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
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.