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How you can prepare your practice for MTD for ITSA

26th May 2022
Brought to you by
xero

Xero is an easy-to-use platform for businesses and advisors.

Share this content

MTD for ITSA is on the way. Here's how you can get your practice ready ahead of time. 

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Xero

You’ll be well aware that MTD for ITSA is inching nearer, with self-employed people and landlords earning above £10,000 having to comply with the rules from April 2024. 

From the starting date, those impacted will need to submit quarterly updates, one End Of Period Statement (EOPS) and a Final Declaration each tax year. To ensure compliance, they’ll need MTD-compatible software for record-keeping and to send updates to HMRC.

It’s also important to remember that you’ll still be able to make submissions on behalf of your clients, but you won’t be able to send quarterly updates through the HMRC website. Instead, you’ll need to send updates to HMRC via clients’ accounting software.

You’ll also know that many affected clients will be turning to you for more than just financial matters. Whether assisting them with their quarterly submissions, teaching them how to use cloud accounting software, or ensuring compliance with digital record-keeping rules, accountants and bookkeepers will need to embrace a broader advisory role. 

But before we dive into some tips to help you best prepare for MTD for ITSA, it’s time to break down the rich potential of the upcoming legislation. 

Opportunity knocks

We’ve already touched upon how your role may change as landlords and self-employed people look to you for advice and guidance during this time, and this will help you broaden your services. In addition, you’ll be sending more frequent updates to HMRC, so clients may need support every quarter instead of just yearly for their returns.

MTD for ITSA may also represent a boon for practices as it will help drive digitalisation among clients. Digitalisation increases efficiency, and again enables you to offer additional services to clients, advising on tech deployment both now and in the future. 

Finally, practices that are more focused on compliance, will find that the shift to digital recordkeeping and cloud-based accounting will allow you to handle clients in a more cost effective manner. Not only that, but it will free up time for you to focus on expanding your client base.

How to prepare for MTD for ITSA

While it may feel like a long way away, the sooner you prepare for MTD for ITSA the better. Here are three steps you can take to prepare your practice now.

Ensure your team is educated on the legislation. It’s important that your team is up to date on the new guidance that is regularly released by HMRC, so be sure to distribute it throughout your practice.

Other ways you can do this include assigning an MTD for ITSA guide who delivers update sessions to the wider team, whether that’s through bi-weekly or monthly catch-ups to discuss the latest news or developments.

Assess and segment your clients. Not all of your clients will be impacted by MTD for ITSA, so make sure you do your due diligence and segment your client base into those who do and those who do not need to follow the new rules. 

Once you’ve identified those that need to comply, assess how they’re currently keeping records, as some clients may need to use cloud-based accounting software for digital record-keeping for the first time, and will need your guidance. 

Others may be more comfortable using bridging software. This doesn’t work for everyone, however, so ensure you educate them on the pros and cons of this approach, especially as using bridging software for MTD for ITSA is more complicated than using it for VAT.

Get an Agent Services Account (and authorise it). You’ll need an Agent Services Account (ASA) if you want to sign clients up to MTD ITSA. Thankfully, practices can manage all of their clients through a single account so you only need one ASA. 

Then, you’ll need to request authorisation from your client, via your ASA. For more information on how to do this, head to the gov.uk website.

While MTD for ITSA may sound like an additional burden during an already taxing (no pun intended) period, it also represents a fantastic opportunity for your practice. The above tips are an excellent way to begin preparation, and to enable you to tap into these benefits when MTD for ITSA finally arrives.