MTD pilot goes live on Monday 3 April

Synergy 2017 HMRC session
Synergy 2017_Zac Meyer_MTD
Hub
Brought to you by Thomson Reuters
Share this content

Essex-based accountant Gary Jacobs will be the first practitioner to join HMRC’s Making Tax Digital (MTD) public beta testing programme, which goes live on Monday.

Jacobs, the managing director of Eazitax had been put forward by Thomson Reuters as one of its candidates for the MTD pilot. At the software company’s user conference in Coventry on Wednesday (pictured above), tax department officials told Jacobs that he had been selected as the first firm to join up.

Chancellor Philip Hammond eased the workload on unincorporated businesses and their advisers by giving those under the VAT threshold until at least April 2019 before they have to enter the new regime. But unincorporated businesses and landlords over the VAT threshold will start quarterly reporting from April next year and the launch of the pilot means that MTD is now a working reality.

HMRC head of customer understanding & engagement Julian Hatt told the conference audience that in the earliest stages of the pilot, “There will be things businesses can do that agents cannot.” But he was keen to build momentum behind the digital programme. “The important thing is to have conversation with clients and get them keeping records,” Hatt said.

There are actually two pilots taking place, one for keeping business records digitally, and one for the online services that will be used for agents.

Thomson Reuters tax product manager Mark Purdue elaborated on some of the constraints and mechanics of the beta test programme. “HMRC won’t be catering for everybody,” he said. “Certain people won’t be able to join.”

HMRC is picking a “handful” of agents who will join the pilot’s earliest phase - but accountants will be able to subscribe for the MTD pilot themselves as businesses. “You can subscribe yourself as a business and then go through and authorise yourself as an agent,” Purdue said.

The next step will be to align the firm’s existing self assessment agent codes to its new MTD code. There will be one MTD code per firm, regardless of its size, and all of the previous self assessment codes will need to be mapped to the new identity. 

New clients will be able to sign up for the pilot later in April and by May it should be possible for them to file MTD updates.

Many of the accountants at the conference responded positively to the pilot announcement, perhaps because it meant there was something tangible they could to start preparing for the transition.

While setting out the department’s plans, HMRC’s Hatt respondent robustly to quibbles raised by accountants about the feasibility of getting their small business clients to adopt smartphone and online accounting tools.

“We are looking to try to change businesses attitudes and behaviour towards record-keeping,” Hatt said. “Nobody underestimates how difficult that will be. We’re not being too ambitious about how quickly we can get this perfect, but we are looking to make an improvement.

“In an ideal world, businesses would capture expenses and income in near real time. Recording them at the point of transaction will not be practical for some, but we would look for information to be captured at end of each day. I cannot say HMRC is going to be especially tolerant of businesses that retain records on paper and catch up at end of quarter.”

When an accountant asked whether a taxi driver who did not currently have the right equipment would be classed as digitally excluded and therefore exempt from MTD, the HMRC official replied: “An individual’s lack of proclivity to use technology is not an indication of digital exclusion. We are living in a digital age. The level of penetration and acceleration of the internet, smartphones and tablets is on a massively upward curve. We can’t be left behind. It’s a question of capability, not preference.”

The persistence of clients putting their receipts into boxes and taking them to their accountants to sort out was was at the root of HMRC’s mission to introduce digital record-keeping, he continued. “Nobody doing that record-keeping is doing anything wrong, yet we have tax gap of £8bn, a lot of which is attributable to poor records.

“The challenge of changing attitudes to record-keeping is not an easy one, but if we get to the point where information is recorded closer to the point of transaction, and that’s based on more consistent, accurate information, that should make everyone’s lives easier.”

The £8bn tax gap claim has become more prominent in HMRC communications in recent weeks, but is being met with scepticism from the profession - as witnessed at the Lords Economic Affairs committee hearing in February.

Tax lecturer and HMRC digital advisory group chair Rebecca Benneyworth added her doubts to the growing pile in recent talks.

“HMRC is being a little more open [that MTD] is about the tax gap,” she said at QuickBooks Connect.

“Their figures say that a large sum of money in the tax gap is attributable by mistakes by small business. They are ranking that as either failure to take reasonable care, or simple error. They have a big number attached to that.

“They’ve decided, if we get small businesses using technology to keep books, there won’t be any more mistakes: ‘We will close the tax gap because we will increase accuracy in the small business sector.’

