MTD for VAT software on the starting block

MTD Live panel with Intuit, ICAEW, HMRC and Rebecca Benneyworth
ICAEW MTD Live_AccountingWEB
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In something of a first for the Making Tax Digital (MTD) project, yesterday’s announcement that the pilot scheme was ready to open up for public testing arrived earlier than many in the software industry expected.

More typically for MTD, the likely explanation is that the public beta phase was announced this week to avoid clashing with other tax initiatives planned by the Chancellor in his 29 October Budget.

The plan to restrict the public beta to the simplest companies and to ease the requirements for larger companies was welcomed by speakers at the ICAEW’s MTD Live event in London on Monday (above).

What the speakers didn’t know was that HMRC would open up the MTD for VAT beta programme the next day and give larger, more complex businesses an extra six months before mandation. Though surprising, the large company concession was very much in tune with the project’s underlying philosophy.

Intuit business development manager Alex Davis earned some plaudits for clairvoyance by telling the audience at Chartered Accountants Hall that the open beta announcement is “fairly imminent”. He and ICAEW Tax Faculty technical manager Anita Monteith noted that only a handful of VAT returns – around 250 – were handled during the private testing phase.

“The private beta was limited to testing whether the pipes worked, and not the subtleties of exemptions and allowances,” Davis explained.

MTD lecturer and AccountingWEB contributor Rebecca Benneyworth provided more background on HMRC’s “agile” approach to development and testing. “The pilot is being restricted to the very simplest businesses. Once HMRC is happy that everything is working for them, they’ll start building it out,” she said.

HMRC still has a long way to go before it will be able to take on more complex scenarios such as partial exemptions and VAT groups, she continued.

Partial exemptions can be done in spreadsheets, or on the back of an envelope as long as you save a digital record and plug the calculations back into the MTD return through software, she continued. “They stripped out all the scary complexity. It’s a pragmatic, sensible decision to take. It doesn’t have to all be ready by April.”

Bookkeeping tools for VAT

As HMRC unveiled new guidance around how to take part in the public beta on Tuesday, the official list of recognised MTD for VAT software included 33 products.

With HMRC planning to retire its own online VAT 100 filing tool, that process will shift to the bookkeeping systems that already compile VAT returns from business transaction data. FreeAgent, QuickBooks, Sage and Xero were all present at the ICAEW event to position themselves as suitable MTD filing providers, along with BTCSoftware from the practice specialist side of the industry and developers including Compleat, Expensify and Receipt Bank that see themselves as “pre-filing” companions for businesses and accountants dealing with VAT data and returns.

Nobody in the industry is going to complain about the opportunity to test MTD filing capabilities more widely, but there is lingering ambivalence around bridging software solutions to connect spreadsheet accounts and calculations into MTD filing systems, not to mention differing levels of enthusiasm for promoting the pilot.

Intuit and Sage initially said they did not plan to develop spreadsheet bridging software, but the volume of feedback from accountants and users looks like it is bringing them around. There will always be edge cases such as exemptions, groups that need to be undertaken outside bookkeeping solutions. “We will bring out bridging software, but purely as a migration path to a fully digital cloud solution,” Davis said on behalf of Intuit.

While the QuickBooks developer was encouraging its customers to join the MTD beta test programme, FreeAgent, Sage and Xero were a little more reticent. All of them confirmed that MTD for VAT filing options were available for their systems and would be activated when customers requested them.

“When HMRC is ready, we’ll ramp up,” said Sage director of product management Chris Downing. “But it’s not just about the HMRC gateway being ready, it’s also about accountants and their business clients being ready.”

All the main Sage accounting systems will have their own paths to MTD, from Sage Business Cloud Accounting and Sage 50c, to Sage Financials (formerly Sage Live), Sage 200/200c and Sage X3, he confirmed.

Agent Services Account links

Sage has also done the engineering work to link its VAT filing mechanisms to the Agent Services Account (ASA) that accountants will need to sign up for to act on their clients’ behalf. The agent account will link to existing credentials to give agents access to clients’ data on HMRC’s MTD for VAT systems. “This is all based on IDs and authorisations carried over from existing records,” Downing said.

The Agent Services Account is built around the application programming interfaces (APIs) that underpin MTD and make it possible for tax data to funnel into HMRC’s computers and back out to commercial programs.

At the moment, most of the vendors are focused on ensuring that the filing processes work and that their software can pick up the ASA authorisations.

