Most of my clients are too busy doing what they do best ie painters,builders, handymen, farmers etc and the last thing on their mind is apps and record keeping. Its all I can do to get them to keep their bank statements. They just want to pass on the record keeping to someone else preferrably once a year. How on earth are we as accountants going to deal with chosing the software, the training and supporting those clients we can get on board to MTD within the time frame. I don't think the clients are going to want to pay for this service either. Any views /advice would be gratefully appreciated.
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It will be easy.
When the painter has finished the work, he (or she) will pull out their smartphone. They'll invoice the client there and then - it will be emailed to the customer, and their bookkeeping updated.
When they stop at a service station for some fuel, he (or she) will pull out their smartphone again ... SNAP. Picture taken and bookkeeping updated.
Every now and again, they'll need to hit a 'MTD Submission' button.
In fact, these changes will actually save the painter time and money. The painter will turn around in a few years time and personally thank you and HMRC for revolutionising their business.
And just to make sure, he'll snap the invoices a couple more times to be sure that the information has been captured. Then he'll have a flat phone battery one day and snap everything that evening. and include some from the previous day just in case..
Oh. He forgot that he bought some business odds and ends with his sainsburys shop. Better snap all those invoices as well.
Oh dear! Junior dropped the phone in a can of paint and trashed it. What backup?
And so on....
Presumably when they take the photo at the service station this will be away from the pump and with the engine off to avoid blowing up the services or getting a fine for using their mobile!
I would imagine that when MTD is in full swing, blowing themselves up will sound appealing.
I know exactly what you mean and I have decided that I am NOT going to spend many hours of unpaid time trying to teach clients how to use accounting software when I know that they are unable to do this.
It is expected that full details of the MTD plans will be included in the Budget documents on the 8th March 2017. If there is no change in the proposals and the burden of mandatory use of prescribed software is not eased, then I will advise my clients to ring HMRC directly asking for advice on what software to use and how much help HMRC is going to give them in understanding how to use it.
This is entirely the responsibility of HMRC and the software developers and it is in their hands to ensure that their proposals are practical.
I suspect that after many hours of trying to teach someone to use accounting software when they are never going to understand what they are supposed to do, HMRC might just concede that their arrogant one-size-fits-all approach is simply not going to work.
I know exactly what you mean and I have decided that I am NOT going to spend many hours of unpaid time trying to teach clients how to use accounting software when I know that they are unable to do this.
I don't envisage any change in the way I operate, apart from having to get the paperwork in a lot quicker and on a monthly basis from annual clients. My software of choice (VT+) will have MTD submission so I will continue to do the bookkeeping (obviously monthly) and submit quarterly, then do the accounting stuff on the annual. The biggest questions for me at the moment is, what are the quarterly deadlines (if its akin to VAT it'll be 5 weeks) and will there be static quarters for every one (eg June, Sept, Dec, March) or can you choose your own quarters aas you can with VAT.
Ultimately, they'll do it or get fined.
But I agree it's the small businesses with no admin structure that are the greatest concern to me.
The Government have always assumed that business owners sit behind desks all day, sussling tea and filling in Government forms. The reality is that most business owners actually do the work for which they charge their customers.
I can do this work. Whether the customer wants to - or, indeed, can afford to - pay for this work is another matter.
We can only hope that the three line accounts bar is set sufficiently high to protect the most vulnerable.
Yes you are right but I think there will be many that choose a fine, or simply ignore the regulations and receive fines, than trying to achieve the impossible.
Whatever happens, unless the Government engage more with Agents and provide incentives for Agents to assist them, then I do not see it as my responsibility at all to help them.
Like most other people who have commented, I can agree that there is a long term benefit for many people, both clients and Agents in moving towards a more digital tax and accounting environment over a reasonable period of time (5 to 10 years) but the current proposals are unworkable and will not receive my support.
Have a feeling I'm going to be shot down in flames but here goes. Surely there's a view that keeping decent records is a responsibility that small business owners should have been complying with all along. And possibly the reason why they have not bothered is because some accountants will accept rubbish and charge rubbish rates for doing the work and justify it on the basis client will go elsewhere if we are firm in our expectations. Perhaps as a profession if we had been stricter with our clients we would not be viewing mtd with such trepidation now. Putting my hard hat on now....
