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Draft MTD response: Costs and savings

3rd Nov 2016
Tax Writer Taxwriter Ltd
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This is the final blog in which I present my personal views on the questions in the consultation document MTD: Bringing business tax into the digital age.

This instalment looks at the costs and savings for a business moving into MTD quarterly reporting. This is a key area for tax agents to examine on behalf of their clients. I have summarised the questions and answers below as the detail is not relevant for my business (I am not a tax agent), but it will be for your practice and your clients.

I believe that HMRC does not understand the expected costs of MTD for the average business. If every accountancy practice in the UK responded to these cost-related questions, the answers would add up to a significant sum that even HM Treasury would have to take seriously.   

Q 39: Do you believe that there is the opportunity for MTD to create savings for your business?

No. MTD will create costs for many businesses. The use of accounting software is likely to take more time to enter transactions than into a spreadsheet.

Q 40: Do you think there are different business sectors or sizes likely to benefit more from MTD? If so, what would these be?

Software providers and accountants may benefit from MTD.

Q 41: What costs might you expect your business to incur in moving to the new regime?

Cost of subscribing for accounting software; up to £50 per month, plus up to two days learn to use the new software.

Q 42: Do you expect that your business will incur additional on-going costs as a result of these changes?

Double the costs of using an accountant to prepare and submit my company accountants from £600 to £1200 per year. I also expect the quarterly submissions to take an extra hour each quarter.

Q 43: Will particular businesses (e.g. partnerships) experience more difficulty in adapting to the changes? If so, please provide details, including any additional one off costs or ongoing costs.

MTD should be voluntary for all businesses. Those who experience difficulties should be offered free training, but compulsion should not be threatened.

Q 44: If you are an agent, please provide details of how these changes will impact on your own business, including details of any one-off and ongoing costs or savings. How do you perceive that these changes might affect your clients?

I am not a tax agent

The questions above do not take into account the time which will be wasted by accountants trying to sort out tax payments and liabilities for their clients, if the voluntary pay-as-you-go system comes into effect. I will address those issues in a separate blog.  

I would urge you to think about the costs to your practice of converting all your clients to digital record keeping, and how much more (or less) each client will have to pay in accountancy fees and software licenses. Perhaps your clients will save money in the long term by using accounting software.

Please report your cost and savings estimates to HMRC at: [email protected] or by completing the HMRC survey which covers the main questions from this consultation document. The consultation period ends at 11.45pm Monday 7th November. Every response counts.

Replies (6)

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blue sheep
04th Nov 2016 14:00

Not sure where you have got your figures from, I have not seen any software that costs £50 a month (Sage accounting £10, Freeagent £14).
It is of course difficult to know for sure until we know what will be involved but as an accountant with my own practice I do not anticipate increasing fees. The savings I will gain in efficiency will pay for the extra software cost.
If your fees go from £600 to £1200 you need another accountant!!

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By Paul.Chillman
04th Nov 2016 14:59

The problem with assuming that software is the magic solution is that there will also be an assumption that all of the users are IT literate. Unfortunately this is far from being the case. Even where the users are IT literate, they are not necessarily familiar with accounting terminology.
Our experience with moving clients onto accounting software is that many of them still rely on their accountant to give advice and support and to tidy-up where they have made simple mistakes.
It seems to me that all or most of the savings and benefits will be for HMRC and it will be the clients and agents who pick up the bill.

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By Briar
04th Nov 2016 16:40

Well done Rebecca. I agree with all that you have said and am happy to be associated with it. As a busy practising accountant, I do not have time to waste answering so-called condocs from HMRC. In the past they have ignored me anyway.

As someone has already said, HMRC should first concentrate on making their own records accurately digital in real time.

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By Marion Hayes
06th Nov 2016 16:07

freeagent for Ltd £29 + vat a month after 6 months, £24 for partnership, and ££19 for sole trader.
then at least 1 hour a month my time to review, more if corrections needed,
I expected moving clients onto Openbooks would reduce my year end time but that wasn't the case

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Replying to Marion Hayes:
blue sheep
06th Nov 2016 16:15

@ Marion If you are with barclays you can get Freeagent for £14, if you enter a partnership agreement with them you can also get it for around that.
We went with Sage who are cheaper, start licenses for £1 or less.
Either way, £50 is way over the top which was my point.
We do bookkeepng for 95% of clients anyway, and cloud software saves us time over the old excel route

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By barbp
07th Nov 2016 15:34

Thank you for these 6 posts, Rebecca, I will now made a response to HMRC, it was a bit daunting before reading your posts.

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