Making Tax Digital took another step forwards when Rowleys Accountants filed one of the first quarterly filing submissions in its beta programme.
By being one of the first to make a submission the Leicester-based practice is set to join the pantheon of digital tax luminaries alongside firms such as AC Mole and Sons, the accountants who filed the UK’s first ever electronic personal tax return back in 1997.
As with any beta test, there have been a few niggles along the way but after three rounds of MTD submissions, Rowleys feels fairly confident that the lessons they have learned thus far will help them adjust to the process.
AccountingWEB caught up with Mark Hook, tax director at Rowleys, to find out how they prepared for the MTD beta programme.
Why get involved?
According to Hook, Rowleys always wanted to join the pilot but never intended on joining so soon or being one of the first to make a submission.
“I took the view that whether we like MTD or loathe MTD it’s coming, and we needed to get in as soon as possible to work out what is going on so we can advise our clients as soon as possible,” said Hook.
As one of the two software vendors currently capable of filing quarterly updates required for MTD, Rowleys’ software provider IRIS had been in discussion with customers about the MTD beta programme and quarterly filing for MTD. Following an email conversation, Hook confirmed that he had a suitable client to go through the submission.
IRIS provided HMRC with a list of approved customers that wanted to take part. After asking some qualifying questions HMRC decided to take Rowleys through the initial subscription process.
The first stage was relatively stress-free. HMRC came to their offices to talk them through the next steps, while IRIS took the firm through the authorisation and verification process.
Picking a client for the pilot
When the MTD goalposts were moved above the VAT threshold, this limited the firm’s selection of eligible clients for the pilot. But at that stage one client was already on Rowley’s radar because of the amount of work it does for them – this was key to making the process less impactful on the firm.
“The client we selected we already do quarterly bookkeeping to produce their VAT returns,” said Hook. “Their VAT returns were the right period to link in with what the pilot needed to be. It was basically continuing to do the VAT returns as we had always done, and the idea was to bolt the MTD submission on - just to see how it would work.”
For the client, the process was no different: “He comes in once a quarter and throws two brown paper bags at us like he always does. He's no different than he was before.”
HMRC and IRIS listened in on the first submission, and Rowley’s provided HMRC with a copy of the computation to make sure that what came out of IRIS Personal Tax was what the Revenue was expecting.
Here’s how the process worked:
- Rowleys accounts department posted the client’s accounts in IRIS Accounts Production, which automatically transferred the data to IRIS Business Tax
- The data was then posted to IRIS Personal tax (click of one button)
- IRIS Personal Tax posted and assigned the posting to the relevant quarter
- Opening the Digital Tax Hub within IRIS Personal Tax shows the breakdown. At this point, Rowleys selected the quarter they wanted to submit
- The submission was shared with the client for e-approval
- Once all parties were happy, Rowleys clicked the ‘Update HMRC button’ and it automatically submitted the submission to HMRC
- HMRC returned the computation within the Personal Tax Digital Tax Hub.
Business as usual then? Not quite. The first submission did require some human intervention.
Because at that point there was no bridge between IRIS and Sage’s bookkeeping software, Hook had to physically re-post the quarterly data into IRIS Personal tax from a printout before they could make the submission.
What we’ve learned
So while there have been some gremlins and error messages, Hook has so far found the process “fairly smooth”.
“I think there are still some gremlins in there but that's the point of a beta test, to identify where the gremlins are. We're going to do the fourth one fairly soon, and it is when we do the adjustments, that'll be the interesting bit for me: how do you get the four quarterly ones into a set of proper accounts.
“We've learned that it was a fairly smooth process but you need to have the information there. If we were to scale it up we'd probably find more problems, but we're selective with the client we chose. “
A key a part of the process that Rowley’s will take forward is lining up a client’s VAT quarters. “We took source records and made it electronic so we digitalised the source documents, and his VAT quarters were conterminous to the year-end,” said Hook. “If you can get your VAT quarters conterminous with your year-end it could save a lot of angst.”
Before the pilot and when there was still uncertainty around the actual MTD start date, Rowleys categorised their clients.
“We started to do a bit of data mining to work out which clients would be in and where they sat within the threshold eg how many clients would be affected if the threshold was £50,000, £60,000, £70,000, or VAT limit.”
In the future, client education will be a top priority for the firm. “We can do it from a place of being able to say we've actually done this and we've seen it live”, Hook said.
“It's always easier to talk a client through a new process if you've actually done it. We can actually stand up and say we've done this and this what we've done, and this is how we did it, and this is what you'll have to do going forward.”
About Richard Hattersley
Richard is AccountingWEB's practice correspondent. If you have any comments or suggestions for us get in touch.