Making Tax Digital

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What the Taxpayers Charter says:

Making things easy
We’ll provide services that are designed around what you need to do, and are accessible, easy and quick to use, minimising the cost to you.

Jim Harra's proposal

By GHarr497688
26th Aug 2022 13:41
Not too sure if I want to laugh or cry. I am retiring anyway because I can. I have serious concerns about how HMRC operate and also all Governments. My understanding is that a builder whose wife is a self employed hairdresser who own two rental properties is now required to keep detailed digital records and file 24 times in a year with almost no allowance for delays in processing data. I can't believe this will work and , if in the first instance it appear to then I would think the filings are incorrect. The unrepresented taxpayers are forgotten as are the Accountants who are supposed to deal with the crap. Whilst the likes of Xero and SAGE jumping on the bandwagon to make huge profits are being encouraged by HMRC and Government.

Once again HMRC break the Taxpayers Charter!

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In the light of my earlier posts, this lot should have their hands full (we'll know who had a lack of foresight if this goes Pete Tong....I wonder if any of them have actually taken an interest in what the public have to say and read Taxationweb; viz Richard Thomas):

Customer Experience Committee
The Customer Experience Committee assists the Commissioners of HMRC in their statutory obligation to report annually on the extent to which HMRC has demonstrated the standards of behaviour and values included in the HMRC Charter and complies with the legal obligation to periodically review the content.

The purpose of the committee is to support and challenge ExCom on customer experience-related issues and to help the department deliver on its strategic objectives.

The committee does this by:

challenging and supporting HMRC to tackle high level risks to the department
examining planned changes to ensure that the impact on customers has been sufficiently considered
providing advice on how relevant policies, strategies and practices can be improved
identifying priority areas in the end-to-end customer experience where improvements are necessary

Customer Experience Committee membership
Below is a list of the Non-Executive Directors of HMRC and independent advisers making up the Customer Experience Committee, along with positions they hold and their experience.

