Responsibility for MTD: Whose job is it anyway?

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Is it the responsibility of accountants to ensure that their clients are MTD for VAT ready? Richard Sergeant investigates.

In a recent Any Answers thread titled MTD and why is it our place to notify clients?  AccountingWEB member Di gave further voice to a conversation on the fringes of the MTD debate: to what extent are accountants responsible for ensuring mandation is met from April 2019?

Speaking off the record over the past few months on this issue has elicited a range of responses, and reflects the approaches that firms have chosen to follow.

On one side, an accountant who chooses to remain anonymous said: “I’m fed up of the whole thing, the reality is that this is a mess of their own [HMRC] making, not mine. I will tell clients how it affects them, when it affects them, but it is ultimately their responsibility.”

While this may seem a little extreme, it does reflect a more general frustration that the rollout of MTD has been generally left to accountants, with up to now, no formal intervention by HMRC to those that will be impacted.

HMRC has been quiet

AccountingWEB member Gordon commented that “if someone needs new software and their accounting year straddles April 2019, they should have possibly already migrated. However, HMRC has not appraised them of this and if they only do so in the New Year, it may well be too late.”

And member John Stone suggested: “Bearing in mind some traders do not employ an accountant - this must leave quite a number potentially still in the dark. This should be quite troubling to the powers that be.”

A recent report from Rebecca Cave’s should come as a relief, then. “I have heard that HMRC is planning to write to all the VAT registered businesses who will have to enter MTD in 2019. Those letters are expected to be sent in September 2018,” she wrote.

However, with time ticking on, and as only the most optimistic (or should that be pessimistic?) are anticipating a delay, it is true that businesses need to be taking steps now to ensure they will be compliant.

So whose job is it anyway?

For some like practice owner Mark Telford, it is clearly the responsibility of the accountant. “The mission is to get the message to those who are 'offline' and make them aware. There are thousands of businesses unaware of what's coming,” he said.

This professional mission to inform clients seems to form the broad consensus: it is the almost-obvious obligation of the trusted adviser and guardian of compliance to inform clients of the changes that will impact them.

Glenn Martin, owner of Avery Martin, added emphasis to this: “We are tax advisers, this is a change to the tax system so who else would advise on it? Of course it's our responsibility.”

But does this imply that you must also ensure that clients make it over the line?

Information, advice and action?

Getting information out to clients is not always easy - and you can never be sure that general communications are actually read, understood and action taken. But to then follow up, and help everyone understand the options, make a transition, and provide training is no mean feat.

This is not the article to dwell on what firms have and haven’t done to date in detail; however, it would be a fair assessment that there has been a very broad response from those taking a light “inform and advise approach” to formal programs of ensuring compliance and even wholesale movement towards cloud solutions.

The picture is of firm’s interpreting for themselves the role they must play and making their own choices about what their ‘solution’ will be.

So, if HMRC is not responsible, and accountants can choose their own path, what about the software providers?

Is it the software providers’ responsibility?

Although they may disagree, the software providers have had good time to get their houses in order, and at least inform their customers if they will be ready. For any sane finance software vendor out there, preparing for MTD must surely have been a priority, but as there are no definitive lists it is impossible to tell.

As MTD is inherently reliant on technology, and an internet connection, those on cloud solutions are at a distinct advantage but even this cannot be taken for granted. While it would be commercial suicide to leave customers in the lurch, it would still be wise for clients to check that they will be OK. As an example, AccountingWEB member Legerman pointed out: “Those using bespoke software...could be left high and dry if their software vendor can't adapt their software in time.”

Software providers are expected to provide the technology, but they don’t have to make sure every client is OK. Companies like Sage and QuickBooks are in a similar situation for some of their clients on older editions of their desktop software and not on subscription.

Reputational damage

Interestingly two of the software providers who provided input to this article, both take a similar view, and point towards reputational damage that could occur if accountants don’t take the lead.

As Intuit’s Alex Davis explained: “I spoke with a business owner friend last week and asked if his accountant has told him about MTD. He said no. When I told him about what is happening his first response was ‘time to find a new accountant’. The customer will go with who offers them the best advice.”

And Xero’s Glen Foster echoed these sentiments: “I’d say accountants have an obligation to inform their clients and advise on a solution. That doesn’t mean every client will take the advice. Having said that, every firm has the right to not, but I’m sure most people would want to be a client of the firm that did.”

