Software companies push for clarity on MTD

Sage Sessions MTD panel, 21 March 2018
Sage Sessions_MTD_AW/Ben Smith
Share this content

Accounting software developers have been quietly exerting pressure on the government and HMRC to finalise the legislative arrangements and confirm the technical details for Making Tax Digital.

In February Financial Secretary to the Treasury, Mel Stride, met with Sage, IRIS and Xero along with professional body representatives to clarify his stance on MTD. Stride took the decision in July to delay the implementation of MTD for income tax originally scheduled for this April and focus instead on bringing VAT-registered businesses into the new reporting infrastructure from April 2019.

It was a sensible decision that took account of the feedback from MPs, Lords, accountancy bodies and the members of AccountingWEB. But his decision left many specialist software developers in the lurch. Collectively, they spent millions adapting their systems for quarterly income and expense reporting, and slackening the pace of implementation raised questions about whether or not MTD for income tax would actually happen.

Mel Stride told the February meeting that his the stance remained the same as it was last July; he would not make any decision on extending MTD until the government had a chance to assess how well the VAT for MTD transition worked during its first year.

That would mean that MTD for income tax will not get the green light until 2020 at the earliest. The government would need a year to lay the groundwork, and current protocol would suggest another consultation cycle would be needed to finalise the details and give businesses time to prepare for the move. That timetable would put the likeliest start date back to April 2022.

For their part, the developers at the meeting let the minister know that they were reluctant to invest significant amounts into creating MTD reporting tools until that had some certainty about what was going to be needed, when.

Since that meeting, QuickBooks, IRIS and Sage have been including MTD updates as part of their spring marketing activities.

At the Sage Sessions meeting in Bristol on Wednesday, HMRC’s Michael Cameron provided more details about the VAT and income tax MTD pilot schemes. The VAT pilot will begin in April and HMRC is expecting around 14 software developers to be involved at the outset. Sage will be ready to join by May and HMRC expected “most of the systems that people use” to be equipped for VAT reporting under MTD by the end of the year-long trial.

To act for clients and access the information in their online tax accounts through commercial software agents will need to create new MTD-compatible agent services accounts and assign the clients they represent to those accounts, Cameron said. Those APIs are being released to software developers now.

Sage vice president of product management Adam Prince pointed out that the developer still needed some regulations to be laid down and final technical specifications to implement the VAT filing mechanism. But he also alerted the audience to more far reaching uncertainties that would affect later stages of the tax digitisation project.

“To us at Sage we’re concerned about whether the regulations will change,” Prince said. “This morning we heard about a possible extension to the Brexit transition period and there’s always the possibility of a general election. There are lots of things that could be disruptive to business and push back the deadline.

“Two weeks ago the government launched a consultation on changes to the VAT threshold. That means you have to think about what a really small business would need to do too keep up with the VAT record keeping requirements.

“Sage wants to wait until there’s more clarity. We don’t want to come out and say anything until we know it’s mandated.”

As Prince explained to AccountingWEB in a video interview (see below) the company wanted to avoid any situation where people pressed ahead with preparations and changed their processes only to discover it was all a pointless exercise – perhaps a hint of the anguish that software companies and early adopters may have felt after last year’s delay announcement.

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.


Please login or register to join the discussion.

23rd Mar 2018 19:12

Very wise - wait until things are final and then proceed. I will do the same and not buy any software for next year's VAT change until I know for certain what is needed.

Thanks (2)
24th Mar 2018 12:45

" Stride took the decision in July to delay the implementation of MTD for income tax originally scheduled for this April and focus instead on bringing VAT-registered businesses into the new reporting infrastructure from April 1919."

Frankly now getting really fed up with all the retrospective legislation.

Thanks (3)
24th Mar 2018 17:17

If it's been delayed for decades, I don't see it happening now.
People in the 1970s bought those new-fangled digital calculators in readiness and that was money down the drain too :-)

Thanks (0)
25th Mar 2018 09:14

:-) Thanks DJKL, have added a more appropriate date.

Thanks (0)
24th Mar 2018 19:26

It's a load of drivel and when it fails there will be blood on the streets. None of it will be mine or my clients. That is my sole MTD objective, hence I will be a very late adopter - using the principles of Just In Time manufacturing.

Thanks (4)
25th Mar 2018 21:34

I've been trying hard to cry tears for the software companies, but no I can't. They've only got their own stupid selves to blame. Everyone knows HMRC can't run a pizz up in a brewery, never mind implement the most complex change to the UK tax system in a generation.

They convinced HMRC senior management they could walk down the street naked and everyone would admire the finery of their clothing. Well they just look damm ugly with no clothes on.

Thanks (9)
to mr. mischief
29th Mar 2018 11:11

I'm crying tears of hilarity at your response. It's like watching a never ending soap opera I suppose (having never had the interest to watch such). Anyone who has already invested money in a project invented by HMRC won't be getting my vote since they will be showing their naivity. Those of us long in the tooth won't make a solitary move until the new system is hardwired and working for millions of others. As for VAT the REAL test will be July 2019 when VAT is due to be paid on the 1st quarter. Will HMRC want the money or will they be happy for the delay while the new systems don't work?

Thanks (3)
to DMBAcc
29th Mar 2018 12:34

Ah, the problem here is that whatever MTD does, VAT will still have to be paid. Although there might be problems with the returns and software, the actual money still has to be paid over.

Thanks (0)
29th Mar 2018 13:31

HMRC said there were 28 software suppliers involved at the start of the 2017 MTD pilot. Now the number has halved to 14. If full MTD doesn't start until 2022 I wonder how many of the 14 will stay the course.

Thanks (0)
to kevinringer
29th Mar 2018 13:55

Quickbooks (your accounts and taxes done) seem to be doing a lot of advertising. I like the one where the bloke looks at his phone, does and sends the invoice and by the time he gets home the invoice is paid. Nothing like a bit of real life to make you want to go and buy the software.
They all claim to be MTD compatable. HMRC haven't even issued the API's to them yet. Hopefully we'll get some proper feed back this coming year.

Thanks (0)
to johnjenkins
29th Mar 2018 14:06

johnjenkins wrote:

They all claim to be MTD compatable. HMRC haven't even issued the API's to them yet.

I recently obtained QB accreditation and was surprised to discover QBO doesn't file the VAT with HMRC: I have to manually log into HMRC and type the VAT figures. In contrast Sage desktop has been filing direct for years, though that stopped last month.
Thanks (0)
to kevinringer
29th Mar 2018 14:08

johnjenkins wrote:

They all claim to be MTD compatable. HMRC haven't even issued the API's to them yet.

False claims? Should the ASA be taking action against QB?
Thanks (0)
to kevinringer
29th Mar 2018 15:56

I think you have to define "compatability". The problem as I see it is that many,like myself, use the "gateway" with our "services we can use", which works pretty well, certainly CIS returns and VAT go through with no bother. So now with VAT, commercial software has to be used, which is supposed to extract information from the digital records us or the client keeps. I presume what QB are saying is that when they are given the API, their software will be adapted so that the API can send information to HMRC. That to me is not compatability.

Thanks (4)
29th Mar 2018 19:35

Totally agree. It is totally irresponsible to claim to be totally compatible with a specification which has not even been written yet!

But I am sure all these spivvy software guys have got good lawyers when it all goes down the Suwannee!

Thanks (0)