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
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.