No Accounting for Taste ep221: The fallout from MTD’s first deadline

Speaker A: Shall we begin? Let's begin now. Hello and welcome to the latest episode of no Accounting for Taste with me, Matthew Ord and the familiar voice of Accounting Web's technology editor, Tom Herbert.

Speaker B: Hi, um, Matt. Hi everyone.

Speaker A: We're talking all things making Tax Digital today on the back of the Q1 deadline coming and going. It's been quite the lead up to this moment with all the ups and downs, but this is the really big mega milestone that we've been waiting for. We'll have Robin Milstead, Director of Tax at lka, Chartered Accountants and founder of Accountants Therapy, joining us later to dive even further into the details. But let's provide some context before then. Tom. Um, the deadline was 7 August and HMRC had previously indicated that it expected about 864,000 taxpayers to be required to join MTD from April 26. The stats indicate that more than 570,000 are registered, but only 436,000 had successfully filed by around 12 August. What's your take on the numbers?

Speaker B: So, yeah, I think while 864,000 were in scope, that is sole traders or landlords with a turnover of more than 50,000 exemptions apply. Don't me, I'd say they probably were not expecting. I, you know, I'd be fascinated to know what they did expect, but I think around half actually filing anything is that good. I guess we'll know once we get to Q2, Q3. It's probably a good thing that they uh, they hit that magic 50% number. That, that, that just feels a bit better, doesn't it?

Speaker A: It does, it does, yeah.

Speaker B: I feel like it's a good thing that they can the penalties for late submission and uh, put that soft landing in place because otherwise I think there'd have been just a gigantic outcry.

Speaker A: Their reaction to this was an interesting one because HMRC said they were happy with the numbers, but then added that from September it will also be signing up any remaining taxpayers it believes to be in scope of MTD for 26, 27. It feels a bit like saying, yeah, I'm absolutely happy having a pizza without ketchup and then adding your own ketchup just to make sure you've got it. Strange one, isn't it?

Speaker B: Top ketchup based analogy there, Matt.

Speaker A: Enjoyed it, thank you.

Speaker B: It's a bold move, but I think it's necessary. I think once we get to the sort of later, uh, submissions, once we're getting onto that final return, um, once penalties come in and um, people are sort of Scrambling around, looking for stuff, uh, signing up at the last minute. Then, you know, I think, uh, that they're just trying to get ahead of the game, I guess. When we published something about this on Accounting Web, I think there was a strain of accountants that kind of felt like, why did I bother signing up my clients? So it was a bit of frustration there. But I think I'd argue actually the best way is to take a look on behalf of your clients, because then you can actually see what figures HMRC has, where's it pulling them from, if they're correct, you know, you're in control of that. So, uh, yeah, in terms of how it'll actually work, um, it was unclear in the press release at the time, but actually, uh, I think the ATT have actually released a few details since then. So HMRC will move them across to the system and then the taxpayer will have to, uh, go in. And there's a specific checking step the HMRC have added, which requires the taxpayer, uh, or their agent to confirm whether HMRC's records are up to date. So they'll need to log in via the personal tax account or the business tax account, or through the agent services account, and then just check and confirm that HMC's information on the business is correct. Um, you know, I think it's possible to notify them the business is no longer active as well, or if it ceased trading. And I think there'll be communication with HMRC to the taxpayer or their agent around this nearer the time in September as well.

Speaker A: You talked there a little bit about accountants feeling a little bit, why did I bother? And I think if you looked at HMRC's numbers, you probably say Q1 kind of went okay. But if you spoke to the accountants, you get a very different answer. It feels like they've really been through the ringer in this one. Whether it be just quite rough, the experience they had with Q1, all this stuff that's happened since. And like you said, there is this feeling of a come on, they've come out the other side feeling a bit battered, a bit bruised, and it's not a great look.

Speaker B: Is, uh, it.