The gist of what you say is nothing new and Accountants are here to interpret our client's records so that information submitted to HMRC is as accurate as possible. Forcing people to try and do something that they cannot do is new and unacceptable. People are not in business to please the Government, the EU or anyone other than themselves and as long as they eventually submit correct tax information to HMRC then that is all that is required of them.
What if the Government decided to pass legislation that only men can give birth to children in the future. Clearly this is impossible but to some people in business, making it mandatory to use specified software is just as impossible.
As an example, I can recall a bricklayer who could never add up the pages of his 'cash book' correctly although most of the necessary information was there somewhere. You might think this person was an idiot and useless at anything, yet if you had seen some of his work, you would be astonished at what he could do. I still do not know how he worked out some of the dimensions and other key information related to building a house, but there was no doubt that he was fully competent at what he did. Just because he was not good at book-keeping did not stop him being a brilliant bricklayer.
This is how it works. We leave our clients to do what they do best and we help them by doing what we do best. Interference by the Government and some 'on trend' juveniles in the MTD Team is just not acceptable and will severely damage the small businesses in this Country if allowed to progress as proposed.
Have a feeling I'm going to be shot down in flames but here goes. Surely there's a view that keeping decent records is a responsibility that small business owners should have been complying with all along.
And, in your opinion, decent records cannot be kept on paper, I take it.
It's not about decent records. It's about appropriate records at a reasonable cost.
Records can be kept on paper but in my experience are only "decent" quality if the business has low volume of transactions or books have been maintained by a bookkeeper. My comments were more about the businesses who produce a brown paper bag stuffed full of anything and everything and accountants who have accepted this. I find it hard to believe anyone would classify these as appropriate records for anything but a business which is so tiny that it will fall outside MTD anyway
So it's OK to give a bookkeeper a brown paper bag full of receipts ?
Or does the businessman need to write them up for the bookkeeper ?
Where do you draw the line ?
There are, actually, many people out there who can keep decent paper records. The fact is (and this is often overlooked by HMRC) that it's much easier to learn paper record keeping than using "proper" accounting software.
Paper records are simply lists of receipts, payments and maybe sales invoices. Accounting software involves making decisions about (particularly) capital/revenue and the allocation of expenses, which are not always clear-cut to the layman.
Agree that the simplified paper records might be completely appropriate for some clients. And I would have absolutely no problem in constructing a set of accounts from them - and for that matter four quarterly returns for which the charge would probably be only slightly higher than one set of accounts on the basis that the work load is not quadrupled just because the reporting frequency has changed. That said the original question seemed to be asking how as a profession we would deal with clients who were not even capable of simple paper records and my initial answer was simply to express the opinion that to a degree we as a profession have allowed such clients to continue with their bad habits.
We all have our strengths. We live in an increasingly specialised world.
How's your plumbing?
Fine thanks as I use someone who does plumbing as a living. Think my plumbing client takes the same view where his accounts are concerned - possibly why he`s not stressing about mtd.....
Then I'm baffled as at why you think your plumber can be criticised for not keeping good books.
Sorry - don't get your point. His records are good. Kept online and on QB - a package we selected together, he inputs to and I review, assist with queries and do his a s and tax from. He preferred a computerized solution to writing out paper records and appreciated the fact that overall his fees were no higher because when I come to the year end I'm working from clean records. I'm afraid I don't subscribe to the view that clients are incapable of managing a computer package just because they are a self employed plumber, carpenter, painter decorator or any other trade you care to mention. I encourage them to keep clean records whether it's paper or software. If they like the idea of software I help get them set up and running. To go back to my original point if accountants have been accepting rubbish records from clients they need to accept responsibility for that. If they've been trying to train clients and work with them I don't believe mtd should be a problem per se. The real problem will be hmrcs systems - something I think we could probably both agree on :)
Sorry - don't get your point. His records are good.
Well, that's great for you and your plumber.
