PTD0002

Written evidence submitted by– Rossmartin Tax Consultancy Limited

Progress with Making Tax Digital

I am Nichola Ross Martin CTA (Fellow) FCA managing director of Ross Martin Tax Consultancy Limited and Tiger Dog Media & Publishing Ltd, which runs a practical tax databased used by several thousand firms of accountants.

When MTD for VAT became compulsory we ran a blog which allowed user feedback called ‘Trying to sign up to MTD for VAT’, the experiences of our accountant clients coupled with our own findings in our accountancy and tax consulting company were that it was extremely difficult to sign up, this was because the tech’ just did not seem to work. Each step was fraught with issues. The first steps being:

Signing up an agent
Registering as an Agent
Registering as a business
Authorising a new client
How on earth to correct reporting errors.

Sizeable problems were met in getting the new Agent Service Account to work. Eventually it all worked. I was under the impression that HMRC had not conducted a wide enough pilot scheme for long enough. The experience has left a bitter taste.

In terms of software for MTD for VAT, when it works its good and it’s useful to be able to report in real time, not that any of our client is using this.

Our supplier Xero has of the last three VAT months crashed as the reporting deadline approaches. It remains to be seen whether this is now going to be more regular process. Another highly annoying and time-wasting factor for everyone is that the bank feeds to the bookkeeping software need to be regularly updated and this is not a seamless process and always go wrong at the worst possible moment.

We have handled several unrepresented businesses who have tried to set up MTD for VAT software on their own. One product which is widely advertised has some unexplained features something in the set up allowed them to double post income (it would let them post sales and the receipt of cash for the same sale as income). This was explained and disturbing.

Another client, a used car dealer had a lot of difficulty finding suitable software to deal with the VAT second hand car margin scheme and his original software gave out completely incorrect results which went unnoticed as he assumed that it the software generated a VAT return it must be correct. We had to redo all the business accounts manually to correct the position. That cost a lot of time.

In terms of reporting for tax. It’s the ability to link bookkeeping software to bank accounts that is the real game changer. In reality, any bank, building society or credit card company could cut the middleman (accountants/bookkeepers) and automatically facilitate a business bookkeeping for them if they had a mind to do so. MTD seems like an interim step in that regard, without doubt this is something that can later be automated.

We find that under MTD we are doing more bookkeeping than ever before. We are charging more for the service but its low margin and time consuming. There is always the added pressure that there will be an IT failure at critical deadlines.

In terms of MTD for Income Tax reporting we are pleased that the deadline for this has moved forward. In common with many small firms of accountants we have not got the staffing levels to allow us sell this service. It’s doubtful whether we would want to offer it as quarterly filing is invasive.

All in all, with my accounting hat on, I can be positive and say that MTD for VAT is an improvement on doing manual returns. ‘The jury is still out’ as to whether MTD for Income Tax will improve tax reporting. From my perspective, the biggest improvement to any business’ bookkeeping is having software that automatically links to a bank feed and is then ‘trained’ to automatically recognise transactions and allocate them to the correct account. Perhaps HMRC should focus on making that a mandatory element. That and the abolition of cash would probably cut a lot of user error.

May 2023