Making Tax Digital Fiasco-Time for MTD Overhaul?

[UK Contractor Accountant]

HMRC have announced that for Income Tax all businesses will have the same the accounting year end date of 5 April and all will have the same quarterly reporting dates and deadlines when the MTD system is rolled out in 2023/24.

How is the average small self employed individual and their Advisors going to be able to meet the quarterly deadlines when they struggle to even meet the annual deadline currently in place?

Even a small Accounting firm can have hundreds of tax returns to file annually and currently has between April and January to get them all done, which is barely manageable, but are used to it and the current system works.

Now taxpayers & their Accountants are expected to file them quarterly all before the same deadline date. They are not simply 'updates', they are tax returns. The rubbish HMRC about spew about initial concessions to allow estimates will not last, don't be fooled into thinking it will!

It will be January deadline every few months. Inevitably Accountants Fees will need to go up, doubled or quadrupled in some cases especially where quarterly book-keeping postings onto MTD Compliant software is required.

 

[John Hemming]

Have they announced the change to the Basis period then? I thought they were still consulting on this.

As you probably know I handle MTD ITSA for smaller landlords etc and there is actually no reason why they must have an accountant.

Also the quarterly updates can be changed it is only on an annual basis that the figures are fixed. (aka Crystallised)

 

[UK Contractor Accountant]

and there is actually no reason why they must have an accountant.

true if they know what they are doing with their book-keeping.

What about your subcontractor working on building sites - you would be lucky to get any form of sensible records from them quarterly. Its a struggle to get them annually at the moment.

 

[UK Contractor Accountant]

I thought they were still consulting on this.

it will be pushed through regardless of consultation just like the MTD proposals.

Even looking at changing the tax year end date to 31 March or 31 Dec? I think i read something about that the other day, not Treasury driven it was keen to point out ...... hmmm?

 

[Newchodge]

Does this change apply to all businesses or just the self employed?

 

[UK Contractor Accountant]

Does this change apply to all businesses or just the self employed?

sole traders, partnerships, landlords.

Not companies - no doubt that will go to quarterly reporting for ctax?

 

[MyAccountantOnline]

Does this change apply to all businesses or just the self employed?

The proposed changes are for those who are self employed

 

[John Hemming]

it will be pushed through regardless of consultation just like the MTD proposals.

Even looking at changing the tax year end date to 31 March or 31 Dec? I think i read something about that the other day, not Treasury driven it was keen to point out ...... hmmm?

So they haven't actually announced it. There is no reason to change the tax year end date as they already treat 31st March as being equivalent to 5th April.

 

[MyAccountantOnline]

sole traders, partnerships, landlords.

Not companies - no doubt that will go to quarterly reporting for ctax?

I believe from what I've seen so far it's landlords with property income above £10,000

 

[UK Contractor Accountant]

So they haven't actually announced it. There is no reason to change the tax year end date as they already treat 31st March as being equivalent to 5th April.

Why does 5 April tax year end matter?

Anita Monteith of the Institute of Chartered Accountants in England and Wales (ICAEW), writing on Accountingweb looks at the impact of the 5 April year-end on for Making Tax Digital (MTD) for Income Tax Self-Assessment, she says:

"...Mandation of MTD ITSA is near and will require reporting based on the digital record of when transactions take place. It would help to be able to align the quarterly reporting obligations for VAT with those for income tax.

It would also help to align them with the other different sources of income to be reported for income tax. Otherwise, we could see an individual having multiples of the headlined ‘four’ quarterly reports to make each year.

For example:

• Income tax is charged on property income based on tax years, 6 April to 5 April, so quarterly reports will most likely be made for quarters to 5th of each month rather than to month ends. MTD ITSA does allow reports to be submitted to any date within a month.
• Business income is taxed either on the tax-adjusted accounting profits of the accounting period ending in the tax year or, as many simpler businesses prefer, on the tax-adjusted profits of the period 6 April to 5 April. Quarterly reports will most likely fit in with this.
• If the business is VAT registered, it will make VAT returns which must be prepared to calendar month ends. A VAT registered business will therefore most likely choose a calendar month-end accounting date."

Anita concludes that:

"The consequences of this [having a 5 April tax year-end] are that a VAT registered sole trader with a buy to let property would be making MTD reports on at least eight occasions in each year.

