The future of client authorisation
In the future, taxpayers will need to be technologically capable in order to authorise an accountant to act for them.
Brave new world
A vision of accountancy’s digital future was laid out in the latest HMRC webinar on Agent Services presented 7 December 2016. Under the government’s Making Tax Digital scheme all tax agents will use software that can submit data to, and pull client data from, HMRC’s systems using application program interfaces (API).
HMRC also envisages that taxpayers will use accounting software that is capable of transmitting accounting data to the agent’s software (which may well be a different product from a different company). The agent will then analyse the data before submitting it as a quarterly update to HMRC. According to the Revenue, there will be no software compatibility problems in this bright future world.
A new procedure for agent authorisation will be needed to allow accountants to act for clients under MTD, which will replace the current paper 64-8 form, and the online authorisation process.
All clients who are currently on an accountant’s client list held with HMRC will be automatically transferred to the new system, but any new clients taken on after an unspecified date will have to go through the new authorisation process.
Registration for agent
Before a tax agent can be authorised to act for new clients under MTD, the agent’s business will have to subscribe to Agent Services. This is the new name given to “Agent View” originally proposed in HMRC’s 2011 Agent Strategy document. As BTC Software explained in their guide ‘Prepare your practice for Agent Services’, HMRC will be carrying our risk assessments of the entire agent population in order to provide “differentiated” services to them according to their competence and quality.
During the webinar the HMRC presenter explained that data on tax agents is already being gathered into the Enterprise Tax Management Platform (ETMP) - which is a database of agents’ details.
The process of subscribing an agent’s business to Agent Services will require up to six items of information about the business to be supplied. The agent must also have a government gateway ID. All this data will be transferred to HMRC through the agent’s accounting software via an API.
HMRC will ask the agent to perform a two-step security process that involves sending a code to a mobile phone or landline. Once that security step is completed the agent will then be invited to sign up for Agent Services. This involves typing in four more data items about the business, which have been supplied before the security check.
If your business uses several government gateway IDs, you should sign up for the next HMRC webinar on Agent Services, as that problem will be discussed in that webinar.
The new authorisation process will be built into the accounting software used by agents, and also (HMRC believes) into accounting software used by taxpayers. Either the taxpayer or the agent will be able to initiate the authorisation process from their software. This process is supposed to be widely available from April 2017.
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If the agent starts the authorisation process the taxpayer will be sent a notification through their software, or to their HMRC online business tax account. The taxpayer will have to know how to log in to their business tax account in order to confirm the authorisation for the agent to act. The agent will not be able to submit any tax returns or MTD updates without an authorisation to act for the taxpayer.
Rob Ellis, CEO of BTC Software, commented; “Both agents and software providers have longed for a more streamlined approach to the necessary chore of creating the agent-client authorisation link. HMRC has long promised an overhaul of the 64-8 process and, whilst the new proposal is a start, it needs further thought before implementation can begin.”
“HMRC doesn’t understand that people in business do exist without access to a computer, or a smart phone, high speed broadband or decent mobile coverage. The models they are designing assume that everyone has access to technology every moment of the day, but this isn’t true.”
HMRC has committed to provide assistance to taxpayers who do not have a digital capability, but they have not yet worked out how this assistance will be provided and what form it will take. It is quite clear that taxpayers who are capable of interacting with a computer, but simply don’t want to, will be forced to use a digital means to appoint a tax agent to act for them.
Non-digital taxpayers (such as an older person who is not comfortable with using a smart phone or computer), who already have an authorised tax agent will not have that relationship with their agent disturbed. However, if a non-digital taxpayer wants to change their tax agent in the future, they may find this very difficult.
Ellis added: “If the new process is slick and painless then all well and good, but if the process runs into issues will this become a reasonable excuse for late filing? I doubt it. I do welcome this overhaul but, like any good piece of software, it’s not how it handles the mainstream that counts - it’s how it deals with the edge-case exceptions that really proves its worth.”
What do you think? Are you prepared for this brave new world?
Consulting tax editor for Accountingweb.co.uk. I also edit Bloomsbury's Tax Rates and Tables and write newsletters for other publishers.