While accountants around the country heaved sighs of relief that Making Tax Digital was being watered down, the software developers who are building the programs to drive the online record-keeping regime had more ambivalent reactions.
Sage, the UK’s biggest accounting software developer, could not conceal a tinge of disappointment in its initial response. Sage UK and Ireland managing director Alan Laing commented: “We know that the UK currently lags behind other nations in terms of digital capability. The announcements on Making Tax Digital today potentially slow the pace of the Government’s vision for a Digital Britain, a vision which could help the UK capitalise on the huge benefits of technology, just as we have seen in other countries.
“We hope that the Government’s ultimate direction and vision will remain firm, even if the timetable and rollout is moderated.”
Sage’s enthusiasm for the digital tax project can be partly attributed to Sage CEO Stephen Kelly’s previous job. As government chief operating officer until 2014, he was probably sitting around the conference table when the tax transformation idea was first sketched out on the policy whiteboard.
“Stephen [Kelly] and I have spoken a lot to government and customers and industry to digital agenda. This puts government back a step in terms of UK leading the way. We want to make sure businesses are able to take advantage of digital agenda. A lot of businesses are still not using accounting software. Every time that happens, we see that as risk.”
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Rob Ellis, CEO of BTCSoftware, was pleased HMRC had responded to calls for a delay. In his view, a recently released development roadmap suggested an “incredibly ambitious” timetable: “It would have meant HMRC’s initial promise of agents having 12 months of parallel running before the previous mandated go-live for Making Tax Digital for Business in April 2018 was clearly not going to happen.
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“I voiced our concerns to HMRC’s digital team and questioned when HMRC was going to come clean about the true timescales for MTD. It’s really good that we, along with the tax and accounting community and the Treasury Select Committee, have been listened to. Saying that, I am surprised it’s been set back so long, as only recently HMRC had been pushing really hard for a 2018 mandation kick-off.”
Ellis also questioned the government’s announcement that Making Tax Digital will be available on a voluntary basis for the smallest businesses and for other taxes. “The voluntary element is completely out of the blue and begs the question that, when given the choice, will people really move over to digital accounting?” he asked.
A more neutral reaction came from Michael Wood at Receipt Bank: “I don’t know of any software developer that needs or is desperate for MTD. I know a lot of accountancy firms were looking for more time to make the changes.
“A change in timetable isn’t a big deal. For those worried about the pace of change, it is a very good deal. From my perspective for British businesses, the key thing is it keeps going. I’ve made the point before - many governments and tax authorities are looking at MTD, saying what a brilliant idea and making their own plans to copy it. An awful lot of small business groups recognise the benefits.”
Use extra time wisely
Mark Purdue, tax product manager at Thomson Reuters, welcomed the end to uncertainty around the MTD timetable. “In our own survey of UK accountants, 80% agreed that an MTD deferral until 2019 should be aligned to the VAT threshold. Today’s news will be well received and the delay will provide more time for the pilot to be widened, and for accountants’ to get prepared.
“To support accountants through the MTD challenge ahead, we made our MTD-compliant software available more than 12 months in advance (of the original 2018 deadline) and urge the accountancy industry to take the opportunity to get up-to-speed with MTD; understand which of their clients will be impacted first; and assess their software supplier for suitability.
“Accountants will now be looking to HMRC to take the lead in terms of letting businesses know about MTD. To date, there has been no official communication from HMRC to businesses and this need to happen to ensure the message gets through to the wider business community.”
Get digital sooner rather than later
Sion Lewis, CEO of IRIS’s accountancy division, was unsurprised by the announcement but, like Purdue, he encouraged accountants to get digital sooner rather than later. “Don’t let it become out of sight, out of mind - complacency will kick in. It’s best not leaving it to the last minute,” Lewis urged.
The IRIS survey of accountants about Making Tax Digital revealed that many were not ready or felt ready. “Credit to HMRC. They have listened. They listened to that survey - I know for a fact that they’ve read the survey because in one of meetings we discussed how our accountants said, ‘We’re not ready. We don’t know enough about it.’”
But Lewis said the delay wasn’t because HMRC wasn’t ready. Whether Brexit or the snap election was to blame, he thinks political pressure played a part.
RIS doesn’t expect any further changes to its MTD timeline: “I think some of my competition will be relieved actually that the pace has gone off it but we’re in control of the roadmap. We’ll be good to make all requirements as and when they pop out and we'll take advantage of HMRC’s APIs as much as we can in the period where it is not mandatory.”
A Proper timeframe to prepare
The message of not becoming complacent continued from others within the vendor world. Wendy Rowe, UK product director for Wolters Kluwer, explained that although practices have now got a more sensible timeframe to prepare that doesn’t mean that they can relax. “With MTD and GDPR [European general data protection regulation] hitting in May, there’s a lot of work practices still need do and consider about how they're moving into the digital age.”
She added: “Our take is that it doesn't change anything that we’re doing because HMRC has made it clear that the pilot will continue. If anything there will be a stronger drive to get more practices involved in the pilot over the coming months, especially from April next year.”