Tax & Accounting Blog

On Compliance – Making Tax Digital Pilot

Accountancy Practices, Accounting, Compliance October 30, 2018

This month’s podcast focuses on the Making Tax Digital pilot from the perspective of two experts who know their stuff when it comes to tax compliance – Rebecca Cave, editor of AccountingWEB and Mark Purdue, MTD guru and product manager for tax products at Thomson Reuters.

Making sense of Making Tax Digital is a seemingly never-ending feat, with the latest revelation being the new public pilot launched by HMRC which may ramp up some interest in the new digital tax process. After years of speculation, the pilot has finally opened to half a million businesses, but what does this mean for UK accountants in practice?

Mark describes the pilot as an opportunity for accountants to “get an early look and see what the fuss is all is about.” So, what should accountants do now? He explains that: “One, is to make sure you’ve got a relationship with a software company that can give you the compatible software”. He also recommends completion of a second step: “via your agent services account, there is a link to link your VAT clients to your account, so that effectively creates a link between your old VAT government gateway and your new agent services account.” Once completed, accountants can then either ask clients to sign up themselves or they can get permission from clients to submit on their behalf.

Rebecca then runs through the list of entities that have been deferred, such as local authorities as businesses who pay more than two million a year of VAT.

When asked about when public awareness from HMRC will start, Rebecca says “there are a whole load of businesses who can’t actually join the pilot yet. All those business who can join the pilot will get a letter from HMRC pretty soon, we think next week.”

She continues to say, “What HMRC are doing is they’re tying in this comms plan with opening up the pilot, so if you’re eligible to go into the pilot now you’ll get a letter saying you’ll be able to submit VAT returns under MTD and you will have to submit Vat returns under MTD for the period beginning on or after 1st April 2019.” She emphasises that there are still many businesses who cannot join the pilot yet; this includes partnerships, among others: “All those business won’t get a Welcome to MTD letter yet until the pilot gets extended to add some of these categories of business in”.

When asked what progress the software industry has seen in relation to MTD, Mark says “over sixty providers have committed to make products and have products in development. There are about 24 provider who have done successful submissions as part of the private pilot.”

Rebecca suggests that HMRC haven’t yet segmented the official software supplier list according to which software applies to which business type, but this is something they’re planning to do.

When asked about the HMRC’s soft-landing concept, she suggests there is “a lot of misunderstanding…people seem to think a soft landing is going to apply to everything to do with MTD; it certainly doesn’t, the soft landing is only supposed to apply to the digital links element so this if for when people have relatively complex systems or perhaps different software packages..” She emphasises that “Under MTD, all those packages – the whole system from entering the transaction at the beginning to the spewing out of the vat return at the end should all be one digital pipe. HMRC knows that these digital pipes are going to be difficult to glue together, so they’re saying that you can have a soft-landing and have some manual links if really necessary between the different parts of the digital pipe until 2020.”

When asked about how HMRC are going to penalise those not complying with MTD, she suggests that HMRC will be lenient towards companies who reach out to say they are struggling with the gluing together of all their digital links: “…it looks like the softer landing for digital links is going to rather flexible according to how clued up you are to go and ask HMRC for further time, which I think is neither fair or equitable, but there you go. If you don’t start submitting under MTD when you’re supposed to, you will get a penalty, however, we don’t know exactly how these penalties are going to work yet.”

Listen to the conversation in full by clicking the arrow below:

If you found this podcast useful, you might also enjoy hearing about changes to Anti-money laundering regulations.

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