Speaker A: You don't want to get through every deadline with accountants just kind of strewn across the floor, having to find the strength to get going again. Which version of MTD do we believe at the moment? Is it that it's the numbers and it's doing okay, or is it the accountants that are just struggled?

Speaker B: Yeah, as I mentioned earlier, it's very hard to tell. This is the first One so is this good? Was it really hard to sort of get it set up but now it's on rails, you know, clients are sort of know that they're supposed to be reporting in quarterly as it were. Get the system up and running and it will be less painful or is it going to be a similar amount of pain every quarter? It's hard to tell but I think the interest ramps up now. So obviously the Q2 figures will come out in November after that second deadline. So that's going to be uh, fascinating uh, to see how that compares. I mean obviously everyone will be signed up by then, but how many actual filings are ah, we going to get Q3 comes in January when everyone's trying to balance their uh, self assessment, uh, tax returns for other clients as well. And then Q4 you've got that those first final returns due. So yeah, I think the interest will ramp up from here on in.

Speaker A: Well let's take a quick look at uh, just how much of this has relied on agents. With the stats showing that about 69% of registrations were completed by an agent or representative, that being about 393,000 taxpayers compared with 31% completing the registration themselves. So they've undoubtedly shouldered a lot of the responsibility here tomorrow. Um, which I'm not sure they signed up to do.

Speaker B: Uh, no, I mean this was, this was a stat that wasn't included in the press release. I went back to HMRC to pull that data. I think it is a tricky one really because I mean 31% of filings made by unrepresented taxpayers, I mean that came to about 176,000 taxpayers and as there are about 200,000 odd in scope, I mean that sounds really good, doesn't it? But actually I think, I mean HMRC said that that registration figure relates to who carried out the sign up action. And it's not just the taxpayers just taking it off their own baton and done it. And I think chatting to Giles Mooney over at Absolute Tax Software, he was saying that uh, they'd had a lot of conversations with accountants who just basically handed they're bridging software over to clients and just said look, you go ahead and do it, we'll see you at final return time. So yeah, I think it's one of those. A taxpayer may have received instruction from a firm on how to sign up and make their own quarterly submissions but they still plan to use accountant for their final return. So uh, yeah, it's going to be, going to be interesting to see but I mean, undoubtedly. I spoke to Emma Rawson from the Attention as part of that article, and she said the MTD just couldn't have been delivered without the agent community. You know, there's hours that's been invested by agents in familiarizing themselves with the rules, sorting out the software, preparing their practice, and working with clients and then just getting them over the line. So, um, there are the stats, but I think they only tell half the story.

Speaker A: Which made it all the more interesting when our former tax editor, Amy Goodchain dropped an article with us that argued that maybe it's time for quarterly updates to be left to clients. We'll come on to this a little bit more with Robin later on, but initial thoughts from you, Tom, about that idea?

Speaker B: Yeah, yeah, yeah, dude, it's, uh, a cheeky whack of the hornet's nest with a baseball bat there. Yeah, I did enjoy that article, and I think it's one of those where I think it speaks to, to the fundamentals set up, the way MTD's been set up. Them saying, oh, it doesn't need to be accurate, trying to set it up for taxpayers. So taxpayer goes off and get, you know, sorts it out with the software vendor, uh, and then they make the filings, but then it's with hmrc. So of course they're going to go off and find an agent. And agents, they have their head in the figures. They are conservative, skeptical people and do not want to be submitting, uh, uh, daft figures regardless of whether hmrc, uh, says or not. And actually it's a little bit of a false claim because, you know, some of those figures may result in an investigation in them. So, you know, it is important to be getting them right. So, yeah, it's an interesting one, but, yeah, yeah, the idea of sort of, uh, banning agents from those quarterly reports is a bit tongue in cheek. Um, but I can see where she's coming from.

Speaker A: Well, for a closer look at all of this, we're joined by Robin Milstead, Director of Tax at LKA Chartered Accountants and founder of Accountants Therapy, who is very much right there in the thick of it all. Robin, thank you so much for joining us. How are you doing?

