In the fifth and final part of his series of articles on participating in the Making Tax Digital pilot, Darren Powell explains why he is leaving the scheme despite having invested so much time in it.
It looks like my involvement on the MTD for income tax pilot may be over. How did this happen? After all, this was not the outcome I had expected. Put simply, I believe it comes down to the fact that there are very few software providers who have market ready, MTD for income tax compliant software.
I joined the pilot in April 2017 as our tax software provider was the first to bring a product to market. Three months ago we decided to change our tax software, having postponed this decision last year, so we could remain on the pilot. You may ask why remaining on the pilot was so important, but having invested a lot of time in it, and HMRC investing their time too, it was the right thing to do.
We are still licensed to use our old software until February 2019 so have two systems running at the same time. I had hoped that by the time our old software licence expired our new software would be MTD for income tax ready. After all, this would be almost two years since we signed up! The intention would be that we would seamlessly switch from one to the other. This will not be the case. I do, however, know that our new software provider has a product ready, but it will not bring it to market until HMRC better define their requirements.
So how far did we get? Out of the four clients on the pilot we were able to make a fourth quarter submission for 5 April 2018 for just one of them. For one of the others, we did not attempt a fourth quarter submission as we had already submitted the tax return. The other two clients are not working as intended and attempts to resolve this by HMRC are still not successful. HMRC have therefore advised that we submit their tax returns in the normal way as they do not wish to delay us any further.
This seems fair. However, it is a shame that we were unable to file a fifth or final submission for our one client who ‘appears’ to be working OK and has straightforward tax affairs. He only has self-employed income and no other income to report. I wonder if this is because HMRC’s system cannot yet cope with this final submission?
Going forward, HMRC only want individuals on the pilot if all their income is supported, removing the need to complete a tax return. Having changed our tax software we cannot guarantee that we will be able to do this. The last quarter that we could possibly achieve will be the third quarter ending 5 January 2019, before the expiry of our old licence.
Unless our new software has a product ready by April 2019 it is pointless to progress, as we will not be able to complete the year.
I would be happy to try anyway, to see if this can be achieved, but with the complexity of the pilot as it is I guess HMRC don’t want any dead wood. I have offered to sign up new clients to the pilot as these would have a ‘clean sheet’, and perhaps the previous issues I have experienced throughout the pilot would not be repeated. Again, HMRC would prefer I did not do this if I cannot submit for the entire tax year. It is slightly disappointing that I was unable to complete the whole process through the MTD platform, but that’s testing for you! The MTD for income tax pilot was extended from controlled private testing to go live public beta testing in March 2018 so by now I expect there are many more practices testing the system.
I will now wait until our new software is MTD for income tax compliant and then hopefully rejoin the pilot. If I am being sentimental I hope this to be soon, but if I am being realistic perhaps it will be more like late 2019. Strange that I should find myself so attached to the pilot, but then it has been enjoyable testing the system and making new connections. There are only four approved software providers listed on HMRC’s website, so let’s hope HMRC can get this working smoothly so more providers join the list. A lot of the major brands are not listed, so what are they waiting for? A U-turn? I don’t think so.
• Darren Powell ICPA is a Partner at Fraser & Co, based in Shepton Mallet
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