As with so much else in accountancy this year, Making Tax Digital dominated the technology headlines. John Stokdyk and Valme Claro describe how the story has developed over the past 12 months.
With Self Assessment season underway, 2017 started with an undercurrent of suppressed panic and uncertainty over the progress of the government’s controversial Making Tax Digital project (MTD): What was going to happen to spreadsheet record-keeping systems within the new regime? Where were the application programming interfaces (APIs) that were going to make MTD work? Would it be worth joining the pilot scheme?
The spreadsheet problem
This time last year, spreadsheets played the role of problem child in our digital drama. At a point when there was precious little information about the shape MTD would take, the fate of spreadsheets provided a source of genuine suspense: were they or weren’t they digital records that could survive the transition to HMRC’s new era? After uproar during 2016, there were hints that HMRC was investigating how spreadsheets might link in to its new processes.
A majority of AccountingWEB members have clients with spreadsheet-based records – some of which work very well for small businesses and landlords – and changing them all to new cloud-based accounting systems by April 2018 was beyond their capability.
The spreadsheet issue was finally resolved in 31 January, with the release of a consultation response explaining, “Businesses will be able to continue to use spreadsheets for record keeping.” The decision was widely welcomed, but created an new conundrum for software suppliers, who needed to work out how they were going to capture spreadsheet income and expense data for the programs they and their customers were going to run to file submissions with HMRC.
It was an encouraging sign that the tax department was willing to listen to professional representation, but we’re no nearer resolving the underlying complexities of converting huge volumes of digital and non-digital records into the formats that HMRC deems acceptable.
Everbody loves their spreadsheets, but judging from the comments of the people writing the scripts in Whitehall and the software industry, they are unlikely to continue playing such a prominent role as the digital tax system develops.
“It seems the ‘spreadsheet’ generation just got a free pass to hide in their comfort zone until the millennials take over,” wrote Clear Books founder Tim Fouracre in his blog.
Summer confusion – and relief
The MTD drama continued with public hearings before MPs and Lords in Westminster as professional representatives and software vendors provided material to select committees that spat it back at the government and HMRC with suggestions that they might want to think again about the MTD timetable.
An unlikely hero emerged in the shape of Tax Justice campaigner and blogger Richard Murphy, who became a new favourite of AccountingWEB members when he lambasted the financial estimates used to justify MTD and almost every other aspect of the programme, including HMRC’s stance on spreadsheets.
According to Murphy, with software costs stripped out of HMRC’s £170m estimate of the extra cost to business of MTD, £103m was left to cover the cost of quarterly updates from 5.9m businesses - equivalent to £4.36 per update.
The 22 March Budget offered further hope for MTD sceptics. With the warnings from select committees ringing in their ears, HMRC and the Treasury announced that the go-live date for companies below the VAT threshold would be pushed back to April 2019. There were still questions to be answered about the criteria and processes involved, and few technical specs for programmers to work with, but then Theresa May had decided to call an election and all formal communication from the civil service stopped for six weeks.
When the dust settled in June, the Conservatives were left without a working majority and a few embarrassing gaps around the ministerial, including former First Secretary to the Treasury and MTD minister Jane Ellison. In stepped Mel Stride, who acted relatively quickly to calm business fears and focus on other priorities. The MTD timetable would slow down for income tax for another year, shifting the focus to implementing VAT for MTD in 2019.
Again, the only problem that remained was where the enabling legislation and technical specs had got to. Throughout the year, software developers complained privately about the continuing uncertainties, speed of development, and lack of progress on APIs and other key technologies needed to deliver the project on time.
According to the CIOT’s policy chief John Cullinane, the civil service is already stretched due to Brexit. “I wouldn’t be surprised if there’s another delay,” he told AccountingWEB last week. That means that as we approach the end of 2017, we’re still in suspense. Will the government throw in yet another plot twist to keep the MTD soap opera simmering and bring it back for another series?
“If I was Netflix, I wouldn’t be commissioning it,” was Cullinane’s reply.
GDPR takes centre stage
July’s MTD delay brought a huge sigh of relief all round, until everyone noticed a new character hovering insistently on the sidelines: the General Data Protection Regulation. Suddenly there was another new panic doing the rounds, with only 10 months until GDPR comes into effect in the UK on 18 May 2018.
In one of the most popular items on the subject this year, the CIPP’s Julie Hodgkin explained all the main requirements, including auditing the information all the personal information an organisation holds, seeking consent from individuals to retain their information and responding when asked by them for a subject access request with full disclosure of the information held on them.
There are new requirements compared to the old Data Protection Act, and above all organisations will need to document and review their data policies and summarise them in a policy notice for individuals they deal with.
Rather than ignoring GDPR and hoping it will go away, AccountingWEB contributor Heather Burns advised in an article taking issue with scaremongering around the subject: “The first step in healthy GDPR compliance is awareness: gaining an informed understanding of what the data protection revamp does involve. That means being able to separate the GDPRubbish from the GDPR and recognise what the requirements do not involve.”
Away from all the compliance concerns, the satellite characters of artificial intelligence (AI) and blockchain have been making huge leaps forward.
In late 2016, few people paid much attention to blockchain technology. Sure they’d heard about bitcoin, but the idea that some centralised, shared register was going to transform the mechanics of accountancy seemed far-fetched.
But then the bitcoin boom happened. The cryptocurrency was valued at $750-$1,000 at the beginning of January. This December it surpassed $18,000 for the first time. Elsewhere, even the ICAEW started talking seriously about the implications of blockchain technology for the profession.
Something similar happened with AI. As specialist supplier MindBridge told us last month: “It's alerady here!” (see video below). Firms other than the Big Four are applying AI tools in day-to-day practice, among them 2017 Practice Excellence Pioneer inniAccounts, Kingston Smith, Kreston Reeves and more. Machine learning is no longer science fiction, it is built in software such as Xero and Receipt Bank that is used every day by many, many accountants. Sage, QuickBooks, Exact and UNIT4 are all developing conversational AI interfaces (commonly known as “bots”) for their accounting systems.
These two incidental characters will certainly play a more promient role in 2018, but not until tax season is over. Then there are new open banking systems to consider and the need to cater for GDPR and MTD. The cruel irony for accountants is that new technologies often start making unexpected leaps forward when compliance pressures are at their most intense.
New technology could help ease some of those burdens, but sometimes people need the time to take a breath and have a look around before they can take on new experiments.
We know time will be in short supply again in 2018, so AccountingWEB will do everything we can to keep you up-to-date on tech that might help you deal with the challenges ahead.
About John Stokdyk
AccountingWEB’s Head of Insight has been with the site since 1999 and likes to spend his time studying accountants’ technology habits. When not nerding out, you can find him exploring obscure indie music and searching for the perfect organic sourdough loaf from his base in Brighton, UK.