What do you mean I “cannot take part in this pilot”?!

If, like many landlords and self-employed people, you’ve tried to voluntarily sign up for HMRC’s new Making Tax Digital (MTD) for Income Tax, you may have encountered the following message:

It’s frustrating. You are trying to do the right thing and prepare for this seismic tax change, yet you are denied. While HMRC do attempt to explain the eligibility criteria here, there’s a lot they don’t explain. 

As the former owner of that page whilst working in the HMRC MTD programme, I wanted to write a lot more to help people understand the process.

This blog is everything I wanted to say but couldn’t...  

A reminder of how MTD will work

The new MTD rules require landlords and the self-employed to submit their income and expenses directly to HMRC via connected tax software. I expect that partnerships and trusts will follow, but this is still to be finalised.

In addition to this information about your business, you’ll also need to include all of the other information that currently goes into your annual Self Assessment Tax Return, such as pension income, savings interest, charitable giving, etc.

However, each piece of information needs to be correctly integrated into HMRC’s systems, so it is recorded in the right place. Each piece of information, therefore, needs its own connector to link HMRC’s systems with MTD software. These connectors are known as APIs. HMRC is building these APIs one by one. When they are released, tax software developers, like APARI, integrate it into our systems.

Until HMRC - and your software provider - support all of the information that you require for your tax return, there is no point signing up for MTD as you won’t be able to submit all your information.

(Note: You'll be able to use APARI to do everything that HMRC supports.)

Why can’t you sign up for MTD now?

If you signed up for MTD but couldn't submit everything you need to, it would be a waste of time. You would still have to send a full Self Assessment Tax Return anyway, doubling your efforts and causing confusion.

Obviously, this would be a terrible experience and would put everyone off MTD, so HMRC try to prevent it. If they think your circumstances don’t match the available APIs, you’ll be blocked from signing up for now.

To check whether you are currently eligible, HMRC look at what you reported on your most recent tax return. If they see you reported overseas income last year, for example, they will assume you need to this year and block you.

Another reason you may be blocked for now is that you are new to self employment, are not a resident of the UK, or you claimed a grant under the Self Employed Income Support Scheme. There are a mix of explanations for this, from the technical to the administrative.

From April 2022 onwards, HMRC expect to allow more landlords and self-employed people to sign up for MTD for the tax year 2022-23.

As you may know, APARI was one of the first pieces of MTD-ready tax software. We will continue working closely with HMRC to integrate new APIs in the new year, adding new functionality and ensuring that APARI users get early access.  

What should you do now?

Check if you’re eligible to volunteer as a test user and have the glory of being a pioneer in the rollout of MTD. Not all heroes wear capes.

Or you can start by using our software, for free, to keep your business and/or property records digitally. As soon as you’re eligible to join MTD, we’ll let you know.

Want to know more about MTD? We created the Ultimate Guide to Making Tax Digital for YOU!