Several delegates at the ICAEW event asked BTCSoftware why they would need an additional practice software tool to handle VAT returns filed by their bookkeeping systems.

“If your firm’s customers only use Xero or QuickBooks then I agree you may not require additional software” answered BTCSoftware director Rob Ellis. “But if your customers all use different products for their bookkeeping you may wish to use a solution like BTCHub which not only links to the bookkeeping packages but also gives you a central view of all of your clients MTD returns in one place.”

BTCSoftware’s BTCHub has API links to a spreadsheet and will file returns to give practitioners a way to track data from different record-keeping systems in one place. “BTCHub produces MTD deadline reports similar to our Self-Assessment software to see who is overdue,” Ellis added.

About John Stokdyk

John Stokdyk, AccountingWEB head of insight

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.


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By Matrix
17th Oct 2018 21:08

If HMRC are retiring their online filing then how will non-mandated businesses file their VAT returns? Please would you clarify.

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to Matrix
18th Oct 2018 10:36

Non mandated businesses will still be able to use it but mandated businesses will be locked out bu HMRC so it will be effectively retired for them.

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to coolmanwithbeard
18th Oct 2018 10:47

How will HMRC know which businesses are mandated? Box 6 includes exempt outputs which are not counted towards the £85,000 threshold for MTD. So a business could have, say, £80,000 taxable and £10,000 exempt (eg rental income) so would declare £90,000 in box 6 but they would not be mandated for MTD. So HMRC will have to keep the GOV.UK portal open for businesses with >£85,000 in box 6.

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By Matrix
to coolmanwithbeard
18th Oct 2018 11:44

So they are not retiring it then.

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to Matrix
18th Oct 2018 13:34

If they did retire it they would need something else for all the businesses that don't have to comply with MTD ie all those with turnover <£85,000 and those that are exempt.

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By Matrix
to kevinringer
18th Oct 2018 22:45

It says in the article that HMRC are retiring the online filing, I do not dispute that it is still needed which is why I questioned it. The article fails to cover these submissions.

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to Matrix
09th Dec 2018 11:27

I saw this today when filing my last quarter but I will not be signing up for the pilot as keeping the paper records for now and looking out for the cheapest bridging software nearer April 19.

"If you have signed up for the Making Tax Digital pilot you should not use this service to file your return. You must file using MTD compatible and enabled software. If you file using this portal your return will not be received.

"From 1 April 2019 all VAT registered businesses making taxable supplies above the threshold (£85,000) have to submit their returns using Making Tax Digital compatible software. For more information including how to join the pilot click"

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to EnglishRose
09th Dec 2018 11:35

I saw it too. HMRC could have been displaying MTD messages on this page for the last year. That way HMRC would know that every business filing via GOV.UK (ie every business that is not exempt or using software) would have seen something about MTD. But HMRC decided to do nothing until now - far too little and far too late.

I too am not signing up for the pilot because I don't see how clients will benefit. I have signed up for every HMRC pilot in the past but not this one.

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18th Oct 2018 10:31

John, you I and many others know that this won't be ready for 1/4/2019. HMRC couldn't face the backlash of putting it back another year (which would have been the common sense thing to do) so they have come up with an extra 6 months for "complex" business. What a load of tosh. If the system is ready, then it's ready. Watch the 6 months become a year.

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18th Oct 2018 10:48

All this effort for 7 figures (4 figures for most businesses)

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18th Oct 2018 10:49

If any business of any complexity can file through the existing GOV.UK portal, why are there so many exclusions for the pilot? It appears unnecessarily complex, and if it is more complex it is more likely to go wrong.

Thanks (1)
18th Oct 2018 11:02

Rebecca Benneyworth said "Partial exemptions can be done in spreadsheets, or on the back of an envelope as long as you save a digital record and plug the calculations back into the MTD return through software", she continued. “They stripped out all the scary complexity. It’s a pragmatic, sensible decision to take. It doesn’t have to all be ready by April.”

Rubbish - I disagree with you Rebecca. The partial exemption has been around for 45 years so the software industry has had plenty of time to get to grips with it. The software is not fit for purpose. Businesses should not be forced onto MTD if the software is not ready. Take for example a car sales business that calculates its margin manually. (1) firstly it is the VAT on the margin that is most likely to be calculated incorrectly so if anything should be digitised it is the margin calculation (2) assuming it is calculated correctly, how is the business to input it into QB, Sage or anything else? - If the owner goes into 'Sales' there's nothing about inputting the margin VAT. No, the business owner has to become a bookkeeper and create a journal, but where do they debit and where do they credit? Are they going to know? Of course not - they are in the business of selling cars, not bookkeeping. There's a 50:50 change they will get it wrong and end up reclaiming the VAT on the margin scheme. I'm astonished that HMRC still think that software is going to increase accuracy.

