Making Tax Digital: full steam ahead for pilot

Making Tax Digital: full steam ahead for pilot

Mark Purdue provides an overview of HMRC’s MTD pilot that started in April

 

Most people now accept the inevitability of Making Tax Digital (MTD), and the associated quarterly reporting that will be mandatory for most businesses. While the ‘go live’ date for most clients is April 2019, and for some April 2018, what is actually happening right now?

At the time of writing, there are rumours gaining momentum in the accounting press that MTD may be delayed until April 2019. The main drivers for these rumours are a combination of a current lack of legislation, a pre-election ‘Purdah’ period, and when the new government is formed it will be swiftly followed by the summer recess. For now, however, we are all focused on April 2018 as the go-live date, and that is why the pilot is so important – the countdown to MTD has already begun.

The pilot is effectively the test phase of the process. It is the opportunity for a selection of eventual users of the system (accountants and sole traders) to use HMRC systems a year early, to get first-hand experience of the new processes while also testing HMRC and software providers’ software. As well as getting early sight of the software, those taking part in the pilot are also able to provide feedback – influencing how MTD will work in practice. At the moment, the pilot is progressing at a very slow pace – on purpose – to ensure HMRC systems are not overloaded.

So what can you do as part of the pilot? An agent taking part in the pilot (which is currently invite-only from HMRC) will be able to follow some key processes:

Agent subscription: This is the process that allows an accounting practice to create their MTD log-in. To create the account, the practice confirms some information known only to them (e.g. UTR) and set-up two factor authentication. Once this is done, their MTD account is created. Functionally, today, it has very little to offer, but the pilot is about slowly increasing capacity and function.

A few points to highlight – under MTD, each practice will have only one set of MTD specific credentials (currently you may have more than one set of government gateway credentials dealing with your self assessment clients). Secondly, the ‘two factor’ will mean that on attempting to log into this account in the future, a code will be sent by HMRC to a nominated mobile phone (or recorded message to a landline) that needs to be keyed in to gain access to the account.

However, the occasions when you should be needing to log-in direct to your account post ‘go live’ should be minimal – the vast majority of interactions between you (on behalf of clients) and HMRC will be via third party software, and said software will need to be authorised by you once every eighteen months – you will need your two factor log-in to re-authorise this software.

Linking MTD account to existing SA accounts: Once the agent MTD account is created, the next process is to link this account to your existing SA government gateway credentials. This will allow, as the pilot progresses, for an accountant to bring clients into MTD.

New client onboarding: In addition to bringing existing clients into MTD in the future, you also need to onboard new clients. This process is a digital only version of the current 64-8 process. If you start to act for a new client in the MTD area, this process will allow you to get authorised much quicker than with a 64-8.

On the assumption that the new client will have access to software (e.g. their bookkeeping product), you inform HMRC you act for the client, HMRC sends a notification to the client, which they read in their software, clicking a link to confirm you act for them – and your software can now access the client’s tax account data.

What next?

As you can tell from the above, the scope of the pilot functionality is still very limited (create your account, link it to your SA log-ins, and onboard a new client). In the near future, those software providers taking part in the pilot will be given more control in expanding the number of participants using their software, and additionally, the final pieces of key functionality will be enabled.

Submit update

Initially due early May, and at the time of writing expected early to mid-June, the submit update functionality will allow certain participants to submit a month’s worth of income and expenses data, rather than data for a quarter. Purely, at this stage, to test the mechanisms of submitting data, and HMRC’s ability to receive it.

Subscribe existing clients

Having previously linked your MTD account to your SA gateway accounts, in late June or early July you would have the ability to import existing SA clients into MTD. This will allow you to start managing clients’ MTD affairs.

Stepping stone

In remembering that all of this functionality (today) is within the context of a pilot rather than truly live, it is however important as a stepping stone to the April 2018 live deadline. Until we know for certain when MTD goes live, participating in the pilot offers the advantage of having an early look at process and what the future of MTD is likely to look like. The future – now that’s something to get prepared for.

  • Mark Purdue is tax product manager at Thomson Reuters

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