It is no secret that HMRC are introducing computerised submission of returns for individuals and for companies.
It’s actually the third time HMRC have attempted to do this. However a couple of years ago this particular effort was initiated by the then Chancellor George Osbourne and so from the top down it got greater priority. There are a number of advantages for HMRC in having all this computerised: They do not have the large expense of processing paper forms and to turn them into data with inevitable errors and omissions. The data is immediately in a form where they can analyse it and find the rogues.
There is at least one disadvantage: they are presenting the top UK hacking target, even above private royal photos.
HMRC have produced a cartoon illustration of the process as they see it:
It concerns an imaginary accountant Alfred and an imaginary Florist sole trader Flo. They use imaginary software COG and LION. Each has a digital identity registered with HMRC.
Many Agencies in the temporary staffing industry start off as one or two employees operating as sole traders marketing their skills under sole trader status which has a number of tax advantages for them. Often they group together to become a small agency. Often small agencies grow because they have the friendly employment environment arising from knowing their industry first hand. At some point someone takes first responsibility for the book keeping process. Sometime they may then feel it is cheaper or more efficient to employ an accountant or third party book keeping service. This is their story in an overview.
Accountant Alfred is preparing for Making Tax Digital (MTD).
He knows we’ll need to subscribe his agency, accountants, to HMRC's agent services to handle tax for clients who have subscribed to Making Tax Digital For Buisness (MTBFB). He uses imaginary business software called COG.
Florist Flo is growing her business
A friend recommends using imaginary LION software to manage her accounts. It will save her time with bookkeeping and chasing invoices. She can even use it to send here tax return to HMRC.
Geoff requests authorisation from Flo so that he can represent her for Making Tax Digital for Business Income Tax Self-Assessment (MTDfB-ITSA)
- Alfred wants to subscribe to HMRC agent services using COG.
- Alfred needs to complete security checks.
- Alfred’s software needs permission for this new interaction.
- Alfred's subscription to agent services is complete.
- Flo’s self-assessment Tax Return is due soon.
- Flo subscribes to MTFB-ITSA. (MTB self assesment)
- Flo needs to complete a security check.
- Flo’s software needs permission to interact with HMRC.
- Flo’s subscription to MTD is not complete.
- Flo sends her first MTD update.
- Alfred adds Flo’s UTR and postcode into COG.
- COG displays the matching client from HMRC’S database.
- COG sends Alfred’s authorisation request to HMRC.
- LION notifies Flo and she approves Alfred’s request.
- Alfred gets access to Flo’s data.
- Alfred submits Flo’s tax update.
Watch this space....