Perhaps another way of saying: “It’s up to you!”

Larger clients are OK? Aren’t they?

As a useful aside, Matt Flanagan, BlueHub, also warned against presumption; for example, with larger or more complex clients: “With some firms I have engaged with they have contacted their larger clients and have found that it is only a small percentage that have something in place, and are much larger projects to become compliant. My advice is don’t assume any client is MTD ready.”

“Complisory”

While appreciating that MTD is highly divisive, it does provide huge opportunities for some firms, and puts others (and their clients) in a more tricky situation.

It would seem that from both within and without, the presumption is that the accountant is best placed, and most professionally obligated - if not “responsible”.

Although not entirely useful, it is true to form that we can rely on entrepreneurial accountants such as Robert Stell from Bradbury Stell to (with a hint of irony)  innovate, “We’re advising them to comply, a merger of two types of service ..’Complisory’!” You heard it here first.

About Richard Sergeant

Richard Sergeant

Specialist insight and business development support for accountants and their vendors. Cloud advocate with a pragmatist eye.

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By Matrix
30th Aug 2018 14:50

I advised all my clients about MTD this morning so they hear it from me first. I had also included details in budget updates.

I waited til now since I was so certain it would be repealed and I didn't want clients to blame me for making any unnecessary changes.

No replies yet but I only have two VAT return clients not on cloud software. All the other clients use bookkeepers so it is the bookkeeper who will have to take the lead (and I of course spoke with them before I sent the email).

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to Matrix
30th Aug 2018 17:47

Matrix wrote:

I advised all my clients about MTD this morning so they hear it from me first. I had also included details in budget updates.

I waited til now since I was so certain it would be repealed and I didn't want clients to blame me for making any unnecessary changes.

It's still possible that Phil Hammond could delay MTD4VAT to 2020 in the Autumn budget. I'm not confident HMRC are ready yet.

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By Matrix
to legerman
30th Aug 2018 18:25

Rebecca Cave said that HMRC are writing to businesses in September, I have clients with APs straddling April and so I felt I couldn't wait any longer.

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30th Aug 2018 17:50

Accountants have a duty of care to their clients, whilst its HMRC who should be responsible for advising their 'customers', we should also be making an effort to make sure that clients comply and are aware of whats coming up

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30th Aug 2018 18:58

Like Matrix I too waited until MTD VAT was (kind of) set in stone. Rather than sending an email out to all I have been advising 'softly softly' personally and getting them used to the new MTD life - all VAT clients to send csv bank statements every month for example. Getting the bookkeepers to work in a way that tries to ensure a smooth ride (if that will be possible!)
Next stage will be getting them all on Yoddle or somesuch.
For the moment I'm just telling them that the deadline is tightening to a month and when I speak to them about this years accounts then I'm telling them more.
Sending emails and other pamphlets as I have seen other accountants do appears to me to be shunning the responsibility. It was known all along that we would be the ones doing the teaching.
I've also been getting my own house in order incl looking at Accountingmanager to help in sending text/emails as reminders.
I think that Richard is being a bit hard on software developers - they havent been told much more than we have and we are all working in the dark. From speaking to Clearbooks staff they have done their best in the limited time.

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31st Aug 2018 09:57

Great article, Richard. Ultimately it is the responsibility of the client. However HMRC have not been forth coming with the correct information to our clients. All we have at the moment is a pilot, which I doubt is working that well, with only a few hand picked business.
I've always felt that more time is needed and I'm sure as we near MTD day this will become obvious to the powers that be. Of course we will give our clients as much help and information as we can, however we are dealing with a lot of people who are frightened of the "computer" and "cloud" world, with good reason. It is my view that everybody's information has been "hacked", sold or whatever since the last 5 years in some way shape or form. Confidence in anything is of paramount importance if something is to work. All HMRC are saying is "there it is, get on with it or be fined".

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to johnjenkins
03rd Sep 2018 17:53

johnjenkins wrote:

All HMRC are saying is "there it is, get on with it or be fined".

and therein lies the issue ... get on with, exactly, what?
Were one to be of a cynical bent one could construe their helpfulness to date to be just enough that you cannot quite 'not get fined' - and not a ba'hair more.
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to dgilmour51
04th Sep 2018 09:08

Which leads me to believe nothing will happen until 2020.

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to johnjenkins
26th Sep 2018 16:45

Apologies!