Speaker C: Thank you very much for having me. How am I doing? That's, um, a really good question. Just after the deadline. Um, I've spoken before about feeling a little bit defeated by it all, to be honest, and I'm still recovering, I think.

Speaker A: Yeah, that's fair. That's fair. Well, that's, That's a perfect segue, actually. Into this, into this set of questions, just to get a gauge of how it's all gone, what you're expecting from Q2, bit of a look ahead. So let me start by saying, yes, you have very much been in the middle of all of this. And now that Q1 is actually behind us, what does MTV look like from the front line? You know, was it as expected? Were there any surprises? What's the general vibe?

Speaker C: I think purely from my point of view, it was generally as expected. I expected that I wouldn't find myself feeling very useful for my clients doing the actual submissions. I expected some would be easier than others. I expected perhaps I, uh, in the positive light, I thought I might come across a bit more tech issues, and I didn't find too many tech issues myself. But overall, I was really hoping to find something positive out of the whole experience because I know that I've often been a voice of negativity in the MTV scene and I thought it might make a nice change to, to change that. But unfortunately I have come out the other side thinking, uh, I was right with my gut feeling in the first place, and, and that actually there hasn't been much to learn, much to improve on, uh, anything that I look back and I think, oh, I made a massive mistake. I'll change that. It is just a, uh, okay, this is what we've got and this is what we need to deal with.

Speaker B: So when we look at the headline figures, so out of those 860,000 taxpayers that were required to join, what was it like? 570,000 signed up. About half actually successfully file quarterly updates. I, um, mean, we were saying earlier, like, is that, is that good? Uh, that's hard to know, isn't it?

Speaker C: It's so lucky for HMRC, isn't it, that it's just over that 50, 50%? Because half of people are going to say that it's great and half of people are going to say that it's awful. And I feel really in the middle on it. I think that 50 is not terrible, is it? It's better than less than 50, but it's also not that great. I think the biggest bit to look out for there is the difference between those signing up and those submitting. So not necessarily that we haven't got everybody signed up yet because we know there's going to be a certain level of population that's not engaging with MTD at all. But how come some people have got to, uh, engage but haven't done the bit that they actually should do? That's the bit that I'm more interested in.

Speaker B: So switching from the taxpayers to the accountants, then obviously, you know yourselves, as Matt said on the front line. But accountants therapy obviously has a lot of firms reporting in, as it were. How are they feeling that? There's been a lot of chat about people being exhausted by Q1. Uh, do you think that's just the inevitable pain of implementing something new, or is it more of a sort of fundamental ongoing workload problem?

Speaker C: I think it's a bit of both. I think definitely we're seeing that people have been tired because this is the first outlet of all of that preparation. It's the first time to sit back and say, okay, well, there isn't actually much for me to do right now. How do I feel about everything when I sit back and look over what I've done? And again, I think a lot of people are feeling a bit. A bit like me, that maybe they were hoping there was something positive to say, but maybe there isn't as much positive to say as they would have liked. But I think there's an awful lot of worry over what comes next, and not necessarily worry over Q2, but what I'm talking about is a worry over the 30,000 cohort, and then onwards to the 20,000 cohort. And I know we're going to speak a little bit about the survey results that we undertook with accountants Therapy, I think, and that was one of the things that we wanted to measure as well. How confident are people feeling about Q2 versus how confident they're feeling about 30,000 cohort? And actually, that was my most interesting statistic from that survey. People aren't loads confident, they're not excited about it, uh, but they're not feeling utter dread is what the results said. But when we come to the 30,000 cohort, we're going, ah, ah, ah. Uh, help. And so I think we've got this kind of weird mix of, okay, well, we sorted that and we, we dealt with that. Okay, but how on earth am I going to deal with that workflow Ongoing?

