Majority of accountants see MTD for ITSA as “growth opportunity”, survey finds
Both practices and clients must adopt new digital solutions to ensure they are MTD compliant by April 2024
Both practices and clients must adopt new digital solutions to ensure they are MTD compliant by April 2024
More than half (58.7 percent) of accountants in practice believe the forthcoming Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA) implementation will act as an opportunity for them to grow their practice, according to a new report by Sage.
“MTD for ITSA is clearly going to be a challenge, but also with it there will be opportunities,” says Chris Downing, director of product marketing at Sage.
“What we saw with MTD for VAT was that people who were self-filers suddenly called upon their accountants to support them in filing quarterly.”
A core pillar of HMRC’s mission to digitalise the UK tax system, MTD for ITSA will require sole traders and landlords to file returns using an MTD-compliant software or a bridging tool. They must also submit an ‘End of Period Statement’ for each income source at the end of the fourth quarter.
The new rules will take effect from April 2024, but general partnerships will not be required to join until April 2025.
Within the report, produced in conjunction with Accountancy Age, Sage’s survey went on to seek accountants’ views on where exactly they thought such opportunities would arise. For instance, more than two thirds (68.1 percent) cited the provision of new services and advice.
Additionally, more than 64 percent expected to win clients who previously filed their own tax returns, while more than 57 percent said the changes will enable them to charge more for existing services.
According to Clare Bowen, director at MHA Monahans, successful practices must first start offering digital literacy skills to clients. “Clients will need to be supported in the technologies that HMRC are expecting them to use,” she says.
“For many, it may feel alien and hard to get a handle on quickly. Because of this, they may struggle to see the benefit of MTD.”
According to the survey, however, accounting firms themselves will also be met with several technological challenges as of the April 2024 deadline.
Sixty-eight percent of respondents, for instance, cited the migration of manual record clients to accounting software as a core challenge. Technology skills gaps (36.1 percent) and disruption to workflows (64.6 percent) were also popular answers.
“The initial challenge is that clients are reticent to change. However, it is our job to ensure that clients see the value of changes being imposed,” Bowen continues.
“The job of the accountant is to show them that MTD, while an additional cost, allows for incredible time savings.”
The survey goes on to note the significant uptick in workload and time loss which could result from the MTD for ITSA rollout, with nearly half (48.7 percent) of participants stating that chasing clients for information and records consumes most of their time.
Fixing client bookkeeping (26 percent) and data processing (13.3 percent) also featured heavily.
With an uptick in these activities on the horizon, respondents were also questioned on how they intend to cope with the increased workload. While 69 percent said they simply plan to employ more staff, more than a quarter said they intend to make better use of technology to automate processes.
“Although 2024 feels like some time away, advisers should now begin planning their approach,” says David Sharp, partner at Rouse Partners.
“This might include appointing internal champions, reviewing and testing the software options, internal training and segmenting clients based on how they currently keep records.”
The survey goes on to reinforce Sharp’s plea for urgency, questioning participants on what they expect to be the prevailing consensus among clients in the MTD for ITSA era.
For instance, less than a third of respondents believe a majority of clients will not use some kind of cloud software in the future.
In addition, while the consensus is that a large proportion of clients will keep using manual records and spreadsheets, 43 percent of respondents said they anticipate the preferred method for clients would be a bookkeeping solution.
“The solution for every client will be different. Some clients will want more help and interaction from us, others will want only guidance,” says Bowen.
“What we, and other accountants, need to offer is a range of solutions so that clients have a choice. It’s not a one-size-fits-all situation and clients’ needs must always be at the forefront of the agenda when it comes to finding viable solutions.”
For more information on how Sage can help with getting prepared for MTD ITSA visit the Sage website: https://www.sage.com/en-gb/making-tax-digital/accountants