Sage has announced that it has been officially approved as a provider that offers software compatible with Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA). What is surprising is that its rival Xero was already listed. That would have been unthinkable a few years ago, but it indicates how far Xero has come in the UK market.
For Sage and its customers, this is an important step. MTD for ITSA is rapidly approaching the next major change. From April 2024, sole traders and landlords with an income of more than £10,000 will need to submit information electronically to HMRC.
To achieve this, they will need to have an HMRC-approved solution or obtain the services of an accountant that can do so for them. There are several other approved solutions, most of which are used by bookkeepers or accountants. It will certainly mean that records will need updating more regularly.
Sage calls out the five things that MTD for ITSA compatible software should support:
- Capture digital records
- Categorise transactions
- File periodic updates with HMRC (which must be submitted at least quarterly)
- Submit an End of Period Statement (EOPS)
- Submit a Final Declaration tax return
What Sage has done differently is to achieve approval through the creation of a Taxes Dashboard. This is an open solution that ensures Sage can answer the needs of its customers and larger numbers of accountants and bookkeepers across the country. It is an approach that will retain and may win back market share.
The key change is that Sage is no longer deploying the proprietary software that it used to but has an open cloud-based approach.
The Taxes Dashboard is not just a means of filing taxes information. It enables accountants and business leaders to collate, validate and report on the information uploaded. It will notify users when filings are imminent or overdue. The solution will also predict business tax liability, ensuring they understand their cash flow position better.
The system will support data ingestion from various sources, including manual, CSV files, bank feeds and Sage software. However, the latter is not noted within the press release. One obvious feed would be from CountingUp, a firm which Sage invested in last year.
Neal Watkins, EVP Product, Sage, commented: “MTD for ITSA will be a significant challenge for many sole traders and landlords who might struggle to comply with the significant changes imposed by MTD for ITSA. Their accountants will be playing a critical role in helping them stay compliant, fulfil these reporting stages and adapt to the changes in legislation quickly and efficiently.
“Developed with accountants and small businesses in mind, our Taxes dashboard will ensure that compliance is a painless process. It will also enable sole traders and accountants to save time and resources, and gain better visibility of their future liabilities resulting in more accurate cashflow forecasts to proactively manage the health of their businesses”
Once added to the solution, users can review, edit and resubmit the entries, ensuring that they are correct and allocated to the correct categories for reporting purposes. The system is available for both browser and mobile devices. It appears to adjust to the form factor of devices rather than a separate mobile application.
Sage calls out five benefits businesses, and their accountants will gain from using the application.
- Digital record-keeping makes tracking taxes simpler than paper-based solutions
- Digital records provide a single version of the truth accessible from anywhere
- With the review and edit features, errors in tax returns are minimised, with errors highlighted and corrected quickly, with tax calculations updated automatically
- Small businesses and their accountants can work on the same version of the data, collaborating to provide an optimal outcome
- With tax estimates surfaced as data is added, small business owners can better control cash flow.
The initial reactions to the solution are positive. Sam Mitcham, owner of SJCM Accountancy, noted: “Sage has a long history of guiding businesses and supporting accountants through legislative change. Having the ability to fulfil all the steps required by MTD for ITSA with one simple and intuitive solution is a massive competitive advantage. We’re continuously striving to save time, reduce risks and streamline our operations which Sage is fulfilling with their MTD solution.
“This, in turn, improves our clients’ understanding of their own business, enlightens them to the broader benefits of being more digital and ultimately improves the accuracy and completeness of the information presented plus the assurance that they’re getting it right, every time.”
Enterprise Times: What does this mean
While Sage may not be the first to market with approval for MTS for ITSA, it has thought broader. Its solution will appeal to small businesses, accountants and bookkeepers who struggle to migrate their clients to cloud-based solutions. The Taxes Dashboard is a way for Sage to re-engage with small businesses across the country, especially as the deadline for MTD for ITSA approaches.
Many, especially landlords, may not want to bear the cost and time of purchasing a full-blown accounting solution. Instead, the Taxes Dashboard could fill the gap and help them to automate the process. What is missing from the Sage announcement is pricing or a link to the Taxes Dashboard. The solution appears to be separate from other Sage solutions, but it was not possible to locate it on the Sage website, as of writing.