How to thrive in the new digital tax era

How to thrive in the new digital tax era

MTD may be a huge change for the industry, but it brings great benefits as well, argues Thomson Reuters' tax product manager Mark Purdue

Making Tax Digital (MTD) is one of the biggest changes to ever face the accountancy industry. It’s set to transform the profession and is by far the greatest challenge facing firms today. As a result, real-time data will provide new opportunities and enable accountancy firms to provide more value-added services to clients.

MTD for VAT will require most VAT registered businesses with a turnover in excess of the registration threshold to start keeping digital records of transactions, either in a bookkeeping solution or a spreadsheet. In addition, all VAT return summary information will have to be submitted to HMRC via digitally enabled software and the current process of submitting via the government gateway will be disabled next month. That one change in itself will significantly impact many businesses in the UK.

Getting ready

As a result, accountancy firms should be ready for the change and ensure that their internal processes meet the needs of MTD. In turn, accountants need to be proactive, advising clients on how to manage the new digital tax compliance process. To do that practices need to look for comprehensive guidance on how best to support their varied clients’ needs. While digital tax processes may seem daunting, the right technology can help take the mystery out of MTD and become a huge opportunity for accountancy practices to win new clients and create a more profitable business.

Practices need to look for technology that can integrate between clients’ digital records and HMRC easily. It’s important to review what will help to transform processes without making staff feel like they may implode. The upfront investment in time, resource and technology will pay dividends when clients seamlessly move across to meet HMRC’s new requirements.

Integrating with existing records

For those practices with clients whose records are spreadsheet based, integration with Microsoft Excel is critical as it has been the spreadsheet of choice for businesses and accountancy firms for many years. Being able to easily import clients’ digital records in a format that is digitally linked to your bridging software is vital. Choosing the right technology in advance will mean that disruption for accountants’ small clients is kept to a minimum – clients can continue to keep transactional records via their existing compliant spreadsheets, with MTD having minimal impact on their existing processes. The spreadsheet of collated data can then be uploaded into company’s bridging VAT solution for submission to HMRC.  It is important to note that, done correctly, this simple process will be compliant with HMRC’s “digital linking” even after the soft landing period.  Bridging software should be seen as a vital tool in any practice’s ongoing MTD arsenal.

“Bridging software should be seen as a vital tool in any practice’s ongoing MTD arsenal”

Freeing up staff time

One of the welcomed benefits of MTD is that workflows can be simplified and this will, in the long run, free up staff time to focus on more interesting and challenging issues. Coupling this simplification with the cloud benefits of automation will only improve efficiency further.

This streamlined yet more intelligent way of submitting VAT returns means that clients can share their transactional records with accountants in a more efficient way, which will be the huge benefit as the scope of MTD expands.

As the compliance processes get more efficient, and the practice has access to reliable real time data, the opportunities for advisory and other value add services should not be underestimated.  Getting the foundations correct now, will benefit both client and accountant in the future.  Perhaps one unforeseen outcome of MTD is that not only are client relationships strengthened by the improved approach but also accountancy firms who successfully understand and adopt the right technology and processes for digital tax gain a competitive advantage.

With weeks to go, are you MTD ready? Let us know in the comments below.

Whitepaper

The Future of Finance is in the CFO's Hands

Business The Future of Finance is in the CFO's Hands

3m
Save a Week a Month Consolidating Accounts

Accounting Software Save a Week a Month Consolidating Accounts

4m
Mitigating Risk Through Internal Control

Legal Mitigating Risk Through Internal Control

4m
Could tax season have run more efficiently?

Corporate Tax Could tax season have run more efficiently?

5m

Related Articles

Making Tax Digital for VAT – can I just record the daily gross takings?

MTD Making Tax Digital for VAT – can I just record the daily gross takings?

1w richardwild, Head of CIOT Tax Technical Team
QuickBooks try dangerously hard to show that MTD is easy

MTD QuickBooks try dangerously hard to show that MTD is easy

2w Tom Lemmon
MTD – don’t forget the records

MTD MTD – don’t forget the records

1m Emma Rawson, ATT Technical Officer
Over 300,000 businesses wrongly believe they are MTD compliant

MTD Over 300,000 businesses wrongly believe they are MTD compliant

1m Tom Lemmon
Making Tax Digital – Understanding the turnover exemption

MTD Making Tax Digital – Understanding the turnover exemption

2m richardwild, Head of CIOT Tax Technical Team
MTD could bring ‘productivity payout’ of £57bn over five years

MTD MTD could bring ‘productivity payout’ of £57bn over five years

3m Beth McLoughlin, Managing Editor
One week to go—are you ready for MTD? 

MTD One week to go—are you ready for MTD? 

4m Emanuela Hawker, Reporter
Spring Statement 2019: VAT MTD is go, but no further mandation until 2021

MTD Spring Statement 2019: VAT MTD is go, but no further mandation until 2021

4m Brian Palmer, AAT