Speaker B: Yeah, that's more than a million, isn't it, Being brought in. And more unrepresented, presumably, would be more inquiries, that kind of thing. Nice, Robin. It's like you've looked at my list of questions. Because we were moving on to the, uh, accounts therapy research, confidence in managing Q2 workloads seemed to be at 6.4 out of 10. What do you think is making practitioners so nervous about the next quarter?

Speaker C: I think it actually shows that people aren't Too nervous about the next quarter. I think that it more than anything acknowledges that we've got it under control but that we would rather not have it at all. I think that's more of what it's saying is that we kind of have it in hand, just that it's not going to be easy peasy that we know that there's still things that we. You can't solve by giving lots more workloads, can you? You've always got the client chasing and um, that. That came out as the biggest challenge that people were facing funnily enough is dealing with clients. You're getting four more touch points in the year with clients. That's always going to be difficult. I, uh, yeah, I don't think that the confidence in Q2 is low. I think it's high and as I've said previously, I think it's Q2 that's really going to show us more about engagement with MTD across the board because we've all geared up to this Q1. What happens with Q2 is going to be way more interesting because that's when we start to go, oh, this is, this is here for four times a year, not just once.

Speaker B: And I guess it's like you got Q2 obviously November Q3, that's going to be interesting in January. Uh, and then you got the final return.

Speaker C: So yeah, I think we will hopefully be able to repeat this survey that we released because uh, aside from it being enormously interesting and we had such an amazing response, we opened it for a week and we had 142 respondents. I thought that was amazing. I wasn't really expecting that kind of reply level. So thank you to everyone that's listening to this that did submit their opinions. I think that we'll repeat it and that will probably be one of those things that changes next quarter is how are you feeling about Q3 when you're thinking about your self assessment? I imagine that will plummet a little bit but I think by then we might get a little bit more comfortable with leaning into the soft landing. Actually for Q1 it never felt like we should do that or for a lot of people. I know that there are some people going it's a soft landing so I'm not going to stress myself out about it. That's a really difficult thing for people in our industry to do. Go. There's a legal obligation but I'm not going to do it because there's no consequence. Um, but I think we might see that happen more when needs must for

Speaker A: Q3 it was a really interesting stat in the, in the research Robin, that talked about whether it was worth it. You know, we know accountants work some extreme hours. Ah, that was the turn of phrase that you used in the column you wrote for us. And whether it was worth it or not, the resounding answer appeared to be no. There was 73% said that they didn't feel like uh, MTD was a good use of time, their time for their clients. Did that come as a surprise for you? Was that the general, general feel you were getting in the run up to this?

Speaker C: So we ran two surveys at the same time with the same kind of questions. So it's absolutely what I expected from accountants therapy members. Okay. That's what I've been hearing for the last year and a half. That's what people have been saying, why are we doing this? What is the point? I'm uh, not adding anything to my clients and that's exactly what I've been saying. So there was part of me that was thinking is, is everyone just repeating me because I've managed to get in a room full of like minded people? But we ran the same survey for non members as well and the stats there were incredibly similar. So yes, that surprised me. It surprised me that everybody's feeling that way a little bit. And as you said, 73% is a resounding though that's, that's a big deal. And on that question as well, it wasn't the rest saying yes, they thought that uh, it was a good use of time. It was only 9.2% that said it was a yes, it was a good use of time. The rest said not sure. Yeah, that's, that's a pretty damning statistic. And then we moved on to the thought of is it a good use of your time for your business? A very slightly different question, right. I. E Kind of measuring whether or not we feel we're making profit on it or doing something profitable or useful for our businesses for. But that was even worse. And 75% said no to that. Bleak. Yeah. The whole survey was unfortunately bleak. Probably came out a little bit more bleak than I was expecting, even though I feel quite bleak about it all myself.

