BTCSoftware CEO Rob Ellis talks MTD past, present and future
Making Tax Digital provides both opportunity and challenge for UK accountants, their clients and businesses. And with self-assessment joining the MTD family from 2023, it’s safe to say that HMRC is committed to the success of its digitalisation initiative.
We sat down with BTCSoftware CEO Rob Ellis to talk about MTD past, present and future. Rob shared lessons learned from the initial pilot and roll-out of Making Tax Digital for VAT and how the software company is applying those lessons to VAT for small businesses, ITSA (Making Tax Digital for Self-Assessment) and the long-term plan for Corporate Tax.
Hey Rob, thanks for taking the time to share your insight into Making Tax Digital. We’re now well into the final 12 months for small businesses to join MTD for VAT, so let’s start there; how’s the rollout to businesses with turnover below the VAT threshold going? Are you seeing any hiccups at this stage?
Currently, it’s pretty quiet on the MTD for VAT front. HMRC’s systems and MTD software systems alike are now tried and tested, so it’s just business as normal now for the new digital VAT regime. BTCSoftware is starting to see a steady flow of new signups to our MTD for VAT platform ahead of the April 2022 mandation for all VAT registered businesses but it’s still early days on this one. As we all know, give a person a deadline and the job gets done the night before so we don’t expect a big rush on this until Q1 2022 at the earliest.
With so much to think about outside of VAT, it’s no wonder many businesses yet to join aren’t rushing to make the switch. BTCSoftware has supported customers from the early days of the VAT pilot, so what would you say is worth doing now in preparation for digital VAT?
The main reason for HMRC launching the MTD for VAT initiative was to get businesses to use digital record keeping. This is the one big thing small businesses can do ahead of the 2022 mandation date. It doesn’t mean you have to change to an expensive monthly cloud product, a simple Excel spreadsheet will do - such as the one we provide free of charge to anyone that would like to use it.
We’re also now hearing a lot more about MTD for ITSA, as the pilot is underway – what’s the plan?
HMRC have certainly picked up the pace in terms of what they are delivering to software developers. MTD for VAT was just a few API endpoints – an API endpoint is essentially a web call to either retrieve or send data – whereas there are many more for MTDfITSA. That’s a good thing because it means we can deliver a more complete system than just the quarterly and annual submissions for sole traders and rental property owners.
We’re still seeing a reluctance to join the pilot right now given that it’s optional and taxpayers are probably still going to have to file the usual self-assessment return in parallel. That said, we are having more and more discussions regarding our forthcoming MTDfITSA product so I expect the interest to ramp up towards the end of 2021 and well ahead of the 2023 mandation date.
There’s only a handful of MTD for ITSA software options currently available, so it seems that many developers like BTCSoftware are working hard behind the scenes on their products. What would you advise accountants, sole traders and landlords to do in terms of getting started with income tax digitalisation?
Whilst there is still plenty of time to get involved, don’t sit back and expect this to go away as it did before. HMRC are investing a lot of time and money into Making Tax Digital and given the success of MTD for VAT they are looking to build on that. Everyone knows that the early bird gets the worm, but the early worm gets eaten by the bird so take your time and find a solution that is right for you and your customers. If you are in practice, it is also unlikely that one solution will be right for all your customers so you need to make sure that the solution you pick is flexible enough to work for everyone, for example with links to many bookkeeping packages, and doesn’t force everyone onto the same platform.
Let’s say you were heading up the HMRC team to roll out ITSA. What would you be prioritising right now?
I’d be doing exactly what HMRC are doing; finishing off the mandatory elements for sole traders and rental property owners and then adding the non-mandatory elements to bring in the other parts of Self-Assessment (e.g. Capital Gains (SA108), Additional Information (SA101) etc.) into MTD.
Alongside all of this, we’re also awaiting the results of the CT consultation – any predictions?
This is a very hard one to call because it’s a huge change to make and certainly the 2026 deadline is a big ask too. And that’s all I’m going to say about that!
Thanks for sharing your thoughts, Rob!