Making Tax Digital is used so often in the accountancy world but it can still instil concern in those who hear it spoken about.
MTD is a government initiative designed to digitise tax paying so records are kept in digital format and returns are filed through online software.
The government is introducing the change in stages. After delaying the plan in July 2017, it was decided that the MTD for VAT deadline would be April 2019 and all other taxes would be 2020 at the earliest.
Businesses with a turnover above the VAT threshold of £85,000 will have to keep digital records for VAT purposes from April 2019.
Postponing the deadline may have caused accountants to place MTD at the bottom of their priority lists, but the sooner firms start focusing on it the better for them and their clients.
Accountants must now embrace the developments MTD will bring as well as continue to navigate pain points associated with other change, like the increasing use of AI and technology, the global economic state, and other regulation like GDPR. Client reluctance, uncertainty, and the costs of MTD compliance are likely to be common issues that come out of this.
The accountant’s role will be to help put clients at ease, ensure they are compliant by the deadline, keep up with changes, advise them on the right software, and help them to overcome any challenges.
Accountants need to position themselves as the experts on MTD, and this can be achieved with some vital changes.
Onboarding clients
Before getting their clients on board with MTD, accountants need to become experts in the subject and predict the questions they will be asked.
To start with, accountants should ensure they understand HMRC compliance obligations and they can confidently recommend software solutions to clients.
Next, accountants need to consider how they will incentivise clients to get on board with MTD. They must explain how MTD will benefit businesses and why not complying could land businesses in trouble.
- MTD makes life easier: businesses will no longer need to keep track of receipts and invoices; and businesses will be able to keep a closer eye on their tax obligations and check at any time what their end-of-year tax bill will be.
- MTD will cut costs in the long term by reducing administrative burdens and allowing businesses to run more efficiently.
- If a business fails to comply with MTD, HMRC have a penalties system in place for late submissions and payments.
While accountants should communicate these facts to all their clients, they should address each client’s needs individually. The implementation of MTD is a good time for accountants to review their client list, and ask themselves if clients will continue to be profitable after implementing MTD changes.
Difficult clients are businesses which are not yet digitised and clients with concerns about cloud technology and cybersecurity.
The first step in becoming an MTD expert is simply recognising these challenges and understanding what is making clients reluctant.
Technology, productivity, and timings
A hot topic this year has been the fact that investment in technology increases productivity, and therefore business growth. Businesses who have already developed their technology will be both more productive and more prepared to embrace MTD.
It is consequently important for accountants to establish a timeline. They must think about which clients they need to target and who they will prioritise.
Considerations include which clients are tech-savvy and therefore relatively easy to transition, compared with those who need more time dedicated to their MTD move. Year-end deadlines are another factor to be aware of.
Training
Accounting firms must train both their staff and clients to deal with MTD properly.
Before even thinking about getting clients up to speed, firms must work out their own internal training plan. Recommendations to do this successfully are:
- Bring on board a sponsor at senior level to support MTD plans.
- Get stakeholder buy-in.
- Implement a champion in each team or across the firm to disseminate training and information surrounding MTD. Consider a dedicated team for MTD depending on the size of the firm.
- Decide what training methods will work well for the firm. Will it be done in-house or remotely, and will an education programme for accountants be used?
- Review and revise chosen training based on the working processes of the team.
When firms have disseminated an effective internal training program, accountants should consider how best to train their clients sufficiently in MTD. Information can be shared and engagement driven through a variety of channels, for example through webinars and at events.
Simply sharing information is not enough. Accountants must also help clients to understand the legislation of MTD and update them on any changes that occur.
Explaining software options available and helping clients to understand what is best for them to drive value is equally expected.
The importance of communication
Communication is key to complying with MTD, both within an accounting firm and between accountants and their clients, and this communication should not stop at the point of onboarding.
Accountants must continue supporting and advising clients on MTD. It is their role to deliver news of any changes or developments from HMRC, for example when technology changes or external factors like Brexit have an impact.
Figures on agent authorisation show that 30% of businesses will be submitting through accountants. This emphasises the pressing need for accountants to stay up-to-date with HMRC releases and ensure clients are compliant.
Accounting firms must also consider how they will engage their clients. Out of all new businesses, 70% of them are under the age of 31 and so accounting firms need to think about how best to communicate with the younger generation. Key to this is ensuring firms are socially and digitally savvy, and have the right technology in place to communicate effectively with target clients.
To stay up to date and find out more about what accountants need to know about Making Tax Digital visit Sage’s online MTD hub.