Software suppliers tweak plans for MTD ITSA in 2024by
Hard-pressed accountants aren’t the only group to breathe a sigh of relief about the delay to Making Tax Digital last week. John Stokdyk gets the inside view from the country’s tax software suppliers.
Like accountants across the UK, accounting and tax software developers are reviewing their calendars and reprioritising plans for the transition to MTD for income tax (MTD ITSA) after the first secretary to the Treasury Lucy Frazer announced a 12-month delay to the timetable last week.
While the announcement came with little warning, there was a growing consensus that the odds were shifting in favour of a delay. “The basis period reform proposal was such a fundamental change that to change something so big seemed like a risk with such a short timetable. Given pushback from accountants, professional bodies and us, it seemed inevitable it would be delayed,” said Jenny Strudwick, head of tax at IRIS Software Group.
TaxCalc director of product compliance Dean Shepherd struck a similar note in a LinkedIn post: “This announcement will no doubt be a relief to many who felt HMRC were not in a position to roll out MTD for ITSA successfully in April 2023.”
The MTD effect on software development
Accountants have devoted so much time and energy to preparing for and adjusting to the ever-changing MTD timetable that many may have overlooked the impact HMRC’s digital transformation has had on the accounting software industry.
Thousands of programmer years that could have been spent on enhancing product functionality have been poured into coding new online compliance rules and tracking the moving target of HMRC’s MTD technical guidance.
As MTD drags on through the decade, HMRC’s grand project will continue to stunt the profession and its software suppliers in other areas. As one industry insider commented, “If we hadn’t had to gear up for the original plan to go live in 2018, we would have been able to do so much more.”
But compliance changes continue to pay the rent for both accountants and the software industry. The big headaches come, however, when HMRC doesn’t give them clear and timely guidance - another characteristic that has become increasingly common during the MTD era.
While welcoming the delay on behalf of customers, “many of whom disagree with the speed of changes”, BTCSoftware director Rob Ellis flagged gaps in HMRC’s technical guidance on MTD ITSA.
“As software developers, this delay provides an opportunity to work with HMRC to gain further clarity into some grey areas identified by many accountants, such as the process for businesses and landlords with multiple income sources,” he told AccountingWEB.
Sage’s product marketing director for accountancy and tax Chris Downing weighed in on remaining unknowns around landlords: “Many accountants have clients with shared property ownership. How should multiple bookkeeping solutions be reflected in a single quarterly update? We’d like to see clarification on what HMRC expects from this journey, and how to differentiate earnings from furnished holiday lets from buy-to-lets.
“There are also nuances in the final declaration - effectively a new self assessment return - we really want to understand the detail.”
TaxCalc’s Dean Shepherd and IRIS head of tax Jenny Strudwick were also waiting for more detail on partnerships. Last week’s draft legislation confirmed that trading and property partnerships would be given an extra year until April 2025 before they join MTD ITSA, but the date when other types of partnerships will have to join was not confirmed, Shepherd noted.
“Partnerships will be mandated from April 2025 and the only way that works is if you have a pilot phase. We’re making the assumption that something has to be there before April 2024 and we’ll be ready to take part in the pilot,” said Strudwick.
As tax software producers the message from IRIS and other developers was that they can only plan their work when they know HMRC’s plans.
“We need a bigger picture view,” said IRIS head of accountancy Steve Cox. “Then we can see how to use one bit of code elsewhere in the program for a similar function. We need the big picture to manage how we’re going to build it.”
The other source of potential friction spotted by sharp-eyed AccountingWEB members last week were unrealistic impact assessment costings that leaned heavily on the availability of free software to make the quarterly MTD submissions.
BTCSoftware’s Rob Ellis responded: “The requirements of MTD ITSA development are complex and likely to prohibit the development of free software. However, we continue to work behind the scenes to create a solution that will provide an affordable, comprehensive and intuitive means to manage MTD for ITSA.”
Sage’s Chris Downing gave a rueful laugh as he considered the comments from AccountingWEB members on the HMRC costings. “I haven't seen how they were computed from the business owner’s perspective of applying the tech,” he said. “They do seem particularly low considering the role agents will play in submitting the update.”
Downing emphasised that Sage seeks to support HMRC in all its propositions, but added that the company was still waiting to find out what the tax department deemed to be simplest businesses that would be worthy of free software.
“It’s a difficult situation,” he said. “A small business may still require sophisticated software - a trader earning £15,000 on Amazon may need a sophisticated tool to capture transactions accurately. The nature and activity of individual businesses will dictate the sophistication of their software need.”
Opportunity to plan properly
The overall response from developers was almost universal - the delay would not affect any of their plans to support customers through the pilot programme and support accounting firms to get ready for MTD ITSA by 2024. With so much change to deliver in the next few years, accountants and developers will now have confidence they can control and plan properly for MTD ITSA.
“My biggest concern for the profession is that people will just sit back and wait,” said Steve Cox. “We need to learn from what happened last time [MTD for VAT implementation in 2019]. People didn’t get clients ready in time. They didn’t explain it to clients and HMRC didn’t put enough information into the marketplace to tell people what MTD was about.
“If we take a holiday, people won’t learn. That’s why we’re not changing our plans.
We’ll continue so they’re ready and they can make their clients ready. Let’s not waste the 12 months we've been given by HMRC.”
Still confused about MTD? Register for one of our popular MTD Bootcamps at AccountingWEB Live Expo with Rebecca Benneyworth or attend one of our HMRC sessions. There are over 60 panels, workshops, seminars and lectures at AccountingWEB Live Expo this December, covering self assessment, the Autumn Budget and much more - many with CPD attached.
AccountingWEB Live Expo takes place on 1-2 December 2021 at Coventry Building Society Arena, Coventry. Registration is now open. A full content programme will be announced in early October enabling you to register for specific sessions.
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AccountingWEB’s interim Editor in Chief has been with the site since 1999 and returned to the editorial hot seat in March 2020 to support the team through the pandemic. When not tending to the needs of AccountingWEB members and geeking out on their technology habits, he devotes much of his time to an oddball collection of stringed instruments...