Speaker B: So yeah, quite an interesting opinion piece we published by uh, our uh, former tax editor Amy Goodchin on the fact that, I mean she came up with this wheeze that agents should be banned from uh caudaly artist just on the fact that accuracy isn't that required. But accountants are uh, the most fastidious bunch imaginable and so were most of whom will try and get these submissions right and we'll spend far too much time on them. I noticed you'd weighed in on the comments below, Robin, but yeah, I had to.

Speaker C: And, but I thought it was such an excellent article and a really good point because it's exactly what I've tried to do with my clients in the whole is to say I don't want involvement in this. You do it. But I haven't been able to convince all of them because some, some of them are too busy, some of them are too anxious, and some of them are incapable. So I can't just say I'm not going to do this for, uh, for you. I mean, I could, but then I'd lose a fair bit of my client base, which seems unnecessary at this point. I wonder whether accountants don't want to take that approach of saying you do it because they're worried about what that looks like when we come to year end. We haven't had a full cycle yet to know exactly how we're going to feel about year end and the adjustments that we have to make at that point. So I can see why people would want to do the opposite and have control over those quarterly updates, even if they're going to make themselves poorly making them all accurate. I can understand that. To the pain now rather than the pain later approach. And I mean it's also potentially a way to make some money if you wanted to. Although the survey results quite conclusively tell you that most people are not making very much money out of this at all.

Speaker A: So let's, let's look ahead a little bit, if we could, then Robin, is there a danger here that firms can get through one deadline through just sheer effort, like you said, those kind of extreme hours, but can't sustain that level of effort four times a year? And how are you in the accountants therapy gang feeling about that? Ah, final return?

Speaker C: I think that's the biggest concern that I have is that all of this effort cannot continue as it is. We've heard of MTD being described as a marathon rather than a sprint. This bit has felt a bit like a sprint, getting ready all of the prep. But once you've done a sprint, you're very unlikely to want to continue on to do need more running, isn't it? Um, and I think that that might be why I'm saying that Q2 is going to be very interesting because that's when we're going to start to see whether or not it's sustainable I think it is longer term than that. The fear again, is not over the rest of this year in the 50,000. The fear is over the 30,000 cohort, because for most people that at least doubles the number of clients that they'll be dealing with under mtd. Well, that's the impression I get in accountant therapy that we look at about doubling the amount coming in. And it's not just that the sort of worry about how many inquiries we're going to get from the unrepresented. I worry for the industry in general that there isn't the capacity there to deal with that. I was trying to think of an illustration this morning a bit about the thought of MTD being this amazing opportunity. And I completely agree, in the right circumstances that you can make MTD an opportunity for yourself. For, for example, if you are not already running at capacity and you know enough about MTD and you can set up your systems to run it and you've got the right kind of clients to sell that to, you can make a good business out of MTD if you have all the right circumstances. But it's kind of making me think it's a little bit sometimes when people say this, like going to someone that has four or five children and saying, do you know what? It's a. I've got an opportunity for you. The next one you have, there's going to be no pain when you give birth. It's going to be. It's great. You can have this one kind of for free. Isn't it going to be great? And you're like, I'm already struggling with four or five kids. Um, I don't want another one. I'm good. Like, thanks, but no thanks there. That was the best I could come up with this morning. And maybe in some cases you would have some people that would go, well, I've just got the one, so I'm cool, I can have another one. I'm not at that place, by the way. It's one kid, no desire for more. But it's a little bit like going, um, well, look, you've got some responsibility. Don't you want loads more? Because it'll be great. It's a great opportunity. And, um, I'm not on that side of the fence at all. I think when you're at capacity, you're at capacity.

Speaker B: Yeah, I think, you know, MTD and Paw Patrol are, uh, sort of natural bad failures, I feel.

Speaker A: So, yeah, there's got to be an

Speaker C: article in that somewhere. Get writing.

Speaker A: But looking at the. Looking at the Aftermath of that Q1 deadline, we know that HMRC have announced that they're going to now start signing up people who haven't registered. Do you think that is a sensible intervention, or does it feel like an admission that what they did originally just wasn't quite working?