 

[John Hemming]

Strictly if someone is VAT registered, also self-employed and also rents out a property then there are four VAT returns, four self employment submissions and four property submissions. They don't take long though.

It is worth aligning the VAT period with the rest, however, as otherwise you end up doing submissions for different periods.

If you use the same software for VAT and self employment it is just "submit return" twice for each set of data.

 

[UK Contractor Accountant]

four self employment submissions

isn't it 5 ?

Five tax returns per year

The first tax year to be affected is 2023-24. This runs from 6 April 2023 to 5 April 2024.

Assuming you choose an accounting period that is co-terminus with the tax year your filing will be as follows:

1. The first report will be due in August 2023.
2. The second report will be due in November 2023.
3. Your Self Assessment tax return for 2022-23 (the previous tax year) will be due by 31 January 2024.
4. The third report will be due in February 2024.
5. The fourth report will be due in May 2024.
6. The fifth and final year-end report will be January 2025.

 

[paulears]

I don't know, my accountant might actually like it to remove the chaos at the end of year. We submit VAT returns quarterly. I'm discovering I just need to spend more time removing the need for my account to fix things. If I do my part accurately he takes less time fixing the errors. Lots of work once, or less work multiple times? Is this really a problem?

 

[NicoJ]

I thought it was the basis period that had to be 5 April (or 31st March if they decide to change it) but that doesn't mean that every self employed individual has the same reporting dates?

 

[UK Contractor Accountant]

If you have book-keeping software set up which is reconciled quarterly then MTD for ITSA is not going to be much of a problem. Push a button at the end of quarter from your MTD compliant software and away it goes.

We are talking here the small business that usually dumps once a year a bag full of invoices/receipts/credit card statements/bank statements to their Accountants for them to magic up a set of accounts & tax return before the 31 Jan deadline date. The hardest part of the job is usually chasing clients for missing information & documents.

Scroll forward to 2023/24 when quarterly returns are due- what are Accountancy practices supposed to do with these type of clients? double or triple their fees, unload these clients, take on more staff to meet the increased workload or merge their Practices with a bigger outfit that can handle the increased workload.

 

[John Hemming]

isn't it 5 ?

Five tax returns per year

The first tax year to be affected is 2023-24. This runs from 6 April 2023 to 5 April 2024.

Assuming you choose an accounting period that is co-terminus with the tax year your filing will be as

It depends really on the income you have. There is only one actual tax return, but you need to send details of all the pages of information that relate to income you have. There is an option to send end of year adjustments, but you dont have to submit adjustments you can simply get it right as you go along. Technically it is like each page of the SA forms being another submission. Hence dividends are a submission, interest is a submission. However, there is only one tax return. The fact that each component can be sent separately is like an online submission with lots of pages.

 

[Karimbo]

If you have book-keeping software set up which is reconciled quarterly then MTD for ITSA is not going to be much of a problem. Push a button at the end of quarter from your MTD compliant software and away it goes.

We are talking here the small business that usually dumps once a year a bag full of invoices/receipts/credit card statements/bank statements to their Accountants for them to magic up a set of accounts & tax return before the 31 Jan deadline date. The hardest part of the job is usually chasing clients for missing information & documents.

Scroll forward to 2023/24 when quarterly returns are due- what are Accountancy practices supposed to do with these type of clients? double or triple their fees, unload these clients, take on more staff to meet the increased workload or merge their Practices with a bigger outfit that can handle the increased workload.

it's going to be a big shock to the self employed "employee" industry. courier drivers, taxi drivers, gig economy drivers are going to get a shock.

They accounting costs are going to be huge if they still rely on an accountant to their annual returns. Huge demand for bookkeepers will cause prices to rise. Many wont be able to get an accountant. Using cloud accounting software is easy enough, but many people aren't confident/able to use these.

 

[UK Contractor Accountant]

Using cloud accounting software is easy enough, but many people aren't confident/able to use these

As I understand it quarterly Excel spreadsheet of income & expenditure will suffice with Bridging software link for HMRC filing requirements.

 

[Rawlinson Pryde]

It was delayed further on Thursday (I think it was) to from April 2024 for landlords and Sole Traders and 2025 for General Partnerships and other income tax returns. All other types of partnership will be confirmed later.

