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The future of client authorisation

9th Dec 2016
Tax Writer Taxwriter Ltd
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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. 

Authorisation

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.

Security checks

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.

Who initiates

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.

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.”

Practical issues

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?

Replies (32)

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By Matrix
09th Dec 2016 21:14

Well even my most IT savvy clients have a tax agent so, among other reasons, they don't need to set up an online account themselves.

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By NH
10th Dec 2016 09:02

for around 95% of my clients, we have accounting software which we use on the clients behalf but the client does not have that software, does not require it or want it - thats why they have us as an agent.

Neither do they wish to jump through hoops to get an online account, again thats why they use an agent.

It is difficult enough at the moment getting a code from them that has been sent through the post - if they have to logon to get it, it will never happen.

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Jennifer Adams
By Jennifer Adams
10th Dec 2016 11:20

HMRC keep being told the same comment as NH makes but just ignore everything being said. Its not just non digital taxpayers being affected but there are still practitioners who use paper 64-8. But it is understandable that the system needed to change. It must cost a fortune in sending out letters to taxpayers for agents authorisation not least the time spent by a member of staff. HMRC keep assuming everyone has computer access. There is nothing anyone can say or do to stop this. MP's tried as you know and got no where.
I have a colleague who is taking over a one man band practice that doesnt use software apart from HMRC's payroll and CT- the change over is going to be a nightmare. Its bad enough trying to get HMRC to get things correct currently if there is a merger or take over by one practice of another.
As readers of my blog will know - I've been holding off telling my clients about this 'brave new world' in the hope that something will come along to make it change for the better - I can no longer live in hope. After the New Year any new clients will have to be forced onto a computer and directed to their Account.
I wonder if PC World are aware of this opportunity for an increase in computer sales?

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Adrian Pearson
By Adrian Pearson
10th Dec 2016 13:54

Hang on a sec... HMRC expect that "The agent will then analyse the data before submitting it as a quarterly update to HMRC."

So, who is paying for that analysis then?

And why is analysis even needed, if HMRC don't plan on doing anything with the quarterly update figures?

More confusing and apparently contradictory information emanating from HMRC. The inconsistency can only mean one of two things:

1. HMRC really do have a hidden agenda
2. HMRC really do not have a clue what they are doing

I strongly suspect it's 1.

Thanks (9)
Replying to Adrian Pearson:
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By MM Bookkeeping Services
10th Dec 2016 16:18

I strongly suspect it is 1 & 2 Adrian!

Thanks (11)
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By feelingthestrain
11th Dec 2016 11:20

I'm sure I'm not the only person getting worn down by all the talk of MTD and visualising the reality of it.

I think for practices with clients who are businesses of "a certain size" and competence then this is something very do-able particularly if clients already maintain much of their own accounting records already.

However, when you have clients who can just about manage to bring in a shoe box once a year full of receipts running their business via a combination of bank/cash then this is a whole different prospect.

I've watched the panel debates on AccountingWeb with interest and hearing the larger, or already online, firms talking about their experience is interesting but this is perhaps chalk and cheese for smaller practitioners.

Personally, I'm waiting on TaxCalc's product with high expectation and hope (because I have always found that TaxCalc "get" how we work) but, alas, at this stage we still do not know what it is going to bring so how on earth are we supposed to get any of this moving forward unless we commit to an alternative cloud based system which, ultimately, may not prove the best fit for us and our clients?

In the meantime we're stuck with nothing to do other than try and abate the panic that hangs quietly over us if April 2018 is the date.....

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By gerrysims
12th Dec 2016 08:16

I act for many overseas clients who have a responsibility to declare in UK. Some do not speak English as their first language. We can get them to pass us a code but the chance of them registering for an HMRC account is pretty low so I suspect many would choose not to report their income if they can't appoint an agent !

