The Last Leg: Accounting Software’s Race To MTD Compliance (by Ian Vickers)

Further to my article in the last issue for Accounting Practice about how I am approaching Making Tax Digital (MTD) for VAT in developing my own software, I would like to tell you about my experiences of the last couple of months, how they have validated my position and what it all means for the end user: you, the Accountant.

As predicated in my last article, there was a last minute change requested by HMRC on how accounting software authenticates with its own systems. This was presented to us developers in a somewhat disingenuous manner by HMRC; we were ‘advised’ to make the change, as if the change was an optional choice for us. This, of course, is a nonsense. If we did not make the advised change, the software would not have worked and it would not have been compliant come April 2019. We have since made the necessary changes.

Given this experience, it does go to show up the pretence of a lot of the communication from HMRC and other accounting software manufacturers in recent months. How can so many other software accounting packages be declared ‘MTD ready’ when the parameters of what is required by the software from HMRC is still in flux?

In addition, HMRC have publicly promoted two lists of accounting packages, one of accounting software that is deemed to ready for MTD (beta-testing) and another of software that is developing MTD capabilities. Prelude, my own software, is cited on the latter list but, not wanting to sound too petty about it, shouldn’t all the software feature on the second list given my argument above?

Regardless, Prelude is always fully compliant on any given date when legislation and new processes require us to be, and we are going to be MTD compliant as of April 2019 (if not before) [Update: We’re now MTD Compliant]. In other words, we are ready when we need to be and not unnecessarily sooner.

The flipside of all this is whether accountants are really ready for MTD themselves. Despite all the publicity surrounding the introduction of Making Tax Digital in both the mainstream and accounting press, our own market research has shown that a worryingly large number of accountants (including ICPA members) are either unaware of MTD and its implications, or are clinging on to the belief that MTD will be scrapped at the last minute, whether that be due to wider political pressures (surrounding issues such as Brexit) or a lack of faith in HMRC’s own IT capabilities.

At the time of writing (February 2019), there is no sign of Making Tax Digital being scrapped before its first wave (MTD for VAT) in April 2019 – just two months out. MTD is going to happen, and I suspect that those accountants who are unaware of it will fold overnight, while those who thought it wasn’t going to happen will be scrabbling to get up to speed as quickly as possible (and will probably lose unimpressed clients in the process).

For those who are aware of the implications of Making Tax Digital on their business, I wonder how many have yet fully stress-tested their processes and software to make sure they can implement MTD for VAT when the time comes. If you yourself have yet to do this, I urge you to do so, if it is not already too late.

Any responsible software developer will make sure that there are clear guidance notes on how their software is to be used to fulfil the MTD for VAT process. Make sure you read the advice thoroughly and do a trial run at the appropriate juncture. Prelude will be producing clear to follow instructions for our users, and we also have a customer support team on hand who can help those still stuck with the new processes.

The next article you will read from me in Accounting Practice will be after the introduction of MTD for VAT, and we will all be lot more aware of how it is working in practice. All I can do now is to wish you luck and urge you to fully embrace the accounting software you have chosen. Prelude is always on hand as a cost-effective alternative to your existing software, and with our aforementioned guidance notes and customer support services, we plan to make the transition as painless as possible. Get in touch with me if you want to know more.

For more information about Prelude, e-mail info@preludeaccounts.com or call 0845 223 2170.  Prelude is now MTD compliant.