Speaker C: I don't think it's an intervention at all. I think it was always the plan, really, to do that. Yeah. So we've been talking about that in accountants therapy for quite a while. Um, because it was over a year ago that I remember speaking directly to Craig on this point, because a lot of therapy members have said, well, what does happen if we don't sign up the clients? Can we get an answer? What happens? Something must happen. What are the consequences? So we really pushed on this answer. We did get the answer that, yes, HMRC will be registering your clients. The timeline was less clear. So it's only really recently that we've known that this is going to happen imminently, but that we've known for a long time that that is the consequence of not signing up your client. And, um, we really pushed for that answer because accountants like to know what's. What we're dealing with. We thought it was completely unfair to not be able to choose what you do and know the consequences. And happily, actually knowing that the revenue are going to sign people up motivated lots of people to sign up. Because then we understood, okay, if they sign up people up for you, they're going to be starting with whatever information they already have on their existing system, and that's likely to be, at best, incomplete, at worst, completely wrong. So own that process and take it on board. So it actually gave us more reason to get on with that process and own it a bit more. Although I'm interested, we polled Accountant Therapy this morning to ask, has everybody signed all of their clients up? And at one point it was 50. 50 between people that have signed everyone up and people who haven't, which was a bit lower than I was expecting. But I suppose, should we be surprised, we've got, what, 300,000 people that haven't signed up in general? So of course that's going to be some agents.

Speaker A: Were you comfortable with how they went about doing this, then? Would you prefer some transparency early on as opposed to getting the deadline out of the way? Uh, how do you feel about it?

Speaker C: I think there should be transparency in everything. I cannot understand why that wasn't part of the deal in the first place and widely published, why we have to have the system where, oh, we kind of all know this is what's going to happen. But we're not going to talk about it because who knows why we're not going to talk about it. And, um, for some things, I understand that. So I understand why there might be soft landings announced slightly later, because otherwise you drop in engagement. But for something like client sign up, like, again, I suppose the reasoning would be because the engagement might go down because the thought of, oh, uh, well, they'll do it, but then tell people the reasons why you should do it. And I think there are good reasons why agents particularly and unrepresented should take control of that. Just be honest with us. We are getting there. We're getting there with people like Craig in charge, who is, uh, working in the open. We are getting there with a bit more openness. But I would like to actually see it more like that.

Speaker B: Final question, Robin. If you could change One thing about MTD based on everything you've seen during Q1 and before, what would it be?

Speaker C: I'd, uh, scrap it. I'd be really unpopular if I said anything else. If I couldn't scrap it and you wanted me to just change one thing, it would be between only having VAT registered clients in to start with and then having a proper reassessment and a proper look at where we're at and consulting with the right people about what's working and what's not and then making it a bigger system and so effectively a slower rollout, which is ironic. Right on, uh, an 11 year old out, or it would be not quarterly, less than quarterly, uh, twice a year, maybe even not. Let's just start with 1, the Q4 and see how that works for first and then roll it out like that. I think I would go with the VAT one first though, because I think we're all stuck in this kind of system where we feel like we're testing the system now with the wrong clients to test it with. Too much that can go wrong and too much going on and too much to deal with. We should have done it in a much more manageable way. And I think you would find that most agents would then be pro and for it. And also it would probably be dealt with in different departments in larger firms. So I think in my firm it would have more likely sat with our bookkeeping and VAT team, but it's come to tax team, and maybe that makes it harder to be profitable. Maybe that's why some of the things that we're seeing are happening. So there you go.

Speaker A: Brilliant. Well, thank you, Robin, for joining us. We shall wish you luck for Q2 and beyond and let you get on with the rest of your day.

Speaker C: Thank you. Take care. Bye bye.

Speaker A: That's all we've got time for this week. Join us next time for a look at all the big goings on. But until then, take care.

Speaker B: It.