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HMRC unwraps MTD income tax pilot for self-employed

19th Mar 2018
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HMRC has opened up its Making Tax Digital income tax pilot to allow all self-employed to register after a near year-long limited testing phase, with unincorporated landlords likely to follow next month.

In an announcement last week, the tax authority stated that self-employed businesses can now voluntarily use software to keep their business records digitally and send income tax updates to HMRC instead of filing a self assessment tax return.

While tax commentators have given the ‘soft launch’ a cautious welcome for moving the project forward, only the self-employed, and only two software houses currently have software capable of filing the quarterly updates required.

What software is available?

HMRC has also published a list of software providers ready to support the MTD pilot for the self-employed or their tax agents.

At the time of writing, there are just two names on the list currently capable of filing the quarterly updates required for MTD: practice software giant IRIS and Rhino, a solution provided by Leicestershire-based Rhino Software. However, HMRC is confident they will soon be joined by others. 

In the final paragraph of the list, HMRC also states that it "doesn’t recommend or endorse" any one product or software supplier, and "isn’t responsible for any problems you have with software.".

According to the AAT’s tax policy adviser Brian Palmer, the lack of MTD-compliant software products for income tax is hardly surprising given last year’s announcement that rollout of the project would be delayed for all businesses under the VAT threshold.

“As a direct consequence,” said Palmer, “software providers switched their resource to ensuring their products will be capable of filing MTD-compliant VAT returns.”

With the VAT-MTD pilot is projected to start next month, many vendors AccountingWEB spoke with are confident they will have products ready to coincide with the start of the VAT-MTD private testing.

What are the implications of the launch?

The AAT’s Brian Palmer stated that he does not expect a “headlong rush” by the self-employed to onboard for income tax purposes, given there are only two income tax update filing solutions available and mandation places the emphasis squarely on VAT.

“However, I do anticipate that if the VAT MTD-pilot is a success, and the subsequent mandation phase goes well, there will be a slow but steady stream of self-employed businesses joining the income tax pilot,” said Palmer, although he did go on to base this on a greater range and depth of MTD for income tax-compliant software becoming available.

According to Palmer, if accountants and tax advisers believe the pilot is going smoothly they may decide self-employed start-ups should be on-boarded straight into MTD to avoid the need to transition from the current regime when mandation comes arrives in 2020.

*This article was amended 19 March to include the correct Rhino Software*

Replies (63)

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Replying to SXGuy:
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By johnjenkins
21st Mar 2018 08:51

It isn't possible. I have 300 clients and I've really looked into what can and can't be done. The only answer is the clients have to do it themselves (which was the original intention of HMRC).
Those smaller clients that have to register for VAT have problems getting the info together on time now.
As Tornado says it is a practical impossibility.

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Replying to johnjenkins:
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By SXGuy
21st Mar 2018 09:06

If only they could do it themselves. I have quite a number of clients who can't even turn a pc on let alone file quarterly info. Record keeping? Lol no way.

Which is why as I say it will fail come July 20. Smes are not ready.

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Replying to SXGuy:
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By johnjenkins
21st Mar 2018 10:36

Unfortunately HMRC have lost sight of what being an SME is all about. As far as HMRC are concerned there shouldn't be any small self-employed, they should all be on PAYE and this is just one of the ways they are going to achieve it, or perhaps a lot of business will go underground.

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By FYI Action
20th Mar 2018 21:38

I couldn't find any software out there that catered for my needs (self-employed or contractor) and with MTD around the corner, although knocked back another year, I designed and created a great new VAT productivity tool specifically to help one-man (woman) bands. It is simple to use and produces an Excel spreadsheet for bookkeepers and accountants. When HMRC have decided exactly what they want, the software will upload VAT. The software is built to help bookkeepers and accountants help the clients who usually push receipts through the letter box or are reluctant to use the usual cloud accounting packages. All I required was incomings, expenses and mileage and the Government Gateway, so that's what I created - although to help with the no fee suggestion by HMRC I have added an extra module - a contact manager and tasks calendar. Plus automatic mileage logging because 'nobody' records their mileage correctly. It's called ACTIVUS for more information please view https://fyiaction.com/

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By EnglishRose
21st Mar 2018 12:59

I looked at teh websites of the only 2 providers. One must be so expensive it does not even give a price and other seemed to require use of a mobile phone to take pictures of things which I won't be doing. I will certainly steer clear of all this until I am forced into it. It is a pity HMRC cannot show me now a list of products and their prices which I will be forced to buy (or even worse, forced to hire by the month - not something I often do) to operate digital VAT next year when it will apparently apply to me.