Name Current positions and experience
Juliette Scott (Current Chair) Juliette is a non-executive director for HMRC. She is also a non-executive board member at Versus Arthritis (formerly known as Arthritis Research UK) and provides advisory services through her consultancy business. Juliette was previously at eBay – firstly on the board of eBay UK as the Director of Customer Insight, and in her last role she was responsible for customer insight and analytics across Europe. Juliette was introduced into the world of data insight through her time at customer data science company dunnhumby, where she worked in senior roles across many areas at Tesco.
Michael Hearty Michael is an non-executive director for HMRC. He is a highly experienced, professionally qualified accountant, with extensive strategic and operational leadership experience up to the level of Director General in a range of large and complex UK government departments and agencies. Michael was also a Director General on the Board of the Welsh Government, the executive arm of devolved government in Wales until 2015, where he provided strategic advice and challenge to both the First Minister and the Finance Minister for Wales on a range of strategic planning, finance, corporate governance and performance matters. Currently, Michael holds a range of Non-Executive and independent adviser roles with a number of organisations including HMRC, the Financial Reporting Council (FRC) and Hywel Dda University Health Board (HDUHB) in Wales.
Patricia Gallan QPM Patricia is a non-executive director for HMRC. She is a former British police officer who was Assistant Commissioner Specialist Crime and Operations of the Metropolitan Police in London until 2018. She previously served as Deputy Assistant Commissioner (Specialist Operations – Security and Protection) and also Deputy Assistant Commissioner (Professionalism) from 2012 to 2015, Assistant Chief Constable (Operations Support) of Merseyside Police from February 2006 to 2012, and also served as temporary Deputy Chief Constable of the force from October 2009 to February 2010. She was Assistant Chief Constable at the National Crime Squad from January 2005 to February 2006.
Jean-François Bessiron Jean-François is an independent adviser on the Customer Experience Committee. He is a global leader with more than 20 years’ experience in supply chain/commercial operations and digital marketing and technology. He has held senior leadership positions with FTSE100 and NASDAQ quoted companies at Kingfisher, TechData, Amazon and most recently at Groupon, where he is International Vice President.
Steven Martin Steven is an independent adviser on the Customer Experience Committee. He is currently Vice President of Data Partnerships Europe and APAC at The Trade Desk following his recent move from LiveRamp, where he was Managing Director of International Data. His role focuses on helping clients to make the most of both their own customer data and other data they can access about their customers from partners and suppliers.
Emma Orr Emma is an independent adviser on the Customer Experience Committee. She developed an expert career in digital in the early 2000s by helping disrupted industries and global brands, such as Prudential (Finance) and Hearst (Publishing), adapt to the new online world. Emma then moved into e-commerce in 2008, leading customer growth at ASOS.com and then at The John Lewis Partnership. With an obvious passion for digital transformation, Emma joined Google in 2014 as an adviser to multinational private companies, first on Data Regulation and SaaS solutions and now leading Customer Experience for Google Cloud technology.
Mark Evans Mark is an independent adviser on the Customer Experience Committee. He sits on the Executive Committee of Direct Line Group (DLG) as Managing Director for Marketing and Digital. Prior to DLG Mark worked at Mars, 118118 and HSBC. Mark sits on the Board of the Marketing Society and is chair of the Advertising Association’s Front Foot. He is also chair of the School of Marketing, and in 2016 founded the Sprintathon – a charity event which has now raised over £700,000 for Stand Up To Cancer. In 2018 Mark was awarded the Marketing Society Leader of the Year award.
Nicola Harris Nicola is an independent adviser on the Customer Experience Committee. She is Virgin Media O2’s Head of Customer Journeys. Nicola is responsible for the customer experience of the O2 and Virgin Media brands and for defining the UK customer experience strategy for cable, TV, Broadband and mobile services. In 2019, Nicola was appointed to the leadership team for Telefonica (O2) UK Limited as Customer Experience Lead with responsibility for all consumer and small business experiences across multiple channels. She joined Telefonica (O2) UK Limited in 2001 and has held many roles across strategic, operational and innovation functions in Sales, Service and Marketing divisions. She was awarded the Customer Experience Leader of the Year award in 2021 by UK CXA and has awards for building a Customer Centric Culture and Putting Customers at the Heart of the Business.
Karen Prodger Karen is an independent adviser on the Customer Experience Committee. She brings 20 years’ experience, leading scale teams across global organisations, researching customer propositions, delivering seamless customer experiences and journeys, transforming digital operations, building technical and customer talent. She recently joined Halfords as Senior Director, leading Customer Strategy & Experience, Marketing and Digital across Group. Before this, she headed Digital Transformation for Vodafone, including strategy, experience and delivery. Karen has a deep consulting background supporting global organisations undergoing strategic change and across Financial Service and Barclays, driving innovative, inclusive propositions for customer segments. She’s been Accountable Exec for top digital investment programmes, radically simplifying mortgage, lending and collections experience

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Another one for the not so nimble nine to absorb. In the words of Barry Davies (loosely)...where, oh where are the professional bodies...and frankly do they care?

ghm
By TaxTeddy
29th Aug 2022 17:11
I never thought I would be saying this - but after 27 years of putting clients' needs above everything else I am admitting that for MTDIT I will be putting my business needs first.

I am a micro business with no staff and I am not a bookkeeper so I will have to offer an "our way or the highway" service for MTDIT. It will be spreadsheets and bridging software only, pretty much how I operate for MTDVAT.

Why am I taking this view? Because I have no choice. The client profile is such that almost 40% of the client base will fall into MTDIT and I don't have the available time to do it any other way - my estimate is that MTDIT will add 350 hours of work across the year, excluding the 'real' tax return process. That's about a 26% increase in my workload.

Revisions to quarterly returns? Forget it. Any revisions will be swept up in the final year end return.

Some clients will have a go themselves (good luck with that), a handful have bookkeepers but most are non-resident landlords or micro self employment where I use spreadsheets to pull together their annual data.

I mention this not to garner pity but as a warning to all sole trader practices out there - run a test exercise now to see how many additional hours you could expect to work. I used a conservative 30 minutes average per filing in my calculation but it could well be more.

If, like me, you are already working more or less at capacity, you will nave to learn to say "no".

