Tax Agents HMRC and Open Banking

23rd May 2020
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Accounts and Book Keepers can benefit from Open Banking using similar systems to Making Tax Digital.

Many Tax Agents are now well versed in using Open Authorization as part of Making Tax Digital to use different software to directly access information from HMRC.

Open Banking is now starting to provide advantages for Accountants and Book keepers in a similar way.   Clients can now give their accountants or book keepers read only access to their bank accounts.  That means that practitioners no longer need to chase clients for copies of bank statements.  Instead their clients can simply provide online access to read transactions as soon as they appear in the bank's computer systems.

In a world in which visiting clients becomes more of a challenge because of a need to maintain social distancing this is even more helpful.  Once a client has given authority through open banking to the tax agent this lasts for 90 days (in a similar way to the way in which HMRC authorisations last 18 months).

The tax agent can then do a weekly download of the bank statement and incorporate that into accounting records.   Although further information will be needed it does enable firms that are offering book keeping services to be able to provide a real time service without having to rely entirely on information from their clients.

The change with open banking is that this authority can be granted on a read-only basis from a wide range of banking institutions.   The client can remotely provide this authority on the tax agent's computer server and then leave the book keeper to get on with handling the processes.

Open Banking uses a similar Open Authorisation system to that used as part of Making Tax Digital. In the same way that MTD has the ability to provide read only access to a tax account, open banking also has two main scopes "accounts" which gives access to bank information and "payments" which enables payments to be made.

There are two types of FCA registered organisations that enable people to process bank information.  Account Information Service Providers (AISPs), which enable access to bank information only and cannot use the "payments" scope and Payment Initiation Service Provides (PISPs) which also can initiate payments.   By using an AISP as the intermediary (Third Party Provider) that enables an accountant to review bank information on behalf of the client the client can be certain that they are not giving payment authorisation rights.

One of the companies that offers these services to tax agents today is Cirrostratus Exedra Ltd with their Vat Direct service.    If anyone is interested in setting up such a service with their clients they should email [email protected]