The site software just took away my attempt to "Thank You" and it went the wrong way!

Please add three ticks now.

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to Michael C Feltham
27th Sep 2018 10:10

Maybe John thinks I'm getting too many thanks?

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By mkowl
31st Aug 2018 10:58

I can't be the only one that remembers the likes of Stakeholder pensions where information letters were sent out en masse and it seemed in hindsight a waste of time. I seem to recall abandoning the 3rd intended letter. Most of our affected clients will be on software already, Sage, Xero so working on the basis these providers will be ready and that in practical terms the required reports are effectively already there for MTD. May be that is too simplistic a view

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to mkowl
31st Aug 2018 11:11

Sounds good, however I would just check to see which version of Sage they are each using and if it will be updated (either FOC or with the paid update)

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31st Aug 2018 11:08

When HMRC introduced Self Assessment many years ago there was loads of publicity plus multiple training sessions delivered free to accountancy firms by well trained and knowledgeable staff. The technology for it was well tested, in place and worked.
Roll forward to MTD and what have we got - ignorance, chaos and uncertainty.
It's just not good enough for HMRC to impose this massive change on businesses and accountancy firms in such an autocratic and shambolic way.
When it all falls apart it won't be the fault of anybody other than those who are in charge of the project.

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to anthonystorey
31st Aug 2018 11:25

I don't disagree with you but knowing who's at fault for the mess doesn't help anyone.

Who will it impact? And who will have to pick up the pieces? It's us and the clients, no matter if it wasn't our fault and we were right all along.

I'm quite sure the one part of MTD that will be working on launch is the part where people are fined for non-compliance, we can just be grateful that bit at least was put back a year.

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By HLB
to anthonystorey
31st Aug 2018 13:44

Totally agree. The lack of information to agents has been the problem. We can tell clients that MTD is coming but providing detail when there has been so many unanswered questions has been the problem. I hate telling clients 'I don't actually know the answer to that yet'. That response does not make me look like or feel like a trusted adviser.

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By Peter-S
31st Aug 2018 11:35

I think we are responsible for advising clients when there is something new that they need to comply with and if we undertake submission of returns on client's behalves we are responsible for complying properly with MTD. However, we cannot 'ensure' that vat registered clients comply anymore than we can ensure they submit an SA return on time. Our responsibility for client's that deal with their own vat returns must be minimal as we are not engaged to provide specific services in this respect and HMRC should not be trying to pass the buck in such cases.

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31st Aug 2018 12:30

It is without doubt the responsibility of HMG to ensure that all changes to legislation are flagged to the populus.
As I understand it MTD is not a change to the Statute so much as a change to HMRC's methodologies.
However, as HMRC are progressively insisting that they want to deal with the populus and progressively making it more aggravating for the populus to address them via their chosen representative/ accountant
then it is, to me at any rate, crystal clear that it is primarily the responsibility of HMRC to fully advise all taxpayers about all tax-payment processes and mechanism with which they are involved - and in a way that is comprehensible to them.
As part of the process, though given the antagonism currently displayed by HMRC to the accountancy profession why would they, there is no reason why HMRC should not add "and if you find this all too arcane for words, seek advice from your accountant".

The only possible interpretations for their current abstruse methodology for promulgating "the good news about MTD" is either
they are effectively blackmailing both accountants and taxpayers into an untenable position
or
They are effectively stealing time from the accounting profession to deliver info/education by proxy.

Frankly, any way you look at it - and I note here my most charitable thought - the way they have gone about MTD as a whole is a 1st class example of reprehensible mendacity.

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to dgilmour51
02nd Sep 2018 10:17

The mission statement of HMRC.

‘A 1st class example of reprehensible mendacity’.

So very well put.

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02nd Sep 2018 12:54

Well, clearly IT OUGHT to be HMRC and Treasury's responsibility to ensure ALL registered SA Taxpayers on HMRC's apologies for an ICT system, are notified of such sweeping changes to the law of the land, rather as did Dave, Gideon and the rest of the paranoid Remainers over Brexit when they mounted and promulgated Project Fear MK I, spending a vast sum of taxpayer's hard won cash in the process and disseminating a fallacious and duplicitous collection of half-truths, non-truths and plain old lies throughout the land.

HMRC, however, have been conspicuous by their absence in disseminating ANYTHING meaningful: even today, in truth, none of us COULD truthfully advise any client of the true ramifications and effects of MTDfb, since we simply do not actually know, as yet!

