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The three MTD software approaches: which one will you choose?

15th Aug 2022
Brought to you by
Coconut
Coconut’s simple bookkeeping and tax app is specifically designed for sole traders, helping them...
Save content
Have you found this content useful? Use the button above to save it to your profile.

With MTD ITSA approaching in April 2024, it’s time to decide how you’re going to make your sole trader clients compliant for the deadline. Here we explore three major approaches so you can decide which is best for your firm and your clients.

Small blocks saying Plan A, B and C on a blue background.
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With MTD ITSA delayed until April 2024, practices have *some* extra time to decide on their strategy for how to engage with the changes and bring their clients into compliance before the deadline.

While the end goals of compliance have been specified, including digital data submission, as well as both quarterly and annual reporting schedules, the route that practices take is open to individual preference. There are a wide range of technologies available for firms looking to bring their clients online, with different strengths and weaknesses available.

Here we look at three different approaches to getting your firm and sole trader clients ready for the big shift and how you can make them work.

1. Build your own software

For firms who want full control over their MTD ITSA transition, the option exists to build your own software. We’ve seen new solutions emerging, with tech-enabled accounting and tax service offerings such as Tax Scouts, Ember and Finmo creating software products that work in conjunction with in-house accountants to offer a low-cost, accessible, simple option for small businesses, sole traders and landlords.

It’s worth noting that these are not tools to enable the accountant-client relationship and help firms adapt – these are standalone services that work directly with clients to facilitate their tax return.

Building your own software is a gamble. You can build a tailored product that does exactly what you need, but it comes at a cost – literally. Tax Scouts alone has raised £9.4m through a combination of venture funding and crowd campaigns. While you can tailor software you create, or commission, to do exactly what you want, it will never be as feature-rich as a dedicated technology company, and you’ll also have the overhead of building and managing a technology and product team, as well as updating it regularly. Along with this comes all the other needs of a technology company: running servers, helping onboard clients and troubleshooting issues to name but a few.

While we may see firms embracing this option, it’s a high-risk, expensive endeavour and mostly one to consider if you have big ambitions, and deep pockets.

2. Stick with your existing software provider 

One of the simplest options for firms already using cloud software for some or all of their clients – change nothing. Stay the software course.

One of the major marketing messages of the large cloud accounting software platforms, albeit a potentially self-interested one, has been ‘use one platform for everything’. By adding all your clients to one accounting package, you can build one efficient workflow for all your clients. By sticking with the same software, you can avoid any new team or client training, skip having to move any data between systems and generally simplify your approach.

It's a lovely dream, and one that works well if you have the one type of client and they’re right for that package.

The challenge comes if you have a mix of different client types within your practice – say, sole traders, limited companies, and landlords. These all have different needs, and when it comes to MTD ITSA, the majority of cloud software packages just aren’t right for anyone smaller than a limited company. They’re not bad software, they’re just not designed to deal with the affairs of sole traders and non-professional landlords – a group that makes up a £360m opportunity for accountants. 

Trying to move your smaller clients onto the same system you use for your already-digitally-compliant limited companies could in fact backfire, since these tend to be:

  • More expensive than sole traders are willing to pay for
  • Over specified in terms of features that sole traders don't need
  • Too complicated for easy onboarding

If your goal is to get all your sole trader and landlord clients compliant by the April 2024 deadline, the most efficient method is using a tool that’s tailored for the job. 

3. Adopt a specialised solution 

A middle ground between the two approaches above is to choose a solution that gives you the exact features you need, without taking on the responsibility of building it yourself.

While early software development focused largely on the small business market, Coconut is an accounting solution designed for the smaller end of the customer scale, bringing sole traders, non-professional landlords and accountants together to work seamlessly, easily and compliantly.

Created with simplicity in mind, Coconut doesn’t just help you digitise your clients – it simplifies their most important financial processes. Using a single, simple app, they can:

  • Invoice from anywhere, any time: meaning they get paid quicker, and you don’t have to chase unpaid invoices
  • Keep track of how much tax they need to save: so there are no nasty surprises (for anyone) when it comes to paying their tax bill
  • Scan and save their receipts in the cloud: meaning you can both say goodbye to bags full of faded receipts, and know exactly where to find the records you need, when you need them.

The platform is also always evolving as we listen closely to customers’ needs and build features based on feedback and requests, including features like automatically sorting personal and business transactions from a personal account, or dedicated support for CIS subcontractors and non-professional landlords (coming very soon).

With Coconut you can get exactly the service you and your clients need, without the risk of joining the software industry. Say goodbye to unnecessary features, extra costs, and confusing interfaces and digitise your sole trader clients with minimal fuss, training, or awkward conversations about pricing.

As an accountant, you can sign up for a Coconut Partner Account for free, explore the Coconut Portal at your leisure, and see for yourself just how easy Coconut will make working with your sole trader clients in advance of the MTD transition.

Create a Partner Account - It’s Free!