We're now saying that traders can only be self employed if they are able to handle their books on accounting software.
I've got a client like that. He truly believes he has done all the bookkeeping work. Unfortunately, he presents us with completely useless computer output.
It is honestly quicker to completely reinput his records from scratch than try to correct what he has done.
On the other hand, we still have clients who present us with an immaculate handwritten cashbook, daybooks, ledgers, properly filed invoices, bank statements and reconciliations.
So do you think it is necessary for a pensioner landlord with one property let at £200 a week to have a computerised accounting system to deal with twelve receipts from the agents per year?
I don't view this with trepidation. It's just that I have to spend a lot of time reviewing each client's specific circumstances so that I can help them to decide how to approach this.
Will they be affected?
When?
What software will suit?
What hardware required/
Who will be keeping records?
Who will submit?
Will any training be needed?
Is client actually capable of doing what they believe they can?
Change to cash basis?
Change of accounting dates necessary.
Decide course of action.
Agree new fee structure.
Issue and agree new engagement letter.
Set up.
Get relevant staff & subbies.
Run in and debug.
To be substantially complete, up and running in time for first submission in less than sixteen months from now.
I don't think I'm being unduly pessimistic.
"So do you think it is necessary for a pensioner landlord with one property let at £200 a week to have a computerised accounting system to deal with twelve receipts from the agents per year?"
Get them to reduce the rent to £190 per week
"So do you think it is necessary for a pensioner landlord with one property let at £200 a week to have a computerised accounting system to deal with twelve receipts from the agents per year?"
Get them to reduce the rent to £190 per week
And take £500 a year out of the pensioner's pocket ?
Even after 20% tax, that's double the winter fuel allowance.
Whether it's "small" depends on your income.
I'd rather look at getting HMRC to agree that the pensioner is digitally excluded.
"I'd rather look at getting HMRC to agree that the pensioner is digitally excluded."
So far you haven't given any reason why they should be.
Whether they should have kept business records or not is not the issue. Some business owners are untrainable, we know this, HMRC has yet to find this out.
Exactly
Whilst I am protective and assist my clients as much as I can, MTD is legislation too far and I will not skivvy for the Government. They need to find out first hand what the problems are.
The simple answer is I DON'T KNOW. Its only on forums like this and training courses that makes me realise I am not the only one actually scared. I run a small PAYE business, declare an eBay account (and God knows how I will do records there), and have a small employment.
Have visions of "losing" the ebay account into the black economy as their website is not the best for producing paperwork.
And this is from someone "in the business" with an accountant husband who is just as baffled dealing with exactly the same type of clients as the question poser.
Some form of relief is in hand for very small sideline businesses - defined as less than £1,000 profit - a trading allowance of £1,000 will wipe out any liability to tax for them, but I fear no escape from MTD!
There will be more certainty after the Spring Budget in which the proposed turnover threshold for MTD will most likely be confirmed - either at the already announced too low £10,000 limit or (many of us hope) at a much higher level, eg. VAT registration threshold.
Until the Budget announcement there will be uncertainty as the scope of MTD.
Until software providors have made their own announcements there will continue to be uncertainty as to costs, and I am concerned that not much has been published recently about HMRC's original announcement of "free" software products being made available.
What I do expect is an increased demand for bookkeepers / bookkeeping services where small business owners lack the time and expertise to face what they might see as the horror of MTD compliance.
The only certainty at the present time is that there is uncertainty!
We can only speculate at present, here's my expectations:
1. More penalty income for HMRC from non-compliance (ie. failing to filer on time every 3 months within specified deadlines)
2. More cost to small business
3. More work for accountants in preparing reliable year end accounting figures (as frequently said on Aweb checking client prepared figures takes just as long as preparing said figures from scratch) - in my experience poorly used software (will result in unreliable quarterly data, most likely down to poorly designed unintuitive software such as Sage)
4. Some clients may forsake using their accountants as they naively believe that MTD will eliminate the need for accountants
5. Increased penalty revenue for HMRC due to errors made by software (eg. ReceiptBank in its present form makes many coding errors)
6. Potential increased fee income for accountants who will see a market for assisting small businesses who have tax enquiries following "DIY" MTD and end of tax year finalisation return
7. Potential increased fee income for bookkeepers (low cost option for small businesses) to be derived from assisting compliance with MTD
5. Increased penalty revenue for HMRC due to errors made by software (eg. ReceiptBank in its present form makes many coding errors)
You have unwittingly hit on the purpose of MTD.
