The first quarter of 2019 is clouded by some big deadlines in late March. John Stokdyk offers some light relief for those doing self assessment work by casting an eye forward to the introduction of Making Tax Digital for VAT from the beginning of April.
With Brexit and MTD for VAT hovering uncertainly on the horizon, the usual January Self Assessment rush this year looks more like a gentle curtain raiser for the fun to come. But even if the go-live date for the new method of filing VAT Returns is still several months away, the clock is ticking inexorably, particularly for the HMRC teams that are responsible for rolling out the enabling technology.
After a spurt of activity ahead of October’s Budget, things have gone very quiet on the MTD front over the holiday period. This is often the case as developers take their holidays and attention focuses on ensuring the self assessment systems work smoothly. However, AccountingWEB members did alert us to a maintenance update over the first weekend in December.
This was a slight shift from the pattern established when external contractors dictated that system upgrades only happened twice a year, but HMRC did not respond to AccountingWEB’s requests to explain what they were maintaining. Without that clarification, we can only speculate that some of the work might have been related to functionality to broaden out the MTD for VAT pilot scheme, which is still only running for 500,000 or so simple businesses.
Groups and those on annual and other VAT schemes will not be mandated to use MTD until the first quarterly return they file after 1 October 2019. HMRC’s December 2018 Agent Update provided brief details of progress so far, including links to software lists showing MTD-compatible programs for VAT that is available now; and developers currently working on MTD for VAT.
The Agent Update reported that more than 8,500 UK firms have set up their agent accounts and are ready to act for VAT clients in MTD. It’s worth remembering that the Agent Services Account is currently only used for the trust registration service, MTD for VAT and the MTD Income Tax pilot testing scheme. You will still need to use your existing Government Gateway credentials to create your ASA and access other HMRC online services.
Progress check on pilots and APIs
Making Tax Digital for VAT depends on the successful functioning of application programming interfaces (APIs) that will share data between HMRC’s MTD system and the commercial software programs used to prepare and file tax returns.
The VAT filing system is relatively straightforward and has been restricted to the basic nine boxes that are currently displayed on the existing Government Gateway online return. But that facility will go for MTD filers and they will have to use commercial software instead.
HMRC’s MTD for VAT API page shows that five key interfaces are in place for filing returns and retrieving information about liabilities and payments. A separate customer journeys document lists many of the outstanding requirements that will be delivered after February 2019, but the main elements are now working – but as beta test systems while the pilot continues. These functions include:
- Creating an agent services account, gaining client authorisation and signing up for MTD
- Customer/agent retrieves obligations in software
- Submitting VAT Returns and amending previously submitted data
- Setting up and amending payments by Direct Debit
- Change of circumstances notifications
- Taxpayers can view previous returns in their Business Tax Account and when their next return and payment are due
During the final part of 2018, HMRC officials were proudly boasting that they had handled more than a million API calls – most of which were coming in from well known accountancy software houses such as Sage, IRIS, FreeAgent, Wolters Kluwer and Xero that are participating in its MTD pilot schemes.
It certainly helps to encourage take up if you are a government department and can rely on legislation that forces people to adopt a particular technology like APIs.
How many developers are on board?
The October MTD announcements – and extra delay for groups and other more complex VAT entities – encouraged the perception that HMRC’s developers were struggling to keep up with the onboarding timetable.
At the time of the initial public beta announcements, 33 developers had products ready to go. The initial response may have been underwhelming, but at the time of writing 10 weeks later, that number has nearly doubled to 62 and there are another 111 programs waiting in the wings.
Because VAT returns are generally driven by bookkeeping software, it makes most sense to stick with the programs already being used. As a result our list of MTD-ready developers will start with the names accountants know best:
Bookkeeping systems: Clear Books, FreeAgent, IRIS (KashFlow), Liquid Accounts, MyDigitalAccounts, QuickBooks, Wolters Kluwer (Twinfield), Xero and Zoho are all listed in the first wave of MTD for VAT applications and several of them have announced their involvement with the public beta testing programme. Sage Business Cloud is on the list, which encompasses several product families including Accounting (formerly Sage One), Financials and Enterprise Management. But Sage 50 Accounts is not part of the MTD compliance package – users will be expected to use Sage 50cloud Accounts instead or access a separate Sage 50 VAT module to access the online filing mechanism.
Tax and practice specialists: BTCSoftware, Capium, TaxCalc and Thomson Reuters are all up and running for MTD and supporting accountants and clients through the pilot process. Nomisma is listed in the “coming soon” section.
Mid-market and ERP accounting systems: developers including Access, AccountsIQ, OneAdvanced, PS Financials (IRIS), Microsoft Dynamics, Oracle NetSuite and SAP are on HMRC’s “pending” list but they tend to serve larger organisations that should benefit from the six month delay. Sage reports that its enterprise products are MTD-ready.
What about all the others?
Our “familiar faces” list above touches on around 10% of all the developers on HMRC’s two lists so there are a lot of other possibilities to take into account. They come from a variety of directions including smaller tax specialists, such as Neilson James, Quickfile, and Tax Systems (AlphaVAT) that were at the forefront of MTD developments.
The MTD-ready list also includes a number of accounting firms ranging from microbusiness accounting specialist Crunch to Big Four outfits Deloitte, EY and PwC.
While some of the mid-market and large company accounting developers are still awaiting recognition from HMRC, resellers including Integra Associates (Agresso and Sage X3/1000), Vanilla (IFS and Microsoft Dynamics) have entered the charts with their own MTD for VAT solutions.
One of the most interesting aspects of MTD is the way it has brought forward developers that specialise in particular vertical markets such as Coins Construction, Farmplan, Farmdata, Landmark (property) and Tyresoft – a specialist app for the tyre industry that had evaded AccountingWEB’s radar up to this point.
The road ahead
To help those seeking MTD for VAT solutions, AccountingWEB will be compiling a comparison table as part of our Software Reviews project. Unfortunately, since the public beta only opened in earnest in October, there is not a lot of user feedback available yet to really get a handle on what the different applications can do. But with the deadline looming, we will endeavour to catalogue their basic functionality in more detail than is currently available from HMRC’s list.
It’s odds-on that MTD for VAT will proceed as planned from the beginning of April, perhaps with a few hiccups, false starts and soft landings along the way.
But if Brexit goes awry, all bets are off the table. The political uncertainties that would result and need to retool tax and Customs systems would take priority, potentially pushing the pioneering dream of universal online filing into the long grass for another few years.
About John Stokdyk
AccountingWEB’s Head of Insight has been with the site since 1999 and likes to spend his time studying accountants’ technology habits. When not nerding out, you can find him exploring obscure indie music and searching for the perfect organic sourdough loaf from his base in Brighton, UK.