Making Tax Digital: What You Need to Know, Now
The deadline for the MTD rollout is only a week away. What impact is it likely to have, and how can businesses ensure they are prepared?
Steve Cox, Head of Accountancy at IRIS Software Group, shares his thoughts on MTD and its implications with Finance Monthly.
HMRC’s prompt decision to delay the next phase of the making tax digital (MTD) rollout in 2020 due to the coronavirus was a welcome move. This now means any businesses who were expected to put digital links in place last year must have this done by the rapidly approaching deadline of April 2021.
Added to this, from April 2022, all VAT-registered businesses will be expected to file their tax returns digitally regardless of their turnover – which was a limitation in the previous phase. For many businesses, this requires a substantial amount of work if the bookkeeping is done manually, on paper records or even not at all, adding to their already full plates as they look to rebuild following the on-going challenges borne from the pandemic last year.
Accountants naturally have a critical role to play in supporting businesses through this next phase of MTD. So, it’s important to have a clear understanding of what needs to be done right now and how to make the transition as simple as possible for clients.
Actions to take now to meet MTD
The first port of call is to evaluate all clients who must comply with MTD before the phase 2 deadline, and review the MTD template built for the first phase. This will help establish a clear strategy of what each client needs to do. Accountants should then begin the transition preparation – communicating with clients about their exact financial positioning, workflow, filing and how to approach switching to digital records.
The first port of call is to evaluate all clients who must comply with MTD before the phase 2 deadline, and review the MTD template built for the first phase.
This is where it is important for accountants to think smart as MTD is a volume play – in both clients and data – when it comes rolling out across a large portion of their client base. One tool that is incredibly valuable and available from software providers, including IRIS, is record digitisation which enables anyone who needs to track receipts, capture photos and digitally process receipts, invoices, purchase orders and bank statements. The physical data automatically becomes a digital record and uploaded to a cloud-based platform, ready for accountants to review and compile VAT returns as required in their process. Such automation tools dramatically increases client efficiency and process productivity, while making life less stressful for accountants and business owners.
Through automation, such systems eliminate the time-consuming everyday chores, ensuring accountants can act smart and get more done. The majority of small business owners end up spending their personal time compiling their records from the week (or month) and would love to get this time back thanks to automation tools. In return, time saved chasing and reconciling client data frees up accountants to focus on client relationships and higher-value advisory services. It also rapidly improves communication speeds, transforming how accountants engage and connect with clients and prospects, ultimately helping them to retain and attract new clients.
Once accountants have successfully evaluated and prepared their clients for MTD and established a clear, proactive plan of action, they then need to make sure all clients have registered for an HMRC Agent Services Account, although proactive accountants could do this ahead of client evaluation. Once this is done, certain HMRC online services, including the MTD, VAT and income tax pilots can be accessed so business owners and accountants can work together to manage the transition efficiently; making it as simple as possible for both parties involved.
By using technology to gain instant access to accurate, real-time data well ahead of this year’s MTD deadline, accountants and business owners can be sure they’re in the best position possible to move forward with confidence.
Future-proofing for challenges ahead
Every client is different and will have their own way of managing their tax – some will have been using paper-based processes for years on end. So, it’s important to frame MTD in a way that isn’t complicated or confusing. Given the rapid digitisation of UK businesses over the last year to survive – and in some cases thrive – during the pandemic, businesses are more likely to be open to a digital records conversation than ever before.
Yes, the practical side of what’s required and expected with regards to MTD is essential to get right. But MTD is about more than mere compliance, it’s about looking to help future-proof businesses. This is a real opportunity to build relationships with clients on a personal level and move into that trusted advisory role.
Working with clients to lay out a clear roadmap of steps they should be taking ahead of the 2021 MTD deadline – as well as the April 2022 VAT rollout – will enable accountants to help their clients on a real-time basis. And ultimately be of more support to business owners looking to recuperate from the impact of the last year.
By digitising now and creating great efficiencies across the client’s business, accountants can take advantage of improved workflows, increasing productivity and working smarter and help their clients future-proof their business for good. Harnessing technology to streamline tax management and create a single view of the data for all financial records, means accountants will put their clients in the best position to move forward with confidence.