'makes me realise I am not the only one actually scared.'
Whilst I have been around long enough now not to lose sleep over the delusions of other people, I do know what it is like to be truly scared by something and I can fully appreciated that MTD will truly scare many people as it presents an impossible task.
I just get irritated these days by the 'expert knowledge' put forward by some people who actually know nothing and are incapable of impartial comment anyway.
If we are to see an acceptable outcome of the MTD proposals them more of us need to bombard our MP's, Philip Hammond and Theresa May with emails about our true feelings and worries about MTD. Tell them the truth about how we feel, and don't give in.
Theresa May wants a compassionate society whilst MTD will create misery for hundreds of thousands of people. This does not compute!
The way I see MTD working is
Q1 Crap submitted by client
Q2 Ditto
Q3 Ditto
Q4 Guess what - more crap
Later
Final accounts submitted with crap removed
We just prepare the proper accounts & HMRC works with Crap.
Sounds about right
MTD is in my opinion and thousands of others, pointless and a complete waste of time and money (taxpayers money too!) why force businesses to submit quarterly reports, which the government will do nothing with and would be meaningless anyway, then submit the correct accounts which will include interest, accruals, prepayments, capital allowances etc etc??
The only reason (my opinion) HMRC are introducing MTD are for the penalties it will generate from failure to report on time. You would think that they (the government) would at least get RTI right before it comes up with ludicrous ideas like MTD.
On another note MTD is not new, we have been submitting accounts, tax returns etc online for years!
I do see practical issues for the one man practice, especially the part time practice
At present when I take my summer holiday in July (stuck with school holidays as wife works in a school) I only have six clients with a June quarter end re vat to deal with, I cope with these, ensure books tied up to 30th June and returns lodged usually between 1st and 11th July (though waiting on bank statements delays start and bank printouts are less helpful than some statements re speed of bank rec) then I get away on holiday for 2-2.5 weeks from say 12th to near the month end.
However with all clients with say March, June, September and December year ends under MTD needing figures lodged within July this plate juggling is going to be a lot worse.
The same applies with Easter holiday in April except tend to only go away for 7-10 days then.
I also already need to juggle dates for holidays re books to 5th of month re CIS returns by 19th of month, this in itself usually needs books written up to make accurate returns.
MTD is just a further nail in the coffin for the part time practice, I will likely address it by either:
1. Going part time in the day job to free up hours.
2. Pack up practice and leave it to younger individuals.
If one works in the day job say 9-6, five days a week, get home and clear of evening meal by say 7.30 most evenings, there only is say 7.30 ish to midnight and weekends to work on private clients.
When holidays squeeze that period, and one's forthcoming holiday from dayjob means working much later than 6.00 anyway to ensure everything sorted before leaving , MTD will really concertina work blitzes.
As I said in another thread I suspect if did not still have family obligations locally, and the Brexit vote had not cast doubt on my being able to move to live in our house in Sweden, I would be planning to sell the house here, invest the money and retire in just under three years when my other half can draw her occupational pension.
I suspect in the race between full MTD implementation and my retirementt could be similar to the words of Wellington,
"It has been a damned nice thing — the nearest run thing you ever saw in your life"
If keeping the records was simple then we'd have no book keepers. Not all clients are capable or have the time, that does not mean the accountant is at fault. MTD time frame is the scary bit as we dont know what is actaully required and it starts April 18.
Further to my earlier post, and now having spent an inordinate time trying to sort out an incorrect PAYE penalty, it is clear to me that it is going to be a huge risk to take on any sort of additional responsibility for ensuring that clients not only maintain accounting software correctly, but also make all of the 5 submissions a year correctly and on time.
