Research suggests 2 out of 3 accountants expect to offer new services due to MTD for ITSA

More than two-thirds of accountants in practice (68.1 percent) expect to roll out new service offerings because of MTD for ITSA, according to a report by Sage.

“In the last 18 months, many businesses were looking for assistance with both management information and forecasting,” says Mark Kearsley, tax partner at DSG Chartered Accountants.

“Regular review of timely management can help businesses identify areas for growth or improvement, and we have seen increased demand in this area.”

As part of a wider government initiative to digitalise the UK tax system, sole traders and landlords with an annual business income above £10,000 will be required to file returns using an MTD-compliant software or bridging tool as of April 2024.

The new rules also stipulate all businesses will have to provide “periodic updates” – no less than quarterly – for the same periods, by the same deadline, regardless of their accounting period.

According to the survey, which was produced by Sage in conjunction with Accountancy Age, accounting firms believe they will be presented with several growth opportunities as a result of the forthcoming changes.

For instance, more than half (57.6 percent) of respondents said they will be able to charge more for existing services due to a greater need for compliance, while nearly two-thirds (64.6 percent) said believe the winning of new clients will be a key opportunity for growth.

“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 even when they’re used to it,” says Chris Downing, director for Accountants and Bookkeepers at Sage.

“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 MTD-compliant software,”They must also submit an ‘End of Period Statement’ for each income source before 31 January following the tax year,” he says.

Today’s estimates suggest around 40 percent of unincorporated or individuals are filing their own personal tax return, he notes.

Additionally, 58.7 percent of respondents said they are expecting MTD for ITSA to create new opportunities for expansion and development.

For many, this also translates into longer-term value – nearly 45 percent of accountants stated they consider MTD for ITSA to be beneficial to their practice long-term.

“MTD is going to be a challenge, but we need to imagine what the world looks like going forward,” says Downing.

Challenges still to overcome

But respondents also proved to be cognisant of the potential for added strain as a result of new opportunities.

When questioned on which aspects of MTD caused the most concern, over 68 percent cited the moving of manual record clients to accounting software, while 57.6 percent cited ‘migrating clients to compliant software’.

Similarly, more than 72 percent of respondents said encouraging tech adoption would be their greatest hurdle moving forward.

“Clearly there will be the opportunity to charge clients more fees, but the challenge is actually delivering that work in the first place,” says Downing.

“Therefore, do you have to employ more staff? Or more importantly, do you adopt technology which saves you time, creates capacity, creates a greater collaboration and workflow with your clients but also at the same time is affordable?”

The survey went on to gauge accountants’ views on this matter, questioning how they intend to cope with the increase in workload. Most strikingly, nearly 69 percent said employing more staff would be their chosen solution.

However, 27.2 percent said making better use of automation would be their preferred option, while over 30 percent said they would consider outsourcing.

“Although 2024 feels like some time away, advisers should now begin planning their approach,” says David Sharp, partner at accounting firm Rouse Partners.

Sharp goes on to cite options such as reviewing software options and internal training, but also points out there are several strategic questions firms must seek the answers to first.

“Should you partner with a software vendor to achieve either a new revenue stream or bulk buying cost savings for clients?” he says.

“If you do, how will you handle new clients using another software package, clients with their own preferences or those with businesses more suited to other software providers?

Also, will you provide client training as a separate service offering or as part of their existing package?”

For more information on how Sage can help with getting prepared for MTD ITSA visit the Sage website here.