Despite this, HMRC have already enacted into law draconian penalties for failures, late filing, mistakes and etc. Though to my actually simple mind, quite how any Government except a Marxist, Fascist or Russian Mafiya system, can enact "Laws" prescribing dire penalties for breaching any system which in itself has not as yet been written into law!

Forsooth and Gadzooks! Even HMRC don't yet know the final rules, regulations and law, as they have dismally, yet again, decided to create a paradigm shift system, yet have failed utterly to meet the program completion by target. And this is without the prototypical budget over run. No doubt a probable tiny 300% or so: Heh! what the hell does it matter when you are spending someone else's dosh!

The (Our) main professional bodies, have also been rather silent on this matter, instead, as one might be entitled to expect, fighting our (the humble practitioners fighting in the trenches and front line) cause.

Bottom Line: When, as it will, it all goes pear-shaped, then it will be OUR FAULT!

Professional Bodies will be inundated by ethics and misconduct complaints and WE, will be hauled through the glowing coals.

Plan for this and treble or even quadruple your multiple annual event PI cover!

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to Michael C Feltham
03rd Sep 2018 09:20

..."Plan for this and treble or even quadruple your multiple annual event PI cover!..."

Or just move all your clients to compliant cloud software.

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to Mark Telford
03rd Sep 2018 09:39

and what if your clients don't want to be moved to the cloud?????

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to johnjenkins
03rd Sep 2018 09:56

If they don't want to move to the cloud they have to find another compliant option...

(Sorry to state the obvious- I'll try and stop doing that now )

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to rsergeant
03rd Sep 2018 13:09

You missed the point, Richard. They could actually say they do not want their data to be sent in a digital manner in case of fraud, hacking etc. So they could get exempt.
My point was that it is not good enough for us to say to our clients you will have to go on the cloud.

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to johnjenkins
03rd Sep 2018 14:39

Hi John - do you think HMRC will be flexible in granting exemptions? From what I've read concern around fraud possibly not going to be enough.

I agree that it's not good enough to tell clients they need to go on the cloud. The actual choice of which products to recommend to each client is a fairly large project before you even start thinking about implementing a migration.

MTD is also likely to put a lot of strain on the resources of most firms in terms of training clients and their own team.

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to AndrewGarvey
03rd Sep 2018 15:17

If HMRC can allow exemption on religious grounds, would the fear of fraud not be a similar argument? To start with I think HMRC will be pretty flexible (the soft landing scenario) so this is why I think it'll be 2020 before things become mandatory. Even then I think penalties will be put off to 2021.

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03rd Sep 2018 16:49

The soft landing approach to penalties makes absolute sense.

I do think that there also needs to be a lot more education available from HMRC about issues such as fraud etc.

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to AndrewGarvey
04th Sep 2018 09:13

HMRC will always skip the stuff that they don't want at the forefront but I think the fraud scenario and hacking within the cloud (and other internet groups) will have to be debated. Don't forget we will be talking about every transaction a business carries out.

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to johnjenkins
27th Sep 2018 11:30

Quite agree, John.

This is all we hear lately: it is Cloud this and Cloud that and Cloud the the other; as it (sic The Cloud) is some magic panacea which solves man's ills and problems at a stroke.

To my cynical grizzled old self, this rapidly propagating myth is almost identical to the myth of The Holy Grail.

It was not and could not have been a gold chalice, studded with precious stones and possessing magical powers to grant the owner everlasting life, dominion over every place on Earth. curing all illness and injury at at one passing over human flesh etc.

The cup Christ used at the Last Supper would have been either unglazed earthenware or wood. However this reality did not stop Knights, and Lords, Dukes and Kings charging off to "The Holy Land" to pretend to rescue this from the heathen invaders and Islam: no these venal barstewards were only in the game for what treasures and gold and silver they could nick and their chance at finding and keeping the mythical Grail.

The current ICT myths are all about (1) AI - Artificial Intelligence; and (2) The Cloud...

(I earlier elsewhere sought to dispel this Cloud Mythology and explaining in simple terms, precisely what it is.) And, using the Grecian Logic inculcated into my thick and unreceptive young brain, ergo just the existence of a Step-Change in ICT hosting, transmission of digital data, networking and storage (Nota Bene: A Step-Change; NOT a Quantum Leap!) will not, cannot and is INCAPABLE, in itself of changing the base Coding, Schemas and Taxonomy of Software, per se.

