Client tech adoption “single greatest hurdle” for accountants, study finds

Client tech adoption “single greatest hurdle” for accountants, study finds

Buy-in from clients is critical to ensure MTD compliance by April 2024

Client tech adoption “single greatest hurdle” for accountants, study finds

The adoption of new technology could turn out to be a major obstacle for the rollout of the UK government’s efforts to digitalise the tax system.

According to research conducted by Accountancy Age, in conjunction with Sage, nearly three-quarters (72%) of accountants in practice believe encouraging technology adoption among clients will be their biggest obstacle as the industry gears up for the rollout of MTD for ITSA.

A core pillar of HMRC’s mission to digitalise the UK tax system, MTD for ITSA will require sole traders and landlords with an annual business income above £10,000 to file returns at least quarterly 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 tax year, and “periodic update” at least quarterly. The new rules will take effect from April 2024, but general partnerships will not be required to join until April 2025.

Accountants responding to the survey also noted that moving manual record clients to accounting software (68.1%), migrating clients to compliant software (57.6%) and disruption to practice workflows (64.6%) were among their top MTD-related concerns.

Clare Bowen, a director at accounting firm MHA Monahans, notes that for many of the self-employed individuals who will be affected by the new MTD rules, this will be the first time they have had to pay for software to keep their records. Many will also have never used digital collection systems, which means the costs may appear significant.

“The initial challenge is that clients are reticent to change, and job of the accountant is to show them that MTD, while an additional cost, allows for incredible time savings,” says Bowen.

Many tax and accounting software packages have been altered to take MTD for ITSA into consideration, including Sage Accounting which allows clients to tackle VAT returns, connect their bank accounts, and share data with an authorised accountant when and where necessary.

The importance of client buy-in

Since the announcement of MTD for ITSA, accountants have dedicated huge amounts of time to preparing to the changing MTD timetable.

In the run-up to the deadline, accountants will need to consider whether their own processes need to undergo a technological upgrade given the increased amount of work which will likely come as a result to changes to the UK’s tax system.

Chris Downing, director of product marketing at Sage, says there will be the opportunity to charge clients more fees because of the increase in workload, but the challenge will be delivering.

“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 is also affordable at the same time?” he asks.

Survey respondents were asked how they planned to cope with this increased workload. While 27.2% said they would employ more staff and 30.5% said they would consider outsourcing, 70% said they would “make better use of technology to automate processes”.

According to David Sharp, partner at Rouse Partners, a series of planning measures for these initiatives must take place immediately in order to achieve compliance and maximise efficiency by 2024.

“Although 2024 feels like some time away, advisors should now begin planning their approach. This might include appointing internal champions, reviewing and testing the software options, internal training and segmenting clients based on how they currently keep records.”

A huge amount of time an effort has already gone into coding new online compliance rules and tracking HMRC’s MTD technical guide. Sharp also goes on to outline some key questions to consider for practice accountants considering a partnership with a software vendor.

“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

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