As I said at the start of this note, I have always maintained a flexible approach to fit in with client needs. It's a sad day when the idiots at HMRC are forcing my hand

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By ireallyshouldknowthisbut
30th Aug 2022 12:08
"MTD ITSA it will have to evolve or die"

I think its already dead, but it just doesn't realise it yet.

Making up rules which no-one can reasonable follow, and HMRC cannot reasonable enforce is rather pointless.

HMRC may as well decree what colour socks the tax payer should wear whilst doing their tax return, and if its the wrong colour instruct them to walk backwards 3 times round the desk whilst flagellating themselves for failure to pray to the exacting requirements of the MTD gods.

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By Tornado
30th Aug 2022 15:18
My socks are blue and white striped, which I hope is within the regulations, but if this is not correct then I don't mind too much as the penance looks quite interesting.

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Thin Lizzy:

Don't believe me
Not a word of this is true

Gauke told delegates at the HMRC stakeholder conference on Monday: “By 2020 HMRC will be a world-leading tax administration that is efficient, effective and easier for customers to use, enabled by £1.3bn of extra investment announced in November’s Autumn Statement.”

So what went wrong Mr Gauke? Can we have the money back?

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By ireallyshouldknowthisbut
31st Aug 2022 17:57
This little snippet is staggering:

"software developers have been advised that HMRC will not be creating any facility that allows agents to sign up their clients for ITSA in bulk. “HMRC has gone so far as to warn software developers against circumventing this by creating any such functionality themselves,”

Why on earth would you actively block development of software tools to remove repetitive data entry tasks? Its child like dogma and demonstrates a fundamental weakness in leadership at HMRC that they cant accept any criticism of this failed project, and act on it.

The project is definitely dead now. The detail us accountant know about is finally starting to drip through to HMRC (and they haven't even got to the hard bit yet - the tax return). I am surprised the software vendors are still putting any serious resources into it given the basic lack of a spec at this point.

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Rebecca Cave's torpedo fired at HMRC's MTD4IT is on the same level as Haaland's current goalscoring for Man City. There are good people out there, but seemingly no bright sparks in HMRC's camp.

A recent AccountingWEB MTD Bootcamp session on Making Tax Digital for sole traders and landlords highlighted several viewer questions that required further investigation. We put them to HMRC, along with a few additional queries, to help fill in a few MTD-based blanks for accountants with landlord clients.

Turnover threshold
Many tax advisers are questioning the entry threshold for MTD ITSA reporting, which currently stands at qualifying income exceeding £10,000 per year. HMRC cemented its position on this in its new guidance on what is included in qualifying income.

During the MTD Bootcamp session, a viewer asked: “A client has self-employed income of over £10,000 and also owns a rental property jointly with her husband (who is employed). Does the rental income have to be on MTD?”

HMRC answered: “The client’s share of the rental income and expenses does have to be reported under MTD ITSA, as that client has qualifying income in excess of £10,000. The husband’s qualifying income is comprised of his rental income alone as he is not also self-employed, so the husband only has to comply with MTD ITSA if his share of the gross rental income is over £10,000 per year.

“The client has to report their share of the rental income quarterly under MTD ITSA irrespective of the amount, as they already have to make separate quarterly reports under MTD for their trading income which exceeds £10,000.”

Husband and wife owners
A listener asked: “For husband and wife landlords, can one digital record be kept or will they need to keep separate records.”

HMRC doesn’t yet have a definite answer on this as it replied: “In practice, we expect that it will be possible for these customers to maintain joint digital records and meet other MTD obligations through their shared software. We are working with external partners on this issue and will set out further guidance on MTD requirements for joint property owners in the coming months.”

Jointly held property
ICAEW has listed the design of obligations for landlords of jointly held property as one of their key concerns about the implementation of MTD ITSA. In particular, ICAEW wants to know how income from different property portfolios will be aggregated prior to submission to HMRC. There is no apparent software solution to this problem yet.

Jointly held property is a very common situation. Within families, different members will often own varying percentages of the properties in the family portfolio.