“The truth is if clients wrote books up a bit more often, I’m sure they would be a bit more reliable. Would they pay more tax as a result? No. We make sure income hasn’t been underdeclared - I’m pretty comfortable about income. Like most accountants, if we’re talking about actual errors, you are going to change the tax take, but it ain’t going to be in the way they think.

“But then the tax gap is a completely made up figure anyway. They genuinely believe it, because to them it’s based on good evidence. To us, we might as well be watching La La Land.”

About John Stokdyk

John Stokdyk is the global editor of AccountingWEB UK and AccountingWEB.com.

Replies

Please login or register to join the discussion.

31st Mar 2017 18:14

Real time record keeping for micro businesess?

Hart is an idiot

Its not going to happen, and HMRC simply cannot make it happen.

Do they really expect every small business person in the country, to come home after a hard days work and bugger_about on a computer "doing the books", rather than using a bookkeeper? Or do they expect bookkeepers to be doing daily bookkeeping for their clients now?

What right do HMRC have to dictate how and when a small business does their records? That is a commercial decision, not a tax one.

This is stepping well beyond what is an acceptable boundary for government to be telling people what they should be doing.

All tax payers need to do is pay the right amount of tax. Period.

Government should not be dictating the method in which that is achieved.

Thanks (22)
avatar
to ireallyshouldknowthisbut
31st Mar 2017 19:01

Well said, I agree.
My clients do what they do best - their trade e.g. hairdresser, plumber etc and leave me to do their bookkeeping.
It will be impossible for me to do all my clients books within the timeframe 'mandated' by HMRC.
It may also mean starting to use new software which will incur new costs.
Really pi--ed off with the whole affair.

Thanks (5)
avatar
31st Mar 2017 20:15

So now we can't even do the bookkeeping quarterly, never mind once a year.
They can sod right off. Am I now meant to work nights, visiting all my clients like Santa to capture their daily receipts.

Thanks (5)
to SpreadsheetUser
01st Apr 2017 08:39

The article was getting a bit long and we couldn't squeeze in everything that was said, but if it gives you any comfort, Julian Hatt did say at one point that the precise conditions would be down to the nuances of wording in the legislation, which is still being drafted.

In a panel session the next day, AccountingWEB's Rebecca Cave pointed out that if the secondary legislation stipulates that summary totals are submitted quarterly, it will be very hard for HMRC to set concrete requirements for when the transaction recording is actually done.

But since the idea is that smartphone apps will be capturing the transactions and pumping data to HMRC at quarter end, the tax department is assuming the bookkeeping workload will evapourate.

Thanks (0)
By Tornado
to John Stokdyk
01st Apr 2017 09:48

"But since the idea is that smartphone apps will be capturing the transactions and pumping data to HMRC at quarter end, the tax department is assuming the bookkeeping workload will evapourate."

I fail to understand how businesses, both unincorporated and incorporated that have thousands of transactions to deal with and different staff dealing with different aspects of the business, are going to be expected to record every transaction on a mobile phone.

These people are ignorant and deluded. The more they pretend to know what they are doing, the more foolish they look.

I think this must all be an April Fools joke and I will wake up soon in the real world.

Thanks (17)
avatar
to Tornado
01st Apr 2017 09:37

Using smartphone apps is a pipe dream. I use the Shell scan and go app as a novelty and it takes far longer to focus on the QR code, wait for it to process my payment and confirm receipt than if I had walked into the garage and used my card.
Novelties can't be used in accounting. Far far quicker to have a receipt and enter it with a keyboard into software

Thanks (6)
By Tornado
31st Mar 2017 20:58

Relax everyone.

It just is not going to happen the way HMRC think and eventually they will get the message.

Legislation or not, the impossible is still the impossible.

Thanks (5)
avatar
By RobertD
31st Mar 2017 21:11

Stronger words from Benneyworth.

Thanks (1)
avatar
31st Mar 2017 21:17

Of course it would be nice if we all got home at night and updated our bookkeeping. But it doesn't happen
His comments about not tolerating this shows utter, utter arrogance. How are they going to police this?
Reminds me of a Kenny Everett character with the catchphrase "it's all in the best possible taste"

Thanks (5)
avatar
to SpreadsheetUser
03rd Apr 2017 11:09

Named "Cupid Stunt" as I recall!

David Winch
Sales & Marketing Consultant
Cambridge

Thanks (0)
avatar
to David Winch
06th Apr 2017 11:22

Yes, I was seeing if anybody would get it!!

Thanks (0)
By Tornado
31st Mar 2017 22:55

Well it seems there will be someone in the pilots then.