All it can and does do is:

1. Simplify the Task-Loading and reduce the costs of Software Houses: as the client does more of the work!

2. Saves issuers of software having to provide a hard, physical copy of the application suite; (Since the user downloads the Comms Protocol software onto their local system and can then easily facilitate the upload and download of data:

3. Saves end users the need to host the application locally; e.g. on their HDD:

4. Saves the end users having to retain and store the output from the app, locally: i.e. client's total records and the produced output: e.g.s End-of-Year Account Sets, Tax Overviews et al;

Just pause and think about this carefully: the IT naive user lacks the ability to access his/her archive of Client's Data if Mission Critical at any time. For example, HMRC commence a hostile investigation into a client's back taxes as they suspect evasion! Where would this leave you?

What happens when (Not If!) your chosen Cloud Bookkeeping/Accounting/Tax Processing supplier is hit by a serious malware attack and on user can access their site?

What happens if your chosen Cloud Bookkeeping/Accounting/Tax Processing supplier, goes err belly up? Administrators are not concerned about you! Only their fees! (Tip: examine PwC's earnings from the liquidation of Lehman Bros; and how clients at financial risk and employees were treated!).

How would or could you access your essential client records when they are warmly and snugly hosted in some amorphous server memory out in the Blue Cloud? Do you have; would you have a backup, enjoying Triple Redundancy?

How would you address the resulting problems for you and your practice under GDPR? And your liability? This could bankrupt you!

Before you are bewitched and bamboozled by an out-of-control Government and software vendors (DESPERATE to try and recover some of their front end development costs!) promising the Sun the Moon and the Stars and the chance of winning 4 weeks all expenses paid for two in Bali, think this over carefully!

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to Michael C Feltham
27th Sep 2018 12:21

Although I agree with you about the "cloud" mythology. (Have a look at "practice excellence awards editorial")
I would like you to consider that if JC was an alien then perhaps the cup could indeed possess powers unimaginable to the human brain.
I also remember when some said that "cash" would be a thing of the past, still going strong and come MTD even stronger.

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to johnjenkins
27th Sep 2018 15:42

@ John Jenkins

"I would like you to consider that if JC was an alien then perhaps the cup could indeed possess powers unimaginable to the human brain.".

He wasn't; Jesus Christ was the Son of God: and both theology and The Holy Bible are quite clear only God and his Son possessed the power to restore life.

Lazarus.

Not even the Angels could restore life; nor could and can Satan.

However, I am a devout Anglo-Catholic Christian as is my darling wife; and we were both, until some short while ago, Lay Assistants, licensed by the Bishop

It is something I don't bang on about, but, however, a personal belief we have shared for many many years.

To Mortal Man, I am sure one could consider God "An Alien", in a Quantum Mechanics type perspective; since the core posit of Quantum Physics is the clear existence of a "Multi-Verse": i.e. a Multiple Universe co-existing with ours, simultaneously.

https://www.edge.org/response-detail/27034

https://en.wikipedia.org/wiki/Many-worlds_interpretation

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to Michael C Feltham
28th Sep 2018 09:56

The debate twixt science and religion will always be interesting. My view is that, as we only use a sixth of our brain capacity it's difficult to stretch our imagination even if we wanted to, out there it is possible to have unlimited permutations of life and forces. To me religion helps many people come to terms with normal life (as we know it) and that has to be a good thing.
We are entering a period of great change in the world where technology (not robots) and either the ability or lack of ability to deal with it seems to be at the centre of it. MTD is a classic example of how some will thrive and many will fall by the wayside.

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29th Nov 2018 19:01

Great article, Richard. Ultimately it is the responsibility of the client. However HMRC have not been forth coming with the correct information to our clients. All we have at the moment is a pilot, which I doubt is working that well, with only a few hand picked business.
I've always felt that more time is needed and I'm sure as we near MTD day this will become obvious to the powers that be. Of course we will give our clients as much help and information as we can, however we are dealing with a lot of people who are frightened of the "computer" and "cloud" world, with good reason. It is my view that everybody's kingroot download information has been "hacked", sold or whatever since the last 5 years in some way shape or form. Confidence in anything is of paramount importance if something is to work. All HMRC are saying is "there it is, get on with it or be fined".

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