Taxpayers who join the Making Tax Digital pilot scheme starting in April won’t have to send HMRC a self-assessment return for 2017-18, HMRC has confirmed.
To encourage 400,000 people to sign up for the “public beta” testing programme starting next month HMRC is offering a “special treat” for participants by excusing them from having to complete an SA return, MTD programme head Theresa Middleton told AccountingWEB last week.
Recognising that filing monthly income and expense updates then having to complete a separate SA return would be the “worst of all worlds”, Middleton said the plan was to let MTD guinea pigs send in details of other income through their personal digital account.
“You’re not opting out of the SA system, but what will happen if you join the pilot is you won’t have to send us a self assessment return for that year,” she said.
In a written clarification for AccountingWEB, HMRC explained: “It is not a question of opting out of the self assessment system. By subscribing to the pilot, and then complying with the conditions (sending in summary updates, End of Year activity, and where appropriate all other tax information) there will be, for the relevant year, no requirement to subsequently submit a self-assessment return because the taxpayer will have already met their statutory obligations.”
The year-long test programme will run from April and be open to volunteers, businesses and landlords.
To make the pilot representative HMRC is approaching certain groups, such as those not currently using accounting software, to encourage them to take part.
The pilot itself will start with a stripped down product that will be upgraded with agile programming methods as the test programme progresses. As new facilities are added, HMRC will look to bring on board other types of organisation.
At a face-to-face meeting with Theresa Middleton and HMRC’s head of digital transformation Bridgid McBride, the latter explained to AccountingWEB how the department works with software companies and their users to bring them on board at “the right time to join the party” in the test phase.
One implication of this approach, however, is that tax agents and accountants may be left out in the cold when the pilot scheme starts, as the application programming interfaces (APIs) that will let them interrogate client data will not be in place.
In his evidence to the House of Lords Economic Affairs Committee last month, IRIS CEO Kevin Dady indicated that his company would not have an MTD-compliant accountant suite ready until the autumn.
Middleton told AccountingWEB: “Our expectation is that the smaller providers of agent software will be ready in April, May and June, and some of the bigger ones are unlikely to be ready until later.”
During the same parliamentary hearings, questions have been raised about the relatively short timescales for testing and the readiness of the HMRC application programming interfaces (APIs) that will allow tax agents to see the contents of their clients’ tax accounts.
Because of the 10 months allowed before a taxpayer has to file their end-of-year confirmation, some tax experts are concerned that the end-to-end system won’t have been tested before it becomes mandatory in April 2018.
Acknowledging that the final review process wouldn’t be tested until after that date, Middleton commented: “Before any mandated customer goes through their end of year, the pilot group will go through their end of year. The pilot group will test the end-of-year process so that by the time you’re mandated it will have been thoroughly tested and tweaked.”
The elements that unincorporated businesses will be mandated to do from April 2018 - subscribing to the digital service, keeping digital records, sending HMRC the data and seeing it replicated in your tax account and paying as you go (if you want to) - will all have been well tested by that date, Middleton confirmed.
And it’s not just the APIs that are proving elusive. According to Middleton, HMRC has been working on a “terms of collaboration” document (including annexes and supporting documentation) that will detail things like free software functionality requirements, security standards, and other elements HMRC wants to see in MTD-compliant applications, such as key legislative requirements. Middleton told us, “HMRC will publish this later this year.”
Questions awaiting answers
AccountingWEB’s meeting with HMRC was part of a continuing effort to help the tax department communicate its plans and guidance around the digital tax project, and AccountingWEB will publish the full set of answers separately.
Some issues await confirmation by ministers, official announcements and publication of further legislation and secondary regulations - some of which may arrive on Budget day next Wednesday (8 March), others in the Finance Bill on 20 March. Until then, we will continue with our enquiries to resolve some of the points raised in this article:
- Where are the APIs that will allow agents to access data in clients’ personal tax accounts? Agents will need this information to participate in the public beta test programme.
- If agent APIs aren’t available until the autumn and clients choose to go into the pilot scheme in the spring and interact with HMRC through their personal tax accounts, how will agents ensure the accuracy and completeness of the information provided?
- Will the free MTD software provided include facilities for taxpayers to authorise their agents to access their online data?
- When can HMRC specify the legislative, functional and security requirements set out in the “terms of collaboration” document with the software industry? What legal status does this document have, and when will it be made public?
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