I guess the other 399,999 will follow in a month or so and everything will be hunky dory by next April.

Thanks (7)
By Tornado
01st Apr 2017 11:56

Thank you John for the article, as usual, and thanks to all that are representing us in the MTD debate.

My only criticism is that everyone seems to be 'too polite' to the HMRC MTD Team and I think they really need to be told the facts in no uncertain terms, by knowledgeable people, exactly what their project really involves.

As has been suggested many times on AWEB, they need to get their hands dirty and visit a variety of Accountancy practices to see exactly what the problems are for some.

Just waiting to see what turns up is not really an option now and HMRC need to be forced to accept the truth and change the way that MTD is being introduced. As has been said by myself and many others, the principle of MTD is acceptable, but the way it is being introduced is certainly not.

I suggest, therefore, that we take to the streets and make sure that everyone actually knows at least what MTD will mean to them even if the detail is fuzzy. All round to my place on Monday then, with some appropriate banners and placards, and we can hit the headlines and ensure that this important topic is not buried under the Brexit story.

(The last paragraph is tongue-in-cheek of course, but you will get the idea. The fact is that my place is just not big enough to accommodate you all).

Thanks (3)
avatar
to Tornado
01st Apr 2017 15:15

I would happily come to your place on Monday with appropriate placards and banners but really don't think it would have much effect.

It seems that people are just accepting this is going to happen without putting up a fight.

I just checked the petition that was started about MTD and this closed on 27 March with only 492 signatures!

Even local newspapers don't want to do a story on this - I am totally gobsmacked.

By the time this gets underway and HMRC 'customers' realise what they are being forced to do it will be too late to put a resistance.

Thanks (3)
avatar
01st Apr 2017 21:17

It appears that, due to HMRC unprofessional & acute incompetence, compounded with bad designed tax policies (IR35), there has been a tax gap (£ 8 billion); which more often than not; one will notice HMRC keep quoting in their every seminar & to fix that, they are now coming up with MTD eliminating agents (Accountants) from the chain, so they can go after taxpayers who are naive to accountancy & could end up paying wrong taxes. If the entire idea is to recover £8 billion pound, Government will already save that money (EU Membership Fees), these two fruitcake womens who are leading this projects that's most dangerous thing and I cannot believe these loose cannons are given too much power...Did anyone remember Margaret Hodge....that's right...

Thanks (0)
avatar
02nd Apr 2017 09:58

The Numpty Department rides out!

We're now 12 months away from full implementation of the biggest change to the UK tax system in a generation. In my view we should be having a comprehensive pilot which should be weighted towards the tougher nuts to crack.

So for example, given that 40% or so of tax returns are filed in January if I was designing the pilot then 60% of the population in the pilot would have filed in January 2017.

I would be asking companies like Thomson Reuters to bias their samples towards the practices and customers who had asked the most questions of their helpline, and who appeared to have made the most errors.

The time for a sample biased towards low-hanging fruit was a long time ago for any tax service which is run properly.

Blaming the tax gap on poor records is an utter fiction, for which not a shred of evidence has ever been produced by HMRC. In my experience most people let loose on cloud software will end up paying less tax.

To take just one obvious example, in my experience less than 10% of new business owners realise the existence of the UK's stupid rules on business entertaining. When you have just set up a business with no clients, what could be more of an obvious trading expense than meeting up with a potential client down your local restaurant? No clients = no profits = no taxes.

HMRC will never ever get this kind of stuff. Our tax service is rubbish compared to what it was 20 years ago.

Thanks (2)
avatar
02nd Apr 2017 18:11

I said at the start and say again HMRC and its advisors appear to think a small business is the size of Debenhams! We have many one man businesses struggling to find time to do their own work leave alone think of mobile telephone book-keeping and even photographing invoices. I truly believe MTD will collapse. HMRC still struggle to answer the bloody telephone, can't amend a simple code number correctly etc. idiots !

Thanks (8)
By Tornado
to barrowbakers
02nd Apr 2017 18:53

"HMRC and its advisors appear to think a small business ........ "

I would challenge your use of the word "think"

Thanks (1)
avatar
to Tornado
02nd Apr 2017 23:15

Sorry a mental aberration I my part. No thought goes into their logic at all!

Thanks (2)
avatar
03rd Apr 2017 06:55

I am just doing the books of a new client, a company director at a senior level who does property development on the side. He uses spreadsheets but clearly is exactly the sort of person HMRC thinks should be on cloud software.

