The VAT deadline for MTD may have passed, but the MTD revolution continues. What do accountants need to know to best prepare themselves for what MTD throws their way next?
Accountancy Age spoke to two MTD experts, Kingsley Samson, Head of Operations at AIMS accountants and Brian Palmer, Tax Policy Expert for AAT, to find out.
Immediate future
According to Samson, there is little for accountants to worry about in the immediate future, or at least until 2021.
“There is nothing new until 2021. On the list of not before 2021, you’ve got getting every VAT registered business into MTD. At the moment, the small ones the under £85,000 don’t have to join. Every year, the exceptions will continue to be the digitally excluded. You have then got personal tax self-assessment, where there is a beta running as we speak, but that will not be mandated before 2021.
“And then you’ve got corporation tax self-assessment, which as far as we can see absolutely nothing has happened on. That again, that will not be mandated before 2021. So, the cans have been firmly kicked down the road,” he added.
On the last point, Palmer agreed saying that he was “certain” that corporation tax won’t be next for MTD as the government is yet to consult on it.
Questions for HMRC
The immediate questions for Palmer were what direction the government would choose to go in. “The conundrum which HMRC needs to solve, is ‘do we expand MTD for VAT by mandating the sub-£85,000s (the voluntarily registered), or do we revert to our original plans i.e start mandating the self-employed to onboard for income tax purposes by requiring them to file quarterly returns of their income and expenditure?’”
Palmer added that mandating the voluntarily registered would be the easier option as “there are only in the region of 1.2m of them as opposed to a pool of over 3.5 million self-employed income tax filers, and the required software is already in place.”
However, he warned that this move would not be without complications as the sub £85,000 VAT registered are less likely to use MTD for VAT compliant software and it may pose a disproportionate cost for such small businesses.
But countering that argument Palmer noted that “by encouraging micro and small businesses to use cloud-based packages, they will have access to sophisticated accounting and management information at a relatively low cost that, if relied upon, will give them a payback via a productivity bonus.”
The other option of mandating the self-employed for income tax was perhaps the best choice for HMRC, but that that too had its own problems. “HMRC would need to decide if it should return to it’s earlier proposal of mandating those with turnover above £85,000 first – this might be easiest as many in this cohort are already filing MTD-compliant VAT return.
“While there is a strong argument that all in business will benefit from easy to use software that offers rafts of added-value features at little or no additional cost it is likely that business membership organisation and lobby groups would be vocal in the opposition,” Palmer said.
Ultimately, Palmer called for a revised MTD road map as the most important next step. “In my view the best approach is for HMRC to adopt a holistic approach to its roll-out of MTD and after a period of soft-consultation with interested parties (developers, agent bodies and membership organisations) publish a revised MTD road map to software developers, accountants and those in business, giving the certainty they all require.”
How to plan ahead
The problem for Palmer with planning ahead was the lack of clarity coming from HMRC.
“Agents can’t really plan ahead. Until HMRC is clear over the direction that any further roll-out of MTD might take, it would be like designing a solution to a moveable feast.
“My advice to agents at the moment is don’t focus on MTD. Instead focus on ensuring your clients get digitised. Whatever way you look at things, the future is digital.”
Sansom argued that whatever happened, accountants must get organised before changes come along thick and fast.
“The key is getting clients organised, getting clients set up with the right account with HMRC. Then accountants who have not been involved in VAT, but will be involved with a personal tax corporation tax, they need to make sure that their agent service and an account with HMRC is set up, and that they understand it. They need to understand the fact that they will not see a list of their clients in it when they’ve transferred to move from the old account – all those things which have been happening with VAT. But most accountants will have gone through all that. It’s then looking at software and deciding on how you going to file the clients and how it’s going to work,” he said.
How will MTD change the role of an accountant?
Palmer was adamant that MTD is only the beginning in the evolution of the role of the accountant, moving into a more advisory role.
“I have long said, and it is already happening, the accountant of the future will be a consultant. The days of the rear-view-mirror accountant, the ones that only deal with the production of end of year accounts and tax returns and numbers are over.
“The power of low-cost cloud-based accounting packages capable of delivering almost limitless reporting functionality in more or less real-time, using automatic data capture mean that those in business will demand timely in-year advice from their accountants.
“Many accountants have already moved to proactive advisory stance where they give timely in year support and advice at a time when its provision enables business owners to make changes that will impact on the bottom line before the end of the current financial year. As opposed to the old model, when an accountant’s advice was given too late to impact on the year under review, as it has already concluded and often too late to make any difference to the subsequent year,” he added.
Despite the move into a more advisory role and the rise of technology, Sansom believed that a lot of the hype around technology was overstated and that the human support accountants provide will remain crucial.
“There are some horror stories that people won’t need accountants, AI will do it all for them. And yes, there will be a group of clients who will say to you, ‘we don’t need an accountant anymore. I can put information in here. And that comes out there. And I don’t need one’ – fine.
“We find that there’s an awful lot of clients out there who just like feeling there is somebody there to talk to, if they want to, rather than dealing with the financial equivalent of Alexa. They’re just unhappy with it.”