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HMRC opens the door to software plug-ins

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2nd Sep 2015
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HMRC has announced an application program interface (API) strategy to boost the development of third party tax applications.

In a formal statement the tax department said the API approach will “see HMRC promoting a ‘third-party software first’ approach for businesses and agents” by enabling third party products to work seamlessly with HMRC systems.

HMRC has been having behind the scenes meetings with software providers since March. 

“It’s certainly a step in the right direction for us,” said Steve Checkley of TaxCalc and chair of the accountants in practice forum at the developers’ trade body BASDA. “If you think about software as we know it, it’s a one-way process. You fill out a tax return and then send it to HMRC.”

Checkley is most excited about the “pre-population” of data in HMRC portals.  “The idea with the digital tax account is that HMRC will gather this information and third party software will be able to pull that information out of the tax account and straight into the software. It will help the practitioner by making our respective software products more efficient,” said Checkley.

HRMC has plans to share its internal business rules with software developers. “When a tax return is submitted to HMRC, they pass it through a number of business rules,” explained Checkley.

“This carries out a number of checks, such as flagging variances with the previous year. This gives it, in effect, a confidence score. If the confidence score hits a certain threshold, it may then get earmarked for an enquiry.”

The Revenue’s idea, said Checkley, is that sharing business rules will improve the information it gets back. “It means that silly mistakes – like adding one too many zeros to a number – should be caught out. The practitioner should be able to pick it up more easily.”

The timeframe for the changes will be discussed at an HMRC event for third party software providers next Monday. “I don’t think it will be a particularly swift transition,” said Checkley. “The APIs need to be built and beta tested and then we developers will need to build them into our respective products.”

One of the stated objectives of the initiative is to stimulate the tax software industry, which was met with a positive response. Steve Cox, product director at IRIS, commented: “[It] will allow the government to concentrate on collecting tax rather than spending precious time and resource on accountancy software.

“This leaves more room for third party software providers to provide the best possible digital service to accountants throughout the UK.”

One question posed by the initiative is whether HMRC has been disappointed by the pace of development from existing suppliers. The emphasis on APIs also raises expectations that the department is keen to open the door to the new wave of cloud software developers who are much more attuned to plugging into other programs via APIs.

According to TaxCalc’s Steve Checkley, however, the changes will straddle the cloud/desktop divide. “It will work with both, I see no reason why an interface HMRC provides shouldn’t work in both types of service – the existing APIs certainly do,” he said. “As well, the majority of the products in this market are desktop based.”

You will be able to find out more about the digital tax account from Steve Checkley at the 2015 Practice Excellence Conference on 24 September. 

Replies (6)

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Richard Sergeant
By Richard Sergeant
02nd Sep 2015 13:25

Positive move

Can't help but be a bad thing.

It further underlines the direction of travel when it comes to online filing, and I think will ensure quality standards are met from emerging suppliers.

The expectation is increasingly on vendors to be flexible, collaborative and be able 'to do' - rather than frustrate and 'not do. HMRC being open in this way at least provides an opportunity to make this happen even more effectively moving forward.

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John Stokdyk, AccountingWEB head of insight
By John Stokdyk
02nd Sep 2015 15:13

Initial soundings

As a long-time HMRC technology watcher, the department’s API strategy announcement is a bit of a mixed bag: there isn’t a lot of substance in place to mark any significant achievement, but the published documentation does plug into a number of stories that we have covered recently on AccountingWEB. A few weeks ago, for example, we reported on how the Adobe Acrobat CT filing form was being replaced by a more interactive online alternative, CATO.

Treasury minister David Gauke, meanwhile, announced the strategy at a new digital “centre of excellence” in Telford. This, too, is part of a wider programme to bring more of HMRC’s technology development work in house as the Aspire outsourcing contract winds down. We will have to assume that Gauke’s appearance in Telford is a sign that the APIs project will be handled at the new office.

While the software industry has enthusiastically embraced HMRC’s API strategy, the internal repercussions are probably more significant. For years Aspire and its predecessor contract have been dogged by the difficulties of moving information between the different legacy systems - most notably, when migrating records from a number of different regional PAYE and national insurance systems caused the new NPS database to generate duplicaterecords when it encountered any mismatches. The real time information (RTI) project continues to suffer from reconciliation and allocation errors that result in nonsense information being posted to companies’ digital tax accounts.