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By ireallyshouldknowthisbut
12th Dec 2016 09:15

One wonders how many of our current clients would have been able to get access the digital account - something that is far from trivial

Currently the minimum requirement is to sign a 64-8 or pass me a letter. The increase in complexity to simply appoint an agent is phenomenal, and I do wonder how we will actually be able to help a number of clients, given it will no longer be possible to file without agent status.

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By RobertD
12th Dec 2016 11:14

I am currently working with three online log ins. Vat, CT and PAYE/CIS/SA.
HMRC suggested that I had to close the CT and then open a new CT in the PAYE/CIS/SA registration. The old client list will than be ported to this.
Sounds dodgy especially relying on the client porting and also it will take 9 days.
Anyone else have experience of this?

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Tornado
By Tornado
12th Dec 2016 16:08

“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.”

In any other circumstances it would be a crime not to consider the needs of disabled people, yet HMRC are seemingly ignoring the needs of people who are digitally disabled.

It is a disgrace and should also be a crime.

Accountants take the role as 'carers' for those that are unable to deal with accounting and tax matters themselves and the appalling arrogance of the Government when it comes to MTD is totally unacceptable.

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By Glenn Martin
12th Dec 2016 16:05

The grading of accountants is potentially of concern as to what HMRC will see as good or bad agents.

Things like tax payment records of clients good leave black marks against you. Also if you defend your clients over HMRC errors are you seen as troublesome as an agent.

Giving HMRC record for making simple tasks difficult I dread to think what will happen with this.

I suspect small agents will be penalised and have less access than bigger companies to the new system.

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Replying to Glennzy:
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By RobertD
12th Dec 2016 17:05

Glennzy wrote:

The grading of accountants is potentially of concern as to what HMRC will see as good or bad agents.

Things like tax payment records of clients good leave black marks against you. Also if you defend your clients over HMRC errors are you seen as troublesome as an agent.

Giving HMRC record for making simple tasks difficult I dread to think what will happen with this.

I suspect small agents will be penalised and have less access than bigger companies to the new system.

It is little wonder that the bigger companies and associations haven't kicked off. They have been promised a greater share of the market in return for their silence.

What I do find curious is why all of this should be so secretive. If the reasons for MTD (more accuracy, certainty on tax and tax gap reduction) given have been shot down in flames by many comentators then why do HMRC persist with them. Who gives HMRC and the Treasury remit to lie to their "customers"? If the real reasons are to introduce quarterly payments to bring tax in line with when profits are made, then why not say so. All of the secrecy achieves nothing. The lack of transparency, including the actual goals of the FRS changes, generates a feeling that we are not being told everything. Why not?
Something stinks.
It occurs to me that it would be cheaper for the 5.3 million small businesses to each contribute to the tax gap instead of proceeding with this farce.
Why not cut out the rubbish and introduce quarterly tax payments?

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Replying to RobertD:
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By rogertax
13th Dec 2016 12:00

I agree with everything you say but, especially your final sentence.
This question has not been given the weight it deserves. None of my 150 clients can see MTD working and those that have given it any serious thought have asked the same question.

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Jennifer Adams
By Jennifer Adams
12th Dec 2016 17:44

This 'grading of accountants' is something that has been known about for a while. A couple of years ago Rebecca Bennyworth wrote about it in a blog. I included a link to her blog in my article: 'Will your firm pass HMRC's new test'? See point 4 and 'Be Advised' sections
https://www.accountingweb.co.uk/tax/hmrc-policy/will-your-firm-pass-hmrc...
It appears to have gone quiet until now but its probably too late anyway - more than likely its already been done. The concern is... how does a firm know whether they have passed the 'test' or not? And what if they havent?

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Replying to Jennifer Adams:
By Glenn Martin
12th Dec 2016 22:06

That's exactly my point HMRC have not wrote and explained the grading or what is expected of agents.

We have probably been pre assessed on a set of criteria we do not know or had any input into.

Is there an appeals process?

Also is it possible to improve your grading once you have it?

