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Making Tax Digital Cloud Burst

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Making Tax Digital (MTD) is on its way whether we like it or not.

Starting from 2018 HMRC will, without exception, start rolling out mandatory quarterly digital reporting for all businesses and individuals with a secondary income in excess of £10,000.

The latest news available on the timescales suggests that the smallest of businesses will be hardest hit first:

  • Income Tax reporting – 2018
  • VAT reporting – 2019
  • Corporation Tax – 2020Good news for Cloud Accounting systems suppliers you might think.But is this really good news for the suppliers?So that’s just a bit of development – right?Six consultation papers will be issued by HMRC on MTD in July; delayed until the country has decided its position on Europe.Huge HMRC projectOf course this means that there is no specification available to give to the software suppliers who will have to have HMRC compliant systems ready for businesses to be able to pass the data over to HMRC starting in 2018.It’ll be an equally huge project for the software suppliers to build the data feeds into the yet to be designed and built HMRC systems.The fear will be that the data demanded by HMRC will continually change as they work out what they are actually doing and realise the complexities they need to address. There’s been no clarity at all from HMRC on simple issues such as cash versus accruals accounting, year end adjustments, aligning quarter dates and so on.Funding for compliance lead developmentThe Cloud Accounting space is renowned for unicorns as well as loss making companies with some raising working capital through crowd funding; all well and good when funding will pull in additional revenue. It will be interesting to see how investors react to significant investment demands for this non fee enhancing compliance project; especially without the clarity of requirements and the joys of dealing with a public sector monster with a reputation for lack of customer service and empathy.
  • Will all suppliers survive the journey into Making Tax Digital or will we see a shakeup of the Cloud Accounting space where only those with profits and surplus funds survive the most disruptive HMRC initiative ever to hit the UK tax payer?
  • That assumes of course that all suppliers are capable of funding this compliance work; although to not allocate funding will be the death knell for any accountancy system – that much is certain.
  • Deep joy for suppliers who will need teams of analysts, developers and testers dedicated to this folly. Teams of people pulled into non profitable compliance work and away from delivering profitable developmental demands on their product roadmaps.
  • Ever changing needs
  • It goes without saying that MTD will be a HUGE IT project for HMRC to undertake; and we all know the public sector’s track record on delivering IT projects within time and budget.
  • So let’s get this into perspective ….. HMRC haven’t got a specification of the requirements to give to their team of developers.
  • Six consultations implies that there is very little in the way of detail actually decided on how Making Tax Digital will operate and we all know when it comes to accounting and tax matters the devil is in the detail!
  • Well who knows? We’re just two years away from the first quarterly reporting and HMRC haven’t got a clue what they are doing.
  • Whatever HMRC demand by way of data from small businesses will need to be delivered to them via the accounting system; most probably a Cloud Accounting system using what’s called an application program interface (API).
  • There may be trouble ahead
  • HMRC will expect all businesses to be using compatible software; excel spreadsheets and old unsupported systems just will not do.

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