MTD for ITSA: ‘The worm that turned’by
In the biggest Any Answers thread ever, AccountingWEB members shared their thoughts on the difficulties of implementing MTD for income tax (MTD ITSA) ahead of April 2023.
MTD ITSA has been a black hole looming on the horizon for many in the profession since 2017. Faced with a massive expansion of online filing and digital record keeping, countless accountants are threatening to hang up their calculators for good to avoid implementing the new MTD regime with their clients.
During the past week, AccountingWEB members took to our Any Answers in their hundreds to vent their frustrations. A recent straw poll post attracted the most comments and votes from members planning to retire or scale back their operation rather than having to deal with the oncoming MTD storm.
“Enough is enough”
In what AccountingWEB historians believe to be our biggest ever thread, member jon_griffey declared that enough was enough. “Time to do something about the MTD ITSA fiasco,” he wrote.
“As a profession we have put up with all the stupid initiatives heaped on us over the years, but really MTD ITSA is the final straw,” he said. “I am loathe to say trade union, but is it now time that some sort of professional accountants association was formed that takes a more confrontational approach and loudly and rudely calls out this BS?”
Raking in over 350 comments in less than a week, it’s clear that MTD ITSA has gotten under the profession’s skin.
Vive la resistance
Among the overwhelming number of responses were many frin accountants who agreed on the need for an MTD overhaul. “I think that now the only thing that would actually make HMRC listen would be an accountants’ strike (say on 31 January) or if enough small practitioners refused to do quarterly filing for MTD,” said Bluebaron.
“If you want to get the attention of those in power (politicians or civil servants like HMRC) then you have to withdraw what sustains them - votes and tax respectively,” agreed Hugo Fair.
“We really need someone of Nigel Farage standing to champion the cause. I think we all agree that the quarterly submissions with a final amendment is both ludicrous and has no foundation or purpose. I don’t even see the need for clients to be digital as long as we do it for them once a year,” added Johnjenkins.
Countless comments speculated about the plausibility of clients being able to turn around the necessary information within the new MTD timeframe. “How are you going to train the average small self employed individual to give you information quarterly when it's often extremely difficult to get it annually?” asked Bernard Michael.
“No software can do the work by magic wand! You need time and staff and resources and clients co-operating to do the actual work writing the books before they hand them over to your bridging software,” added Neanderthal.
“The MTD returns are going to be pretty similar to doing the normal tax returns using Excel, so it could be five, 10 or 15 extra returns [a year], so saying four times the time is a conservative estimate. And with all of them with the same deadlines, it’s simply going to be impossible for us to do it,” commented Kenny achampong.
“It is not just a case of keeping things moving every month/quarter - it is scaling that process up by however many clients need to submit MTD for ITSA returns, juggling it with other work in the practice all of which is already deadline driven, bringing clients on board with the quarterly reporting that have never had to deal with their accounts more than once a year previously and dealing with their questions and issues as they grapple with the software,” chimed in Jimess.
Make the most of ITSA
However, some members disagreed with jon_griffey, claiming that with the MTD train rolling on at full speed, there may be no other option than to get onboard.
“Well, good luck with that,” said Lionofludesch. “Your professional bodies don’t support you. The only response we can make is, ‘We told you so’ after the entire system goes teats up.”
Creamdelacream chipped in: “To me this whole thing is a storm in a teacup, it’s really not a big deal and there could be many benefits to requiring businesses to complete their bookkeeping more regularly. If it’s going to be mandatory, why don’t we focus on the positives the benefits can bring rather than just being outraged and complaining?”
Peter Saxton struck a similar note: “It seems like several people who don’t like MTD for ITSA are coming up with straw man arguments. They claim that accountants who think that problems can be overcome are saying things like, ‘Bank feeds will solve everything’, or ‘It’s only five submissions that are needed.’ We would be better off discussing real problems and real solutions.”
Behind the HMRC-enes
Some were sceptical about the reasons behind the MTD onslaught, with one member hatching an HMRC conspiracy theory.
“The more I think about this the more I think that what HMRC are actually looking for is everybody's income (hence why they don't seem to care about expenses). They’re thinking this will expose the black economy. But I don't see how it’s going to make any difference at all. They could have got legislation to have the banks report all credits to everybody’s bank account but they’ve presumably realised that this is going to be utter rubbish because people move money between current accounts and savings accounts. But I don't see how asking the taxpayer to do it is going to make things better,” said NotAnAccountant2.
“Now you are seeing the full consequences of HMRC's slippery slope,” added Justin Bryant. “There is something called the Tax Professionals Forum Group that regularly meets with HMRC and are supposed to keep things like that in check, but guess what? Yes; that’s right, they are all appointed by HMRC (like the supposedly independent GAAR Panel). It will be the mother of all fiascos. How will HMRC and the FTT have the capacity to deal with all the penalty appeals etc? It has been commented elsewhere here today that the ICAEW etc are effectively only run by and for the benefit of the Big Four, so don’t hold your breath there.”
DKB-Sheffield responded: “I don't believe for one minute there will be an entire backtracking (or even a delay) by HMRC on what they see as the answer to their problems (albeit not - in many cases - a simplification of problems for their ‘customers’). It’s HMRC’s pet project and like it or lump it, we’re stuck with it.”
For the sake of balance and to defend the professional bodies in this instance, Rebecca Cave reported on 20 August that the ICAEW, ICAS, CIOT, ATT and LITRG had come together to publish a joint letter calling on the government to delay MTD ITSA to prevent the resulting chaos and disorder from disrupting the tax system. Like several recent MTD-related posts, this article generated another 100+ comments.
With so many fixes flying around such as raising the threshold and increasing fees, I’msorryIhaven’taclue pulled together a checklist to guide firms through the fundamental overhaul that the next phase of MTD will require:
- Profitability: Back to basics by using timesheets to measure the wheat and identify the chaff
- Collaboration: Encourage client participation in preparing books to whatever level they desire, beyond which work becomes chargeable
- Graded labour: Hire very junior clerical staff to chase up clients for their records, and match invoices to bank feeds
- Annual contracts: Issue fixed period 12 month contracts, with no auto-renewal, to avoid client dependency and facilitate fee reviews.
Member Winnie Wiggleroom also cleared up some confusion around practical points raised, including:
- You don’t have to prepare accounts four times a year now instead of one
- Banks feeds will not solve all of the problems
- You will have to find a way to capture cash purchases, for example with a suitable smartphone app
- All the work does not need to be done within a month
- It is not going to be quadruple the work
- Communication with clients is key to getting the information four times annually.
What do you think of the MTD for ITSA changes? Share your thoughts below or feel free to post in our Any Answers forum.