MTD preparations hampered by limited software options, expert says

MTD preparations hampered by limited software options, expert says

Another source argued that client relations could be jeopardised by the inability to prepare

MTD preparations hampered by limited software options, expert says

The lack of software available on HMRC’s Making Tax Digital (MTD) pilot scheme is limiting the ability for accounting firms to prepare their clients for the transition, according to Susan Cattell, head of tax technical policy at ICAS.

“Feedback ICAS has received indicates that preparations are being hampered by the restrictions currently in place that mean very few clients can join the pilot.

“For example, as set out on the government website, only clients with year ends of April 5 can join.”

The scheme, which is only available to taxpayers matching certain criteria, is currently compatible with just seven software products. Others are “in development”, it says.

HMRC has said that it intends to evolve the pilot scheme into a full public beta in 2023.

But for Cattell, all businesses should have been able to join the pilot by now. The benefits of deferring MTD ITSA until April 2024 risk being lost if access is not expanded “rapidly”, she adds.

The UK’s corporation tax system is also set to be digitalised as part of the MTD initiative. As per the government’s response to a consultation in 2021, the rollout is set for April 2026.

But Cattell goes on to argue that, since the publication of the response, there has been limited HMRC engagement with stakeholders.

“ICAS believes that it is important that engagement does resume soon,” she says.

“The consultation response expressed a commitment to ongoing collaboration with stakeholders to help design a service that works for everyone; it will take time to achieve this.”

Resuming this engagement will allow software developers and businesses to ensure that a range of software will be available in time for a pilot, Cattell adds.

Client relations at risk

Elie Pippard-Kemp, senior tax manager at SRLV Chartered Accountants, also laments the apparent lack of urgency from HMRC surrounding the MTD pilot schemes, arguing that one of the main challenges of MTD so far has been how to convey a clear and integrated message to clients.

“A truly tailored and personal service for each client is central to our work but a separate approach and message for each one is neither practical nor cost effective.”

Pippard-Kemp anticipates further challenges relating to the transition of quarterly filing and tight timeframes to submit information, which she argues is separate and perhaps more onerous than typical VAT filings.

“With the global workplace, many of our clients can be difficult to reach at short notice. We also anticipate challenges for those individuals who have multiple MTD-qualifying trades and income sources, as well as other income streams and claims to be made.

“There will be considerable complexity for some.”

According to research published by digital marketing agency PracticeWeb in August 2022, one in four businesses characterised the MTD scheme as “extremely” or “very” challenging.

In addition, nearly a third (32%) of business owners cites regulatory compliance as a particularly challenging issue.

Despite this, Pippard-Kemp says her firm can already identify tangible benefits from MTD.

These include the spread of work over the tax year due to quarterly filings, and the newfound impetus for clients to move to efficient book-keeping methods, she says.

But Pippard-Kemp hails the “integration of software and systems and the advances of technology” as arguably the greatest value-add, arguing that this could deliver considerable benefits for businesses in the long run.

“Businesses can use the new quarterly reporting as an opportunity to explore the range of reports the software provides, identifying where costs are increasing and can be controlled, as well as forecasting future profits.”

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