This April will see a stepchange in the development of Making Tax Digital (MTD), as HMRC moves from private to public testing. Some 700 businesses have been helping HMRC during the private beta phase, but the number sought to participate in the public beta is likely to be several hundred thousand.
Shortly before the start of the new tax year, HMRC is intending to launch an MTD subscription service for businesses to register their interest in acting as volunteers during the public testing phase. Initially the subscription service will be for unincorporated businesses and landlords, who will need to subscribe themselves directly and be using MTD compatible software.
The public beta phase will launch with a small number of users at the outset, in a controlled go-live environment to make sure the subscription service is working properly, before being opened up to wider access.
Accountants will not be able to register willing clients to begin with. However HMRC is likely to provide accountants with the necessary functionality, to subscribe their clients, within a short time frame afterwards.
HMRC is not intending to run a full series of face to face seminars for accountants to discuss MTD related issues, as it did during the consultation process, but will be using webinars as a means to target a higher audience. A marketing strategy is being designed to offer more information and advice to businesses and accountants later this year.
Our Head of Technical Research, Guy Smith, comments:
‘Making Tax Digital is going to happen and the subscription service is laying the foundation for the full rollout to unincorporated businesses and landlords in April 2018. Volunteer businesses can rest assured no penalties will be applied during the testing period and I suspect they will receive more help from HMRC during the public beta than they may perhaps receive when MTD goes fully live.
HMRC has an awful lot of work ahead of it though. Awareness of MTD amongst SMEs is patchy at best and the forthcoming marketing campaign will be a belated good start.
Then there are the SMEs who do not use accounting software at all. A recent survey conducted by the UK200 group amongst its members found that 65% fall into this category. It would be foolish for the marketing campaign to focus solely on the software and filing requirements though. Some of the campaign will also need to educate businesses on what good record keeping looks like and the quality of information to be uploaded. The same UK200 group survey found that 16% of members clients still use the ‘shoebox method’, with all the business paperwork provided at the accounting year end in a box for the accountant to reconcile and enter on the tax return.
Attracting willing volunteer businesses is the easy part. By volunteering in the first place, businesses are demonstrating a desire to comply with mandatory MTD. There will also be the businesses which gradually change their systems over the next 12 months to prepare themselves for next April. These businesses are probably already using accounting software and MTD will be a relatively straightforward transition. Some businesses will undoubtedly come to MTD very late and some will not adopt MTD at all.
HMRC will need a strategy to deal with each different scenario and the non-adopters in particular.’