Accountants must use MTD delay to their advantage

Lee_Murphy
Managing Director and Owner of Pandle
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Lee Murphy, owner of accountancy software Pandle, picks apart the challenges and opportunities of the Making Tax Digital delay for accountants.

When MPs return from their summer break in September they will debate a second version of the Finance Bill. But one measure missing from this will be the biggest piece of new tax policy in years. Under HMRC’s Making Tax Digital, from 2018 onwards businesses will have had to start filing more regular, quarterly mini ‘tax returns’ through a new range of online software.

After the outcry over red tape, the government pulled the measure from the Finance Act, with the new requirement delayed until 2019 for VAT payers and 2020 for other business owners.

Tending to your accounts and submitting returns more frequently is a good thing, eliminating the torture of annual receipt hunting and giving business owners a more up-to-date picture of their company’s health and tax liability. My own cloud accounting software company was ready to go, with systems primed to help customers file their new-look reports to their HMRC digital dashboard.

I also welcome the fact that MPs now won’t need to debate Making Tax Digital this autumn, and that business owners and accountants have more time to prepare.

The timescale makes much more sense now. Not only will HMRC developers have more time to overcome engineering issues - an extra two years to get all their systems and connections right - but the delay also benefits taxpayers and their accountants.

VAT-registered businesses already file quarterly VAT returns. For them, quarterly tax filing in two years’ time will be little to no extra work.

By the time other businesses have to do the same one year later, accountants will have had plenty of practice in filing the new regular digital returns, they will know how the software works and a lot of bugs will have been sorted out.

Despite the outcry against Making Tax Digital, the majority of accountants I speak to recognise the benefits of more regular filing, and the inherent efficiencies the new system will bestow. Now is their time to shine and agents now have a fantastic opportunity to prepare their clients and their own practices, which is where Making Tax Digital will succeed or fail.

Adapting may be tough for some accountants. With some extra client work required on their part, they may have to work out a new fee structure for their services. They may need to recruit extra staff and will need to be mindful of potentially losing clients as a result of either fee increases or clients’ new belief they can manage and file their own affairs.

Every accountant now has the luxury of more time to rethink the tools they use they and their clients to do their work. It’s my opinion that at this kind of volume of operation, dedicated cloud accounting software will likely be robust, easier to use and more scaleable than continuing to use spreadsheets. This pause in the policy will give everyone plenty of time to pick their best solution.

More than that, they now have time in which they should educate those clients about how they should best keep their own records. For sure, many business owners will continue to dump a shoebox of receipts on their bookkeeper at year’s end. But smart agents will set up clients’ accounts in a cloud accounting package and, in the next couple of years, look to migrate their customers to use it in a self-service fashion.

The earlier they act the better. Business owners who are educated in the benefits of keeping up to date invariably stick with the new regime and run more effective companies. In fact, the optimum outcome for everyone in the next couple of years will be if practices can manage to bring clients into a quarterly filing regime, even if it not formally mandated by HMRC.

If the industry can develop muscle memory for how this will all work, everyone will be in a better place by the time it becomes a requirement.

Whilst the government’s delay to Making Tax Digital is welcome, I only wish it had implemented a pilot programme, one in which savvy businesses could choose to voluntarily submit as regularly as they like. Because there is no time to act like the present.

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By DJKL
29th Aug 2017 11:49

Surely we are merely back to square one?

We (well certainly I) still do not know what will be the final requirements, so cannot plan. Delaying implementation until 2019/2020 is great re giving extra time to prepare but only if the exact requirements re the data and its submission have been determined and published at the start of that extra time, otherwise we actually have no extra time but are merely delaying when we start preparing.

I still see little benefit from MTD but at least the delay gives me more chance to hopefully pack in accountancy before it all bites. My father gave up the practice of law because of the introduction of IHT to replace CTT which had itself replaced ED, he just could not be bothered; I now truly know how he felt.

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By cbp99
to DJKL
30th Aug 2017 10:15

[quote=DJKL]

Surely we are merely back to square one?

We (well certainly I) still do not know what will be the final requirements, so cannot plan. Delaying implementation until 2019/2020 is great re giving extra time to prepare but only if the exact requirements re the data and its submission have been determined and published at the start of that extra time, otherwise we actually have no extra time but are merely delaying when we start preparing.

Agreed. The software providers and other MTD cheerleaders continue to tell us how marvellous it will be.

It remains debatable whether five tax returns per year, four of which will be overridden by the fifth, is more efficient than the current system.

Keeping client records up to date on a timely basis is no reason for sending partial and incomplete information to HMRC on a quarterly basis.

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30th Aug 2017 13:58

We have now moved 46 of our clients onto various cloud solutions, incl. Kashflow, Xero, SageOne and Waveapps (cos they wanted to!) and find them all very similar to use with each offering something that differing business types will find helpful. There is also a new landlord package (LL Vision) we are evaluating for those letting as none of the above truly caters for a letting 'business'.

Primarily we did this in anticipation of mandated MTD but have found there to be advantages both for us and clients:

1) They work across platforms and look the same;
2) Some have apps for smart phones - this is a massive thing as clients like to use this; for sales initially as they can issue on the job and check credit control with the bank uploads. They've then started to use for cash expenses (incl photos of receipts which will no longer get lost). A lot already paid around the same £ for an app to do the invoicing/quotes.
3) We have up to date info without having to rush post 6 months of info because the client now wants a mortgage application and needs management figures
4) It is possible to advise some previously inadvisable tradesmen on their financial position and help them save towards tax bills - they actually appreciate this and will pay to your client account if needs be - this'll be good when interest rates finally begin to rise again!
5) We get a regular income from the on-sale of the products.

The disadvantage is that, depending which one, posting large volumes can take substantially longer than previous software. The rapidfire/quick entries do speed things up or you could use imports but they also have limitations (e.g. supplier invoices where splitting by line item is required).

I wasn't looking forward to MTD previously but, as it's incumbent upon the solution providers to make the activation run smoothly, it should not be a concern to us when it arrives.

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By 7555775
to the_fishmonger
30th Aug 2017 16:33

So now we all become software salesmen, I don't see how this is an advance. Accountants selling software isn't the answer to anything.

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to 7555775
30th Aug 2017 16:54

no, we become more useful (valuable) to our clients than being somewhere they simply consider a drop off point for a bag of receipts and a cost they could do without. We will have information to provide advice and guidance.

The software is merely the thing which allows them to do half decent bookkeeping and makes it a lot more difficult than older systems for them to screw up (if you put a little time into setting it up for them).

Of those using it, my trade clients are those where there's an unbelievable increase in communication and getting involved and *that* is making my profit margin 100% better in those cases as there's less chasing around and I can look through monthly and ask questions while they remember.

Re: smartphone - some, yes. But over the next 18 months most will be offered an upgrade.

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By 7555775
to the_fishmonger
30th Aug 2017 16:34

And another thing, some peoples smart phones don't have the spare capacity to run a big app.

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31st Aug 2017 15:08

This guy owns a software company. So all he's interested in is selling software. Period.

I mainly deal with smaller "shoebox" clients, and I can tell you now, 95 percent will not be able to cope. Will agents have access to individual taxpayer accounts? If not, then the whole exercise is doomed.

I agree with other posters that you can't prepare for something you have next to no information about. It's not my job to make ill thought out government policy work. As far as I'm concerned, the buck stops at the Treasury.

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