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By RobertD
12th Dec 2016 22:21

Surely if HMRC hinder a nominated agent by restricting access allowed to others, they are contravening their own charter

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Replying to RobertD:
By Glenn Martin
13th Dec 2016 09:45

You couldn't make it up RobertD.

If MTD is to have any chance of working agents need to be fully engaged in putting the problems right.

Mixing and matching access depending of your face fits or not is surely a recipe for disaster.

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By Christopher J Thacker
13th Dec 2016 10:29

Isn't the whole answer to the MTD shambles to quite simply require that every person and business have their accounts/tax returns prepared by an accountant. This would get rid of the problems caused by those who go it alone.

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Replying to Christopher J Thacker:
Tornado
By Tornado
13th Dec 2016 11:04

In the days before Self-Assessment and do-it-yourself tax, it was necessary to send in Trading Accounts with your Tax Return and an Inspector looked at every Return with an expert eye. It was possible to prepare your own Accounts and submit them with a Return yourself but I guess that the relative 'tax gap' was much smaller in those days as most accounts were prepared by professionals.

With self-assessment and the encouragement of do-it-yourself tax, it is not a surprise that there is such a large tax gap at the moment. This is probably due to the ignorant efforts of many do-it-themselfers and, of course, those able to deliberately defraud the system undetected.

It is interesting to note that way back in 1995/6 it was originally intended that Self-Assessment apply to everyone but this idea was scrapped pretty quickly when it was realised that HMRC could not deal with that much work, This was also at a time when HMRC were not really fit for purpose with some letters not being answered for literally years and much of the back log had to be simply written-off.

It has taken the Government a long time to see the major flaw in Self-Assessment which is assuming that ordinary people who are not trained/qualified professionals are capable of completing complex tax returns correctly.

Whether the Government like it or not, the key to a smooth and efficient tax administration system is an honest approach to involving the Accountancy (and associated) professions in the preparation of tax submissions and ditching the unrealistic view that everyone is an Accountant and can deal with taxes themselves.

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By CJaneH
13th Dec 2016 10:50

HMRC need to understand that

A many individuals are not at all internet savvy, even those that use it for a limited range of uses.

B Most people really do not understand accounts or tax and need an agent to act for them.

Therefore HMRC need to allow a system where individuals appoint an agent, and that agent ensures that the information is collated and submitted to HMRC.

This week I had failed to register a new techno fob client with pension & rental income by submission of a SA1.

I decided to get him to phone HMRC in my office. Had I not been there instead of issuing a UTR the HMRC employee wished to assume that the rental income would be constant and wanted to adjusted my clients PAYE coding.

HMRC need to realise that agents are the interface between HMRC and the tax payer, and with out us they will receive a lot of very inaccurate information

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By lechiffre
13th Dec 2016 10:58

Why on earth HMRC can't incorporate some form of 64-8 in the SA Return has puzzled me for many years.

It would be so simple... maybe that's why it hasn't been done!

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By David Gordon FCCA
13th Dec 2016 11:07

"HMRC will be carrying out risk assessments of the entire agent population"
In politcal terms this is known as "Soft" censorship. In Russia and China it is a well-practiced art.
The unspoken inference being that we do not lock you up, but if your actions or behaviour happen not to agree with our view of the matter we can and do make it difficult for you to operate.
In this way, accountancy firms which maintain a robust position vis a vis HMRC for and on behalf of their clients, HMRC will be able through a down-grading process be be able to adversely affect the accountant's business.
All very polite, with the best of motives, and utterly repressive.
It becomes more and more apparent that the longterm goal of HMRC is to turn accountants in public practice into unpaid servants of "Lord" HMRC.
Similar reasoning applies to the 64-8 fiasco. It should not be any more difficult than filling in one form and that is it.
In mechanical terms it is called over-engineering a product.
.

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By CJMaslen
13th Dec 2016 11:25

I spent a large chunk of yesterday talking to the software suppliers (a major organisation) because a very simple tax return would not finalise for submission. They (and I) remain baffled, although we managed to progress the task by trickery. As the systems become more complex and the customers are used as guinea pigs to find the glitches, using technology is becoming more complex, more stressful and less reliable. The grandiose MTD scheme is guaranteed to cause more headaches. HMRC surely realise that there are many people who have never used a computer. Why bully them?