In his spreadsheets, there is no difference in treatment between a restaurant meal 300 miles away from home on a business trip, and one 2 miles down the road with a customer or his wife - all in the business expense column with VAT claimed back. He is claiming VAT on fuel but also 45 pence per business mile.

No doubt every Cloud software director and HMRC officer who looks at this site is now going to jump right into this thread and tell us all the algorithm they are writing which will pick this stuff up at source and hence reduce the size of the tax gap.

Because the last time I looked, it is me correcting this sort of stuff and informing this client about his VAT return errors in my accounts follow up letter that is reducing the tax gap.

Thanks (6)
avatar
03rd Apr 2017 10:43

I worry about the reliance HMRC are placing on people using the apps correctly to do the book keeping. All good if the book keeping is really straight forward. In my experience what is going in still needs thinking through. A new client last year used an app which cost £14 a month to do his bookkeeping by being linked to his business bank account. The information he proudly presented to me was complete rubbish. The bank didn't balance, no account was taken of his drawing cash and making purchases. Cash purchases weren't accounted for, some entries were just in suspense accounts. We do book keeping for a lot of builders who have accounts at various trade accounts at builders merchants, use Sub Contractors in CIS etc. I fear there would be a lot of double counting if these clients were left to their own devices. I imagine that they would use the app for the invoice they receive when they go the builders merchant and then use it again when they receive the monthly statement for payment. I think HMRC will find rather than close an imagined tax gap it would probably increase it. I also can't wait to tell pensioner clients who don't have mobile phones let alone computers or broadband "It’s a question of capability, not preference.”

Thanks (4)
avatar
03rd Apr 2017 11:01

I think HMRC have put off for a year those under the VAT threshold because they actually realise that it could never work .
What I think they will do is to make it mandatory that all business have to register for VAT. Then all bookkeeping would done, at first, on a quarterly basis.
There is no other way I can see this remotely (no pun intended) working. Nor can anyone else I feel. Do our bodies actually think MTD (in its present form) will work????????????

Thanks (2)
avatar
03rd Apr 2017 11:23

If the £8bn tax gap exists, then it is far more likely to be unrepresented businesses/traders which are responsible. Agents do at least make an effort to restrict the extravagances of clients' ignorance in the realms of non-tax allowable deductions, don't we?

The simpler way of HMRC dealing with the gap would have been to stipulate that any person/entity registered for SA/VAT/CT should have an 'approved' agent through which HMRC and the business would communicate all accounting and tax matters.

UK plc...the land where simple is just too hard

* 'Approved' is of course, a word for further discussion!
** Perhaps it should be MtG - Mind the Gap instead of MtD (Sorry, it is a Monday morning!)

Thanks (2)
avatar
to the_fishmonger
04th Apr 2017 12:00

Mandating the use of an "Approved Agent" (Accountant) is a slur on those non-Accountants who are nevertheless competent to manage our own books, accounts and tax affairs.

This looks like a severe case of 'jobs for the boys'.

I think it ought to be mandatory for all Accountancy practices to engage the services of a Sales & Marketing Consultant, given the "extravagances of Accountants' ignorance in the realms of marketing and selling".

Sounds only fair to me.

David Winch
Sales & Marketing Consultant
Cambridge

Thanks (0)
avatar
to David Winch
04th Apr 2017 12:10

oooo David. There is no place for marketing in the Accountancy profession. You only have to look at the mess banks got into when they started ponsing around, listening to the marketing strategies.
If there are errors where oh where are they coming from. Does anyone know.
If they are from DIY business then why hit agents. If it's agents making the errors then HMRC should know who the error makers are and do something specific about it, not drown everyone.

Thanks (0)
avatar
to David Winch
04th Apr 2017 12:22

The matter of who should approve those agents would be a matter for conjecture and shouldn't preclude competent persons from obtaining approval. Perhaps a proper audit sample of returns submitted by each gateway over the past year or two would suffice?

The purpose of using the word 'Approved' was to avoid the assertion that they be accountants, qualified or otherwise. That is another conversation/argument entirely since I have no truck with those waving a certificate but their work suggests they struggle to utilise the knowledge gained whilst obtaining those certificates

Mandating would be no surprise following the [likely] imposition of MTD regardless of the proof supplied relating to hardships, abilities and the cost to business owners.

Thanks (0)
avatar
03rd Apr 2017 12:00

"I cannot say HMRC is going to be especially tolerant of businesses that retain records on paper and catch up at end of quarter.”

Why ever not? I think that this one sentence encapsulates all that is wrong with HMRC's thought process!