HMRC and the Software Developers are driving MTD so I am even more convinced that it will be their responsibility to ensure that clients are properly trained to use the prescribed software and to make quarterly submissions on time, so that I can distance myself from the inevitable fines and penalties that will arise.
Why on earth would I put myself in a position to be accused of not submitting on time or correctly any one of hundreds of additional submissions that will arise from the MTD.
No way. This is down to HMRC and the Software Developers to deal with.
I am happy to come in at the end to check the quarterly submissions and assist with the submission of the fifth return each year. Much less risk and probably more profitable.
HMRC and the Software Developers are driving MTD so I am even more convinced that it will be their responsibility to ensure that clients are properly trained to use the prescribed software and to make quarterly submissions on time ......
Yeah.
Right.
Having previously been in practice, I have to say, after having read about MTD, I am glad I am no longer in practice. I just don't get why it is necessary and why the powers that be cannot foresee the carnage.
My ideal client, back in the day, came in with everything posted to a software package and all I had to do was the depreciation journal and audit accrual. This ideal client was the exception.
I cannot begin to imagine how my typical client would have grappled with getting their details to me on a quarterly basis as there is absolutely no way they would have maintained their own books to submit quarterly, never mind the whole issue of accruals, prepayments, depreciation, capital allowances, add backs, etc. etc.
What a mess!
That really does sound like an ideal client - I don't have any of them but to be honest if they were that good then they wouldn't really need an accountant anyway!
I have one that is pretty close, books kept on a specific to client excel workbook I devised, client delivers with everything posted in and bank squared, all I do quarterly is review, analysis of misc, tweak reverse charges in vat return and adjust for non EU sales of goods-get sent report for this from online platform by client.
All auto feeds into an ETB so year end is stock, depreciation and a few accruals/and odd debtors, final accounts from same then CT600.
But, to be clear, only have one of these and the client is very smart so learns very quickly, despite being outwith his particular area of expertise.
I have about fifty limited company clients and they are all set up on Liberty Accounts. We also handle the self assessment tax returns for the directors of these companies. The theory is that we should be well placed for MTD. The reality is that:
1. The additional data needed for self assessment, is always hard to get, particularly with buy to let properties. None of my clients have records that could be used for MTD on a quarterly basis for this additional data.
2. The limited company dividends will probably need to be uploaded for MTD and this should be easy enough as they are recorded in Liberty.
3. We process the payroll for virtually all of our clients and all of the payrolls are filed under RTI from within Liberty.
4. Our clients generally invoice their customers in Liberty and there their work usually stops. Some process the receipt when invoices are paid, but most wait until the end of each month when we do the bank download.
5. Some of our clients process their own travel expenses, some upload scans to Dropbox for us to process and some send us the receipts.
6. Some process purchase invoices and the fun starts when they choose the expense account and then handle the VAT. When we do the quarterly VAT Returns we check that VAT has been handled correctly (not claimed on Entertaining etc).
7. All of the above is underpinned by monthly bank downloads that are reconciled to the penny. Most clients left to their own devices, wouldn't have a clue how to do this and furthermore they don't understand that the whole accounting system is a pack of cards waiting to fall if this is not done. Then again why should they?
8. At the year end we adjust accruals, prepayments, work in progress, stock, depreciation, capital allowances and compute the corporation tax. Most clients haven't a clue how this works and don't want to understand it. Why would someone need to understand this anyway? That is what they pay us for, so they dodge this aggravation. These adjustments make a fundamental difference to the profit and won't be done on a quarterly basis. OK for limited company clients, uploading dividends, but what about sole traders, who won't be doing this each quarter?
So, as a practice who has taken time to try and get clients to use cloud accounting for over ten years, we are miles away from succeeding and I doubt we ever will. Move this conclusion over to the self employed arena, where many have never started on the cloud software journey and chaos is just around the corner.
So, as a practice who has taken time to try and get clients to use cloud accounting for over ten years, we are miles away from succeeding and I doubt we ever will. Move this conclusion over to the self employed arena, where many have never started on the cloud software journey and chaos is just around the corner.
Bearing in mind you're a practice heavily into technology, this is quite depressing.
Yet, at the same time, realistic.