 

[John Hemming]

They accounting costs are going to be huge if they still rely on an accountant to their annual returns. Huge demand for bookkeepers will cause prices to rise. Many wont be able to get an accountant. Using cloud accounting software is easy enough, but many people aren't confident/able to use these.

There is quite a bit of free software already available and people are not forced to rely on an accountant.

 

[fisicx]

Discussed this with my accountant and it’s no real hardship. The various software packages look after all this for you. All I need to do is upload invoices and bills. And I can do that with my phone.

 

[Deleted member 59730]

The various software packages look after all this for you.

I'd like to see software deal with the date of Easter! Seasonal businesses will no longer have meaningful management accounts if some years there are 2 Easters and some years there are none. I deliberately chose my tax year to cope with analysis and planning in a quiet period. Do HMRC really want to make themselves more unpoipular?

 

[Newchodge]

I'd like to see software deal with the date of Easter! Seasonal businesses will no longer have meaningful management accounts if some years there are 2 Easters and some years there are none. I deliberately chose my tax year to cope with analysis and planning in a quiet period. Do HMRC really want to make themselves more unpoipular?

Easter? they are also considering moving the year end date to end December. That'lll work.

 

[UK Contractor Accountant]

MTDITSA - further delay. Any chance they can scrap this nonsense?

The UK government has recently announced that the implementation of the new Making Tax Digital (MTD) system will be delayed until April 2026. This delay comes after concerns were raised about the readiness of HMRC’s computer systems. There were worries about their ability to handle the increased volume of digital tax data. The government has stated that it wants to ensure a smooth transition to the MTD system. They want to avoid any technical issues that could cause disruptions for businesses.

 

[Newchodge]

MTDITSA - further delay. Any chance they can scrap this nonsense?

The UK government has recently announced that the implementation of the new Making Tax Digital (MTD) system will be delayed until April 2026. This delay comes after concerns were raised about the readiness of HMRC’s computer systems. There were worries about their ability to handle the increased volume of digital tax data. The government has stated that it wants to ensure a smooth transition to the MTD system. They want to avoid any technical issues that could cause disruptions for businesses.

Given that will be after the election, that may be it!

 

[UK Contractor Accountant]

Given that will be after the election, that may be it!

i did think of that - Starmer/Davey combo might kick it into touch

 

[WaveJumper]

Doesn't surprise me based on some of the issues I had over the last month using the HMRC website, I think it was down more than it was up. And after using the CH website today we were wondering how long it will be before they engage Amazon to process everything for a fee.

 

[thetiger2015]

Doesn't surprise me based on some of the issues I had over the last month using the HMRC website, I think it was down more than it was up. And after using the CH website today we were wondering how long it will be before they engage Amazon to process everything for a fee.

I think that's exactly what's going to happen. The HMRC website is a complete mess.

I tried to log in yesterday and it just said 'Sorry, the service is unavailable'.

Also, why do they let you create multiple Government Gateway IDs? I've got about 30 of the things. Because it keeps asking me to create a new ID whenever I try to access a different part of the website. It's insane. You can't just click through, you have to enter your ID at each area of the site and if you enter it wrong, it logs you out and sends you back to the start.

Ever tried filing a tax return AFTER submitting end of year accounts? No chance. You can only do it at the same time, otherwise you're stuck in an infinite death loop and eventually the website logs you out for too many sign-in attempts.

 

[charcinders]

I'm a sole trader electronics engineer and to be honest I've been keeping my head firmly in the sand about this because I just don't want to think about it. My accountant's fees are going to increase a lot, and they already take a significant chunk of my income. I am worried about the fact that my income is very sporadic, so I can easily make a loss of £3,000 in one quarter and a profit of £20,000 the next, so if I have a 'good' quarter I'm going to be hit with a huge tax bill (maybe at the higher rate??), eating into the funds I need for my next project, only to claim it back the next quarter? It's insane.

 

[UK Contractor Accountant]

My accountant's fees are going to increase a lot

yep - already warning clients about this and advising them to consider filing it themselves for the first 3 quarters and we will do the final year end 4th quarter.

Will be a large increase in accountancy & taxation fees for self employed traders!