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Tornado
By Tornado
13th Dec 2016 13:22

"Theresa May said that Britain should be a country that works for everyone and opportunity is "fairly shared".

"Government cannot stand aside when it sees social injustice and unfairness," she said.

Fat chance of all that happening then.

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By AndrewV12
13th Dec 2016 14:39

Extract above
“Both agents and software providers have longed for a more streamlined approach to the necessary chore of creating the agent-client authorisation link".

I have never longed for a more streamlined approached, the current system is slow and poor but will suffice, (the new system will also be slow and poor) yet another example of HMRC identifying a need (a devious one in this case) and introducing a lot of changes on the back of it, give them a centimetre and they take a kilometre, and all apparently because i wanted change..

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By Rosey
13th Dec 2016 14:55

Having been in tax since a raw junior straight out of school in 1968, I am pleased I am retiring in March 2017 !!!

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Replying to Rosey:
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By Jack the Lad
13th Dec 2016 16:21

Me too Rosey!

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By Arm266
13th Dec 2016 15:26

I have 90% of my clients who just about manage to respond to emails, and some who can only deal by mail, and they are too far away for me to travel to sign up new clients to the system. How am I to get them registered!!!
I currently sent out the SA1 and then register them myself when they email or post the UTR.

Also, I am still awaiting a decision on what is expected of those businesses who are under the £10k turnover [or whatever figure is finally agreed] Most of my clients come into this category.

Isn't it time HMRC got off its backside and sorted that out instead of setting up systems that people can't use. Will inability to register be an acceptable excuse for non-return??

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By Digit Dabbler
13th Dec 2016 23:55

I had two lads in the office last week who couldn't register for self-assessment online because they don't do email. Well one of them might have but he's never used it and the other thought he could go to the library and get someone to help him set one up. They're just out of school and I'm more technologically advanced. We went for the phone route. Finally got through to a real person at HMRC who took their details and will post their UTRs. They're going for the shoebox, pen and diary accounting system. What hope do they have with accounting software and MTD?

I'm hoping I've upset HMRC sufficiently over the years with my caustic letters that I'll be blacklisted and forced to retire. Stacking supermarket shelves seems preferable to MTD!

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By AndrenaM
14th Dec 2016 21:34

I tried to log into HMRC for a client that wanted to initiate her tax refund. She doesn't have a passport, so that was it, system stopped dead there and then and we couldn't go any further. So how is she supposed to authorise an agent?

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By Ian McTernan CTA
20th Dec 2016 11:15

They need to rename this new system 'Making Tax Complicated'.

Every time we hear more details it gets worse. Appointing an agent should be simple.

Being an agent should be simple, not having to jump through imposed hoops just to get some sort of 'Revenue approval' to be able to act for clients.

Perhaps they will grade on qualifications, with CTA being top tier, qualified ACCA with tax modules as second tier, then ATT third tier, AAT fourth, and so on?

I spoke to one of my clients briefly about MTD the other day. His response? Why should he care less. Then I explained about the additional fees it would all cost, at which point he decided HMRC's MTD team should take a running jump (I've obviously cleaned up the words that were actually said).

HMRC are determined to make everyone either use cloud software or just stop declaring their income by the looks of things.

One subbie even suggested the way to file in future was to send in a paper return with the words 'see attached' in the self employment section, and then include all his receipts and vouchers and bank statements. I wonder if that counts as providing all the information to HMRC for them to determine his taxes...

One thing's for certain, he won't be filing anything quarterly or using any sort of software...

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Replying to Ian McTernan CTA:
Tornado
By Tornado
20th Dec 2016 11:30

"One thing's for certain, he won't be filing anything quarterly or using any sort of software..."

.... just like hundreds of thousands, perhaps millions, of other HMRC customers.

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