HMRC was also asked: “How do you deal with a client who has interests in several properties under different ownerships which are each dealt with by different accountants or bookkeepers.”

The HMRC reply does not inspire confidence: “Currently only one agent can access a customer’s MTD account. We are working with developers and stakeholders to understand the user need for multiple agent access to the MTD system.”

Accruals or cash accounting
Landlords can choose whether to draw up their property accounts on a cash or accruals basis, with the cash basis being the default if their gross income is not more than £150,000 per year. Where the gross amount received in the year exceeds £150,000, the landlord must not use the cash basis but must use the GAAP basis of accruals accounting.

An AccountingWEB reader asked: “For landlords reporting on an accruals basis, do they still have to report quarterly on a cash/receipts basis?”

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HMRC replied: “Customers should choose at the beginning of a tax year whether they are using the accruals or cash basis for their record-keeping. They will then submit their quarterly updates and end of period statement in line with their record keeping.”

This answer does not solve the dilemma for the landlord, who will not know whether they have to use the cash basis or the accruals basis until the year is complete, as the decision is based on the total gross property income for the year.

Furnished holiday lettings
A similar problem arises with furnished holiday lettings (FHL). The landlord won’t know whether the property qualifies as FHL for the year until it has been let for at least 105 days and been available for holiday letting for at least 210 days in that same year. In some cases, the grace period or averaging elections will apply but those adjustments can’t be invoked until the tax year is complete.

We asked how a landlord will know at the end of a quarter whether the property will qualify as FHL and thus be subject to different accounting rules.

HMRC provided this answer: “MTD ITSA will mean that customers move closer to a system of real-time reporting which will have various benefits for them and HMRC. However, this means that some decisions previously made after the year-end will need to be made at the beginning of a tax year. If a customer later finds that they do not meet certain requirements, for example, a property failing to qualify as an FHL, then they will be able to adjust their digital records accordingly by removing disallowable expenses etc.”

Lack of NI number
Not all landlords have a national insurance number, especially if the individual is resident outside of the UK or was born overseas. Currently, both the taxpayer’s NI number and UTR number are required in order to sign-up to MTD ITSA.

We asked HMRC: “How will landlords who do not have an NI number report under MTD ITSA?

HMRC replied: “We are continuing to explore options around the identity verification of those customers that do not have a national insurance number. Further details will be set out in due course.”

Non-resident landlords
Non-resident companies are automatically exempt from MTD ITSA but non-resident individuals are within MTD in respect of their UK property. AccountingWEB asked HMRC how non-resident landlords should report their non-residence status at the end of the year.

HMRC replied: “We are aware of this issue and are working through how changes of residence and domicile will affect MTD obligations and be processed through the system.”

More guidance to come
With 19 months to go before MTD ITSA goes live, there are clearly a number of issues which need to be thought through and designed into the system. More guidance is expected in the coming months, and we will let you know when these known unknowns are resolved


Rebecca Cave
Tax Writer
Taxwriter Ltd
Consulting tax editor for Accountingweb.co.uk. I also write newsletters for a number of other publishers including the Tax Advice Network and PTP Training.


Replies (7)
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By Beef curtains
02nd Sep 2022 16:06
As usual/fully expected, the Blob is making it up as it's going along. MTD is benefit free, work creating nonsense in any event but to do it at the same time as changes to basis periods and an economic crisis is the sort of unbridled insanity that is the hallmark of the zealots at the Revenue.

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Tornado
By Tornado
02nd Sep 2022 16:26
Thanks once again Rebecca. You are on fire at the moment.

I cannot find any further words to describe how unbelievably chaotic this project is. It seems obvious to me that the many problems still to be resolved will be impossible to resolve and HMRC really have no right to expect people to even attempt to comply with this pointless rubbish. (And of course, I think hundreds of thousands [perhaps millions] will not even attempt to comply).

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Replying to Tornado:

By ireallyshouldknowthisbut
02nd Sep 2022 17:06
I am rather enjoying the style of these articles.

Dismantling of the whole project, fact by fact.

And we haven't really gotten into the real detail of any of this yet, we are still skirting around the edges of it.