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By Dandan
to kevinringer
18th Oct 2018 20:11

kevinringer wrote:
The partial exemption has been around for 45 years so the software industry has had plenty of time to get to grips with it. The software is not fit for purpose. Businesses should not be forced onto MTD if the software is not ready.

Good point. Sage, Quickbooks or any other software have never been able to cope with partial examption and are simply not fit for that purpose.

An accounting software that deals with partial exemption can be written but nobody has bothered to consider it.

In my family we have qualified accountants that are also IT experts. My brother is a programmer and systems analyst and manages projects for banks and hospitals. Once you put accountants at the helm of accounting software companies, you are on to a winner. Instead we have to deal with below average software such as Sage and Online QB. Mind you I still have respect for QB Desktop and Enterprise (still used in the US). Pity that the US does not have a similar VAT system. If they did I think we would already have part exempt VAT features.

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18th Oct 2018 15:35

Attending this MTD Live event at ICAEW on Monday prompted me to log back into my Agents Services account today. HMRC truly don't understand the issues that we in the profession encounter. I had huge problems when I first set up this new HMRC account some months ago. I was talking to a number of accountants about it on Monday (including some senior members of the ICAEW tax faculty) and they all had similar problems with the sign-up process. I ended up accidentally creating three agent services accounts, as it kept asking me to add in my existing login details (to migrate those clients across) and each time I did that it created a new account!

I spoke on Monday to the senior HMRC person that had been wheeled out for the day and asked her why it was so complicated to set up an account and also why, having created an agents services account and imported the list of existing, authorised clients, it was (apparently) necessary to then manually re-type each client's VAT number plus key, identifying data from their VAT certificate (such as effective registration date and most recent box 5 figure) in order to register each one for MTD. It already has the list of those clients (and their VAT numbers) that it knows that I have authorisation for, so why does it need me to prove that I have identifying data for them all over again? Why can we not just click on the relevant client and tick a box, indicating our desire to subscribe that client for MTD? I told her that, if any of the software companies in the room required us to re-key a load of data (that they already have) into their systems, even after we have successfully logged in and identified ourselves, they would not survive and their competitors would steal their market share.

But, nevertheless, we are still 'customers' to HMRC and not 'taxpayers'. The utter stupidity of this viewpoint of the relationship was brought home to me again today when I logged back out, as it asked me "How likely are you to recommend this service to a friend or colleague if they needed to do the same thing?"....seriously? This isn't an optional service that I could decline and use from another supplier, so why are they asking if I would recommend it? If a "friend or colleague" is an accountant, they HAVE to use the new agents services account for MTD, so my recommendation is irrelevant. HMRC may as well ask me if I would recommend to my friends that they breathe air!

I despair for the future of the relationship between the profession and the increasingly detached HMRC.

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22nd Oct 2018 10:24

1 Jan 2019 Italy goes for mandatory electronic systems for invoicing

My invoices have a huge amount of very confidential information on them including name of the client. It would be a big change if they were being sent to third parties and with 100,000 public sector workers have access to them more easily than if I posted them off to HMRC by courier once every 20 years.

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to EnglishRose
22nd Oct 2018 10:39

Electronic systems are brilliant if you have full control over them. Accounting packages not on the cloud can save a huge amount of time with you in charge. Once you are not in charge then it all goes to pot. The amount of hacking (which will get worse as more people become adept at it) that goes on is too intrusive and WILL eventually cause MAJOR problems.

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24th Oct 2018 18:38

I had put off updating my agent services account till yesterday, went like a dream!

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25th Oct 2018 15:02

I listened to the MTD webinar yesterday and put a question forward that wasn't answered. Can anyone here help?

Some of my clients use book keeping packages others will be over the £85k threshold but only raise around 10 invoices a year and have very little expenditure. Their accounting fits very comfortably on a small spreadsheet - typically 50 lines. I was going to use bridging software to keep costs down.

The speaker yesterday said that we would have to link our accounting software package to our agent services account. My question was simply could we link several different software packages or are we limited to using one?

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02nd Nov 2018 14:00

I think there should be more affordable software packages out there to help rather then the big 4. Cross border VAT software Is meant to be really affordable for a new start up business.

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