The ICPA recently asked BTCSoftware for their thoughts on how accountants and tax advisers can best prepare for the Autumn ahead. Here’s a copy of an article which is appearing in the latest copy of their member magazine.
It’s certainly been a turbulent few months for accountants. What with two Finance Bills either side of the Election, plus announcements in July that Making Tax Digital’s mandation dates and qualifying criteria had changed, many accountants are no doubt wondering what HMRC will do next.
So how can accountants best prepare their practices to navigate smoothly through whatever the Autumn brings? And what should they be advising their clients to help them prepare?
In this article, the BTCSoftware team has flagged two key developments which should be on accountants’ radars.
2-Step Verification
HMRC is still planning that, from September 2017, all businesses using their online tax accounts will need to register for 2 Step Verification – if they’re not already using it. This means that, when logging in, tax account users will be asked to give HMRC a mobile number when a tax account is created. A six-digit verification code will then be sent to that mobile whenever anyone attempts to log in to that account.
HMRC sees 2 Step Verification as a means to protect personal tax data, and to also stop agents using client IDs to log into their online records. They plan to create a separate 2 Step Verification for agents but this isn’t finalised yet. The idea is that HMRC will create a verification approach that will only be required on an occasional basis for agents, and not every time they log in.
At BTCSoftware we are working closely with HMRC to ensure our software integrates seamlessly with the Government Gateway. The lack of a 2 Step Verification for agents is frustrating and we have been voicing our concerns to HMRC. In the meantime, accountancy practices will be under pressure to guide and liaise with clients more closely on the new 2 Step Verification for businesses.
BTCSoftware’s Self-Assessment pre-population software currently links to HMRC’s related API (the application programme interfaces that enables data to effectively pass through HMRC’s portal). In doing so it uses 2 Step Verification but once an agent has logged in once, that lasts for 18 months. This currently only applies to the Self-Assessment pre-population API as HMRC hasn’t yet developed the API for an agent 2 Step Verification for its other services.
A Welcome Delay to Making Tax Digital
The delay to Making Tax Digital, which was announced in July was welcome relief to most accountancy and tax professionals.
Under the current new timetable only businesses with a turnover above the VAT threshold (currently £85,000) will have to keep digital records and only for VAT purposes. They will only need to do so from 2019 and businesses will not be asked to keep digital records, or to update HMRC quarterly, for other taxes until at least 2020.
The Government also indicated that Making Tax Digital (MTD) will be available on a voluntary basis for the smallest businesses, and for other taxes. It announced that:
- Businesses and landlords with a turnover below the VAT threshold will be able to choose when to move to the new digital system.
- As VAT already requires quarterly returns, no business will need to provide information to HMRC more regularly during this initial phase than they do now.
- All businesses and landlords will have at least two years to adapt to the changes before being asked to keep digital records for other taxes.
The voluntary basis caught many in the profession by surprise and begs the question, when given the choice, will small businesses really move over to Digital Accounting? HMRC stood to get significant efficiency gains from MTD and it’s surprising that a significant number of business may be given the option to opt out.
Testing of VAT compliant MTD software is currently still on schedule to start in late 2017 and will then be widened out from April 2018. We guess there will be further clarification from HMRC in the months ahead. In the meantime, if you have clients who would be better placed to move over to Digital Accounting, it would be sensible to start the learning curve now, rather than wait until it’s (possibly) enforced.
How BTCSoftware is helping
At BTCSoftware we continue to monitor the latest developments and work closely with HMRC to integrate their changes into our software. As 2017 progresses into its final months there will no doubt be further announcements and changes. To help accountants keep up to date with the latest tax rates, news and calculators BTCSoftware has created a handy free app.
You can also get a 15 day free trial of our Practice Management, Accounts Production, Corporation Tax and Self-Assessment software solutions. Contact our friendly UK-based team on tel. 0345 241 5030, email sales@btcsoftware.co.uk or visit our Solutions page to find out more.
