, distraction and expense to the taxpayer who should be concentrating on running his/her business. For quarterly returns to be accurate would involve quarterly stock takes and adjustments for accruals and prepayments etc. Has this detail been addressed? It is totally unworkable without significant expense to the taxpayer and I concur with earlier comments that the ICAEW has failed to challenge it with more vigour and commonsense.

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Replying to robertmmatthews:
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By raju m
12th May 2023 12:43

spot on! Totally agree!!!

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LL
By RickyRoark
12th May 2023 10:27

Scrapping MTD is the compromise position.

All its advocates in HMRC and Government should be removed from their positions indefinitely and should repay to the taxpayer all costs associated with trying to implement such a terrible scheme.

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By johnjenkins
12th May 2023 10:31

Most has been said but a question remains. Why have ICAEW chosen now to send a letter? Could it be that HMRC have already decided to give up on QU and our PB wants to jump on the bandwagon?
Postponement after postponement, then watered down. Everyone, right from the start has said that QU wouldn't work. Let's hope they take notice then we can shout...................................wait for it..........................bit like Eurovision................................Harra. What do you expect, it is Friday.

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By ArianBloodwood
12th May 2023 10:34

Forgive my ignorance, but what IS the "issue of multiple agents"?

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Replying to ArianBloodwood:
By Silver Birch Accts
12th May 2023 13:06

I believe that the main problem is between Bookkeepers and Accountants, other than that I don't see many clients wanting multiple accountants.

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Replying to ArianBloodwood:
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By Jo Nokes
12th May 2023 19:44

I think it was the fact that bookkeepers would do the day to day and file the QUs, and the accountant would deal with the end of year filings, but only one could be the recognised agent

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By Crouchy
12th May 2023 11:21

My cat can see quarterly reporting isnt workable for most, hopefully it won't be too long before the powers that be wake up to reality

some alternative suggestions:

1. Keep SA as it is, it works pretty well
2. bring in quarterly POA's, perhaps even monthly POA's, we have lots of clients who would actually welcome that
3. have POA's collected by DD, increase penalties for those who dont go on DD or who's DD payments bounce
4. invest funds earmarked for MTD development into staff - both staff numbers and training for staff - HMRC may actually have the right amount of people with the right skills to do the job if this happens
5 - 100. see point 4

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Replying to Crouchy:
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By johnjenkins
12th May 2023 11:47

DD's a bit dodgy. HMRC could take fines out of your account without you knowing.
STO is ok. I believe you can actually do that now. HMRC have always accepted on account payments.
Do you actually need skills to do the day to day mundane operations that are required? Investigation and collections, certainly. So as I have said many times, let us do the admin and HMRC concentrate on investigation and collection.

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Replying to Crouchy:
By Nick Graves
12th May 2023 12:17

Crouchy wrote:

My cat can see quarterly reporting isnt workable for most, hopefully it won't be too long before the powers that be wake up to reality

some alternative suggestions:

1. Keep SA as it is, it works pretty well
2. bring in quarterly POA's, perhaps even monthly POA's, we have lots of clients who would actually welcome that
3. have POA's collected by DD, increase penalties for those who dont go on DD or who's DD payments bounce
4. invest funds earmarked for MTD development into staff - both staff numbers and training for staff - HMRC may actually have the right amount of people with the right skills to do the job if this happens
5 - 100. see point 4

IF their existing system could reliably suck in the info they already hold (TGP & TD, NIRP, etc) then I might be inclined to agree with you.

But it cannot, therefore I don't.

I'd like to see some entrepreneurs (aided and abetted by some long-serving, disillusioned tax inspectors) set up a rival system to which we could subscribe.

See which system wins...

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Replying to Crouchy:
Tornado
By Tornado
12th May 2023 14:42

1. Keep SA as it is, it works pretty well

I think this sums it all up very well.

HMRC are trying to reinvent the wheel and have just ended up with a square one.

Absolutely pointless (unless you have been a beneficiary of the 3,000 million pounds plus that has already been thrown at this project).

Like others, I think the ICAEW could have been much stronger with their criticism of the project instead of just trying to offer fatherly advice to HMRC.

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Replying to Crouchy:
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By raju m
12th May 2023 15:38

My dog is applying for a HMRC job. He is very confident of sorting out the problems.!!!!!!!!!!!He is sure he can not make anything worse then at present!!!

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Replying to raju m:
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By johnjenkins
12th May 2023 15:44

Let's hope it's not My Timid Dog, but My Tenacious Dog.

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By Mr J Andrews
12th May 2023 14:03

If the National Press publicised this whole ridicule initiated by Osborne and Joe Public became aware of the complete and utter time wasting administration involved, normal service would be resumed. { Normal service as far as HMRC is concerned meaning poor as opposed to pathetic }.
We all know the Revenue's hell bent infatuation with this MTD road to destruction under its current CEO. No amount of lobbying to HMRC by CIOT or ICAEW will change this dumb fixated stance.
Come on Joanna, Jonathan and Frank , its about time to make the Revenue's ''customers'' fully aware. Your collective article on this Orwellian nightmare would, I'm certain, make wonderful nationwide reading. And [***] any cowtowing calls to HMRC.

