In the first in a series of regular articles for Accounting Practice, Darren Powell relates his experiences of taking part in the Making Tax Digital pilot scheme
It is old news now that Making Tax Digital (MTD) will be affecting the majority of us over the next few years and as agents we need to be fully aware of what impact this will have on our practice. Although MTD for individuals is postponed until at least 6 April 2020, MTD for VAT will creep up on us, with mandation from 1 April 2019.
With the uncertainty surrounding the concept of MTD we decided we would ask to join the pilot and get a headstart with the whole process. As a practice we prefer to be proactive rather than reactive, and although we are among the majority who wonder whether this is workable it certainly is on its way and should not be ignored.
We initially registered our interest in the pilot scheme back in April and Forbes, our tax software provider, were leading the way in the MTD Pilot. It soon became apparent that we had been chosen to be the ‘guinea pig’ for the pilot and would be the first agent to make a successful MTD submission. Interestingly, the pilot is currently testing the self-assessment side of MTD and not VAT, even though MTD for VAT will now come sooner.
Clearly, to be part of the pilot three key elements need to be in place:
- You need to convince a handful of your clients to participate.
- You need to be registered as an agent on the pilot.
- You need to have MTD-compliant software.
The first step required the set up of a digital tax account for our clients who had agreed to take part in the pilot. This was created via an email link provided by HMRC and produced a 15-digit success code that we had to report back to HMRC. This would later be linked to our MTD agent account.
The second step was for us to register as an agent under the MTD pilot. This was a straightforward process and required the set-up of a new agent government gateway account. Again, we received a link via email from HMRC that directed us to the required set-up page. This is identical to the standard screens we are all used to where you enter your user name and password and access your agent HMRC account.
HMRC assured us that our existing 64-8 authorisations would be honoured under the new agent login credentials we had created, and I am pleased to confirm this did happen. We now have two agent accounts running side by side, the new one only being used for the MTD pilot. Our existing agent account has not been affected in any way.
We have four clients participating in the pilot, three being self employed and one being a property landlord – we purposely chose clients with book-keepers to ensure we would receive up-to-date and accurate records.
To date, we have successfully filed three MTD submissions for the period ending 5 July 2017, but this was after several failed attempts. The fourth submission for the same period is still not successful and under investigation by the technical team.
Due to various problems, it took around six weeks from the first MTD submission attempt for the correct data to be received by HMRC. To their credit, this is a largely untested process and the pilot is in place to iron out these problems. We have been working closely with them to resolve any issues, some of which were not the result of HMRC’s computers.
The first period submissions allowed us to generate a tax computation based on the year to date figures and a pro rata utilisation of the tax and NI allowances. Although the raw data is there, it is at present not in the format we are used to and is simply in the layout received from HMRC.
Improvements to its layout will be made by Forbes in time to resemble a more traditional tax computation.
We have attempted to make MTD submissions for the period ending 5th October, but these are unsuccessful at the time of writing (although a solution to the problem looks very close). From our early involvement in the pilot so far, it is evident that this is a huge undertaking by HMRC and postponing the mandation is a sensible decision. However, when the time arrives, we will be confident we will be as ready as we can be for the challenges of MTD.
- Darren Powell ICPA is a Partner at Fraser & Co, based in Shepton Mallet
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