If HMRC’s programmers can get the links to work, they will be able to pass information much more easily between their internal systems.

FreeAgent’s founder and CEO Ed Molyneux said that opening up the APIs and online validation filing rules to third party developers would create new opportunities to streamline processes and improve the customer experience - for example by being able to retrieve VAT registration details electronically.

“By making this available, they’re trying to lower the barriers to people building really interesting software,” Molyneux added. “When you look at how mobile and web apps have grown, there’s a lot of stuff that can happen when you’re open with data. What we’ve learned is that if the data is there and there’s an openness to manipulate that data, then really interesting solutions come about.”

Xero UK managing director Gary Turner told AccountingWEB: “I’d definitely give HMRC credit for going the contemporary route by opening up their APIs in this way.” Rather than viewing the strategy as an endorsement of the interoperative cloud computing model, Turner said the move was “more a symptom of the modern world of software where it’s expected that systems should just integrate naturally and openly”.

Thanks (2)
By Charlie Carne
03rd Sep 2015 00:12

Sounds very promising

If HMRC get it to work (and given their history, that's a big "if"), this could be a huge step forward. For years, we have been able to use third party software to submit data to HMRC but, if we want to check what information HMRC holds, we have had to go to HMRC's poorly designed portals.

By opening up the API's, commercial software will be able to export data from HMRC and we can then obtain a report of, for example, all SA clients whose taxes have not been paid. At the moment, I can tell my clients what tax to pay, but I can only be sure that they have paid it on time and used the correct reference by individually looking at each client's record on the HMRC portal. In future, tax software will be able to interrogate HMRC and create a single report of all clients for whom HMRC record outstanding SA tax on (say) 1st February. Similarly, I will be able to run a single report that tells me which of my clients have not yet filed their VAT returns.

HMRC's reports are often poorly designed and hard to interpret. Once commercial software is capable of a two-way dialogue with HMRC, accountants will have access to much better practice management reports. It can't come soon enough!

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Replying to Tax Dragon:
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By hpyatt
03rd Sep 2015 12:18

.. but there is problem

@charliecarne The vision is good but unachievable whilst HMRC do not report in realtime. Unfortunately your SA tax report would be "subject to " uncertainties of processing that would render little confidence in it. I also defy any third party software guru to work out how client PAYE payments are allocated to pay periods under RTI.

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By Charlie Carne
03rd Sep 2015 15:46

Reactive vs proactive responses

@hpyatt - you're right that HMRC's concept of "real time" is not as defined in the OED, but they normally update their records within about 2-3 days to show payments received. I will only want my software to interrogate HMRC and check that they have received the payment and allocated it to that client. If HMRC have allocated it to the wrong period, that is much less of an issue and it can be resolved later.

If, for example, my software tells me that HMRC show that client X has paid the amount of SA tax that I told him to, then I need not chase my client to ensure that he does not get stung for tax-related penalties. If HMRC subsequently tell my client that they have allocated the payment elsewhere and charged penalties, then I can tell HMRC to reallocate it as intended and the penalties will be repealed. My immediate concern is to ensure that HMRC have recorded receipt of all payments that I calculate are due. Any allocation issues can be resolved at a later date.

The same applies to RTI, where I want to be sure that, despite any errors by HMRC in allocating tax and NI amounts due to the correct month, my calculation of monthly payments due is met by payments made. Again, if HMRC complain (incorrectly) that one month was underpaid (due to their incompetence in, for example, deducting SMP or annual Employment Allowance from the correct month), I can work reactively (rather then needing to look at every client's account every month) with HMRC to resolve the problem. My commercial software will highlight areas of concern, so that I can respond proactively when there really is a problem, but I can save time by only responding reactively when the problem is merely HMRC's incorrect perception.

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By AndrewV12
06th Oct 2015 15:25

Leave it all as it is

HMRC software is fine, its slow but steady, why go looking for trouble.

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