O and as for the new tax return.....................they are going to build that in a few months of course between April 2024 and April 2025 when it goes in.......

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By Paul Crowley
02nd Sep 2022 16:39
'Husband and wife owners
A listener asked: “For husband and wife landlords, can one digital record be kept or will they need to keep separate records.”

HMRC doesn’t yet have a definite answer on this as it replied: “In practice, we expect that it will be possible for these customers to maintain joint digital records and meet other MTD obligations through their shared software. We are working with external partners on this issue and will set out further guidance on MTD requirements for joint property owners in the coming months.” '

Such a basic starter question and HMRC have absolutely no idea how MTD ITSA will work in practice
Heads in the clouds and never dealt with a real client or a real accountant that deals with really small clients

The big four have no problem with MTD ITSA because they will have so few needing to engage, and the few will all be exceedingly rich
As ICAEW is operated by the big four, ICAEW also see no problems.

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By Paul Crowley
02nd Sep 2022 16:47
Much appreciated
Every HMRC answer is 'we did not think of that so did not design for that' and probably means they will ask the software developers (rather than accountants) for an opinion that HMRC will trot out 10 minutes before kicking it down the road again

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By Hugo Fair
02nd Sep 2022 17:16
Who writes the sub-titles (the bit above the picture)? Not Rebecca I guess.

".. summarises the known knowns and the known unknowns" isn't even true.
There are no 'known knowns' listed - just "We expect .." / "We are working .." / "We are continuing to explore .." / "We are aware .." responses from HMRC (aka 'Ooh good point/ not sure really').

And the one item (under Turnover Threshold) that is clear, contains a misleading response from HMRC:
“The client has to report their share of the rental income quarterly under MTD ITSA irrespective of the amount, as they already have to make separate quarterly reports under MTD for their trading income which exceeds £10,000.”
That's true up to where the comma appears - but the reason they have to submit QUs is NOT because their trading income exceeds £10,000 (but because their combined trading + rental income exceeds £10k).
HMRC's response suggests that trading income of £9.9k + rental income of £9.9k does not require MTD reporting?!?

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Replying to Hugo Fair:
Tornado
By Tornado
02nd Sep 2022 17:20
The most baffling aspect of this whole MTD project is that we already have a perfectly good Tax Administration System (Self-Assessment) that after 25 years of fine tuning, deals very well with just about all the problems that are being thrown up by the MTD project.

What is the point of MTD for ITSA?

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By adam.arca
03rd Sep 2022 07:45
There’s a danger, for quite some time now, that accountants’ Pavlovian response to MTD is “utter rubbish.” But is it any wonder when HMRC drop, erm, utter rubbish like this seemingly out of the ether, without consultation and without consideration for the mugs (taxpayers and their agents) who will have to make it work?

These “answers” aren’t answers at all, they’re deflections and we’re all being treated with contempt.

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Something else for Liz Truss' long list:

By kevinringer
05th Sep 2022 09:56
I can summarise Rebecca's excellent article:

Q1: Can couples maintain one digital record?
HMRC: Dunno

Q2: How will it work for joint owners with different agents?
HMRC: Dunno

Q3: How does it work for taxpayers who need to account from 6 April but don’t know what basis they qualify for until later in the year?
HMRC: Dunno

Q4: Hoes does it work for non-residents who don’t have a NINO?
HMRC: Dunno

HMRC should have decided on these before George Osbourne opened his mouth in 2015. The MTD ITSA pilot has been running since April 2017: that’s over 5 years ago. Surely HMRC and the software industry have had more than enough time to have figured this out. I know HMRC is a shambles and a disgrace, but even at their most chaotic, can they really be this unprepared and learned so little over the intervening years? After all, we have been asking HMRC all these questions since their 2016 consultation. What have HMRC been doing these last 6 years? HMRC have nothing to show for all those years and all those £millions of taxpayer funds. HMRC heads should roll. I know HMRC is a labyrinth of chaos, but Rebecca’s article has revealed that HMRC are even more incompetent than I could have imagined. When I started in practice, HMRC were respected, now they are a national embarrassment.

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