Why can't they just design a product and let us download and start having a look at it now so we can get ready? I don't think they understand the time demands on we one person sole traders who pay VAT. I once had to give some talks to civil servants. They had to leave early one day for chess club and another for choir - it was very sweet but made me realise how the other half on PAYE live.

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Replying to EnglishRose:
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By johnjenkins
21st Mar 2018 14:12

Ah, this is where it gets interesting.
Over the years HMRC have had their hands smacked for wasting money. So the answer is, let the software people do it and when it all goes wrong (and it will) HMRC can step back and say "not our problem". So the onus is going to be on the tax payer and the software people to get it right or suffer the dreaded "penalty regime".

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Replying to EnglishRose:
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By FYI Action
21st Mar 2018 16:12

Hello EnglishRose, you are the reason why I designed Activus because I was in the same position as you and I know how really frustrating it is.

I give away a free trial because I want users to have to the time to use Activus and not feel pressured into buying something. We even offer flexible payments (monthly, annual or something in between)

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By Ammie
21st Mar 2018 13:34

MTD was "sold" on the chancellors throw away comment declaring the end of the tax return, which will not be required any more. Sounds so sweet!

We should all know better, as the old adage states;

"if it sounds too good to be true, more often than not it is."

And I would add, that very often such statements hide the reality of the unnoticed underlying blow to the proverbials, as is with MTD.

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Replying to Ammie:
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By johnjenkins
22nd Mar 2018 09:11

We still don't have a date when the "end of the tax return as we know it Jim" will be.
Perhaps HMRC have decided that we still need it, but then that is what MTD is all about isn't it?

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By David Gordon FCCA
22nd Mar 2018 11:31

The point is HMRC have been constructively dishonest, and we, meaning ICAEW with ACCA, with various other similar bodies, have bent over and allowed HMRC to do what they like:
What is the constructive dishonesty?
I am sure many of us have suffered from the guarantee con. This is, you buy an expensive piece of kit. For whatever reason, it don't work. So you take it back to the well known furniture supplier only to be told that in fact the guarantee is not with the vendor, the vendor has sold you (Even for "Free") a guarantee supplied by an independent guarantee company, so, says vendor,"F*** off, it is not my problem".
HMRC have sold Parliament a software based system for which they give no guarantee at all.
If it goes wrong, "Tough" say HMRC "Nothing to do with us, go chase Megabyte IT Corp who sold you the stuff. Oh! and by the way we are going to charge you penalties as a result of duff software because the software is not our problem"
I guess most of us know sub-prime car dealers, HP companies, TV sales retailers that work that way. It is a well know and widely suffered con trick.

Meanwhile the executive of HMRC who jointly severally and personally approved this con trick sit there smirking- "Nothing to with us mate, go see the software supplier".

If HMRC had suggested MTD and also supplied useable sofware, I would take a different attitude.

This is in effect a further exercise of shifting the cost of the tax system onto the taxpayer and so constitutes a covert increase in taxation.

Software houses think this will enhance their businesses. It will not. It will diminish their reputations because users will see it as an unfair cost having nothing to do with the enhancement of their livelihoods. I have not met any accountant in practice who thinks it will ease the administration of the tax system. Most of us seem to be puzzling over how do we get our clients to accept the additional costs involved.

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Replying to David Gordon FCCA:
Tornado
By Tornado
22nd Mar 2018 11:55

"If HMRC had suggested MTD and also supplied useable sofware, I would take a different attitude. "

Exactly, something I have been advocating for a long time -

https://www.accountingweb.co.uk/any-answers/universal-free-tax-accountin...

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Replying to Tornado:
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By johnjenkins
22nd Mar 2018 12:04

Had HMRC discussed MTD with the likes of us and not our bodies then maybe we would be in a better position. Are you listening HMRC. It's never to late.

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By uktaylor
23rd Mar 2018 09:34

Is there a document about MTD that accountants should be sending their clients now to notify (warn) them?

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