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Replying to Mr J Andrews:
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By Justin Bryant
12th May 2023 14:24

kowtowing.

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Replying to Justin Bryant:
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By Mr J Andrews
13th May 2023 09:28

I was being bullish

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By Dinnages
12th May 2023 14:49

In all discussions about MTD the references to both turnover and income are so confusing again both used in this article.

While one sole trader may have a nett income the same as another their turnover could be vastly different based on what they buy in related to their trade.
A kitchen fitter would have much bigger initial expenses therefore a higher turnover while say a locksmith needs very much less outlay but could easily earn more for a tax year in pre tax income.

So those mixed references of turnover, income and earnings is certainly not clear to which one would be the criteria wether that sole trader and certainly those not VAT registered are liable to be included or not.
Finding wide differences to the cost of MTD apps and accounts that when you have two separate businesses both have to use the same package one may get a freebie account the second would not and offerings out there the support is lacking in wether two different banks can be used as Lloyds told me Id have to bring my other business account to Lloyds to use their package.

Quote: ...raised the turnover threshold to £50,000 from £10,000, and then those earning more than £30,000

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Should Be Working ... not playing with the car
By should_be_working
12th May 2023 14:58

As much as I'd love MTD to die a slow painful death, the way I'm reading this is the ICAEW are suggesting a face-saving way for HMRC to row back, to a point where what we get is effectively "MTD in name only" - which is fine by me. Those Treasury/HMRC mandarins still worshipping at the Church of Digital don't have to admit failure but the rest of us can then progress in a more pragmatic manner.

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Replying to should_be_working:
Tornado
By Tornado
12th May 2023 15:11

Why offer as face-saving way out?

HMRC have caused a great deal of unnecessary expense and disruption with this toxic project, and do not deserve a face-saving exit in my opinion. Those responsible for this mess need 'a good talking to' and a move to less important duties.

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By Ian McTernan CTA
12th May 2023 16:50

FINALLY. Thank you ICAEW. Now let's hope the CIOT can follow this up by fully backing the ICAEW's stance.

It's just a shame it's come from the accounting body first instead of our tax body.

If they really want everyone to switch to digital record keeping then rather than coming up with some unworkable garbage, introduce an incentive: 5% off your tax bill for the next 3 years when you confirm everything is digital. then all we need is a system to prove it (with agents being able to do this!).

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By Ajtms
12th May 2023 17:49

I wish ICAEW and CIOT and others would also campaign about the unfairness of the Basis Period "Reform." There are over half a million self-employed who do not have an accounts year in synchronisation with the tax year. For my clients with a 30 April year end they will not be able to afford to pay tax on 23 months of income (despite the 5 year spread and a tiny amount of overlap relief); this at a time when mortgage interest rates are rising, fuel bills and food costs are rising. The clients affected will not be able to pay my fees either, simply because HMRC is financially ruining them with this truly outrageous stealth tax. Mercifully MTD is being delayed and will hopefully be abolished to lessen the burden on the self-employed, but we need intervention now to stop this near doubling of 2023/2024 tax liabilities, before tens of thousands of hard working people will be bankrupted by this Basis Period "Reform"

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By Barry E
12th May 2023 19:18

Unfortunately, to repeat my view with regard to Harra & HMRC - If it looks like s**t and smells like s**t then it is s**t !!!! Clueless would be an improvement.......

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By SE_Confused
12th May 2023 20:11

Anyone remember Mr Gauke and the ''death of the tax return?''

https://www.gov.uk/government/speeches/david-gauke-on-making-tax-digital

abolish the tax return ? https://publications.parliament.uk/pa/cm201617/cmselect/cmtreasy/927/927...

For a party that is pro business this lot have only been going against business since day one.

They will not cancel it after spending more than 1bn on it already

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Replying to SE_Confused:
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By Yossarian
12th May 2023 21:44

double post

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Replying to SE_Confused:
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By Yossarian
12th May 2023 21:43

SE_Confused wrote:

Anyone remember Mr Gauke and the ''death of the tax return?''

https://www.gov.uk/government/speeches/david-gauke-on-making-tax-digital

Christ, he really didn't have a clue what he was talking about did he?

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Replying to Yossarian:
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By amycollier2893
15th May 2023 11:13

Tired and emotional.

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Replying to Yossarian:
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By amycollier2893
15th May 2023 11:13

Tired and emotional.

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By listerramjet
13th May 2023 04:09

I think you are being slightly unfair. The ICAEW does seem to be asking HMRC to rethink its MTD approach, which is entirely reasonable, and in line with what many others are saying. And as a part of that they are highlighting the issue of quarterly reporting, pointing out its flaws and costs whilst identifying that it offers no benefits.
As one of the Chartered accountancy bodies then we would hope its comments are taken fairly seriously by both HMRC and government, although the latter does seem to give higher regard to the legal profession, to the extent they listen to anybody!
It is perhaps difficult to fully understand where tax policy is formulated, but there seems little doubt that HMRC regularly abuses it through the administration process. You would have hoped that Parliamentary scrutiny would be applied more rigourously given its role in formulating and in accountability for spending public funds, but clearly most MPs have little to no understanding of the system they are ultimately responsible for.

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