HMRC seem to picture Mr Self-Employed as a sole, sole trader ie with no employees, a couple of sales invoices a week and a dozen weekly expense items.

Thanks (1)
By Tornado
03rd Apr 2017 12:02

What upsets me most about MTD is that this could have been planned in a much more structured way with a wide consultation from all stakeholders and the use of more traditional project management techniques.

We really could have created a Digital Tax Administration system that was the envy of the world with provisions to make it all inclusive by carefully catering for the needs of everyone it affects.

Instead we have a project doomed to failure due to the self serving attitude of ignorant bureaucrats who should never have been involved in such an important and innovative initiative.

Whilst industry and commerce forge ahead with new ideas which this Country can be proud of, we have to put up with this sort of c**p from our Government.

Such a shame.

Thanks (4)
avatar
03rd Apr 2017 12:54

There is no way this will reduce the tax gap.

A self employed person who pockets cash "fiddle" jobs will continue to do so. These aren't recorded now and encouraging more regular recording will not change this.

I expect the tax gap to increase as many taxpayers will think stuff this MTD lark, drop out the system and carry on as before, only now not paying anything into system.

Thanks (1)
03rd Apr 2017 13:57

Julian "he's speaking through his" Hatt. HMRC head of customer understanding & engagement. Obviously his post hasn't started yet. If it had started it would have scrapped MTD.

Thanks (0)
avatar
to kevinringer
03rd Apr 2017 15:23

An anagram of Julian Hatt is Jail That Nu (where Nu is a top level internet code for an independent territory - says it all).

Thanks (0)
By Tornado
to kevinringer
04th Apr 2017 12:56

"HMRC head of customer understanding & engagement."

Isn't that cute. Wish I had that sort of imagination.

Thanks (0)
avatar
By RobertD
03rd Apr 2017 14:46

The system has gone live without trouble.
I thought it might learn at a geometric rate and become self-aware like Skynet.
Small business terminators Ellison and Harra will be disappointed.

Thanks (1)
avatar
03rd Apr 2017 16:13

This may become the accountants algorithm:

Client up to the task? If yes then charge to show them how to do quarterly reporting and review at year end with option of charging them to file quarterly reports (but what if you then see those reports with numerous errors..... what do you do in short time-frame?)

Client not up to the task? Far more frequent (not quarterly!) carrier bags/envelopes required and try to get a bank feed running or at very least train client to download data in a .csv. Also just consider improving what they already do even if it is just better organisation of paperwork or basic schedule we can convert to an acceptable format for submission.

Client happy to pay enhanced fees? If yes then depending on workload take on additional number crunching staff

Client not happy to pay enhanced fees? Wave goodbye unfortunately.

Biggest issue here for US is that for most of us we have clients just not capable or competent enough to do the task. Or quite simply choosing to do what they do best and pay us to do what we do best.

Biggest issue for HMRC is that they have failed to understand that the tax gap is largely created by SME's doing things themselves, submitting via the HMRC website with no professional looking at the data at any point - their solution is to add to the number filing with little input or review = tax gap more likely to widen than to narrow!

Thanks (1)
avatar
By spcm
04th Apr 2017 16:54

“In an ideal world, businesses would capture expenses and income in near real time. Recording them at the point of transaction will not be practical for some, but we would look for information to be captured at end of each day. I cannot say HMRC is going to be especially tolerant of businesses that retain records on paper and catch up at end of quarter.”
This isn't an ideal world and when will HMRC wake up to the fact!! I and my clients are very rural, therefore we either do not or rarely have access in any meaningful way to 3 or 4G, broadband can be dodgy at best and non-existent at worst. Therefore even the cloud doesn't work for us, unless we are hanging upside down in a tree in the middle of town!! Doesn't really aid book keeping!
All my clients will, even if not now, be put through the desktop accounting software as and when necessary. But they will still stick to using paper/spreadsheets - to try and persuade them otherwise with the consequent expense will be next to impossible.
Austrialia and New Zealand are well down this route but they have a totally different attitude - really quite refreshing in comparison. This link - https://www.acuitymag.com/finance/the-role-of-accountants-in-a-digitalis... - gives a good idea as to how they are doing it. However, the Australian system recently had a major hardware crash which they are still trying to finally sort out.

Thanks (0)
avatar
23rd Apr 2017 11:11

I have clients that don't even have a smartphone, how are they going to be able to comply? I certainly won't be able to take on the kind of workload that will transpire. There is still too little information available for my clients!!

Thanks (0)