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Martin-Tregonning

Sole practitioners draw up plans for MTD for ITSA

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Sole practitioner Martin Tregonning considers how he plans on tackling Making Tax Digital and expresses his concerns on client awareness. 

2nd Aug 2021
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The countdown to Making Tax Digital for income tax has left many sole practitioners wondering how they’re going to cope. For starters, the practice processes will need to change for the online filing regime. And then there are the client challenges, the big one being client education. 

Like a lot of sole practitioners, Shetland-based Martin Tregonning is hatching his MTD plans this summer ahead of the inevitable client handholding parade. 

Our upcoming MTD Bootcamp webcast series will explore how Tregonning and other practitioners are preparing for the next phase of MTD and the efforts they’ve taken to ensure their clients are MTD-compliant. 

First stop on road to MTD

The first stop on the road to MTD for ITSA is for all VAT-registered to enter the online filing regime in April 2022. Tregonning still has work to be done here, but he has been warning clients since last year and most seem ready for the transition. At least, no one said they want to stick with their journals. However, MTD for ITSA is a different story. 

“A lot of ignorance about what it is and what it means,” he said. One owner of a small business he spoke to assumed that their software already does it. “They had no idea about quarterly reporting,” recounted Tregonning. 

“I am concerned about the lack of knowledge about MTD for ITSA. It would appear that HMRC’s tactic is to leave it to the accountant to deal with.”

Client segmentation and simplification

Tregonning is using these months ahead of the April 2023 transition date to get clients ready. His first step is to get everyone running on cloud software. He’s aware that this switch depends on the MTD income products that become available, but his plan is to run submissions on the solution that Sage delivers.

Like many sole practitioners, Tregonning is grappling with client segmentation and ensuring all the capabilities are in place to deal with the transition. In Any Answers recently one AccountingWEB member shared their plan to manage 100 clients. Their clients generally just leave a bag and some bank statements, so their first step is to make a list of the affected clients and those that can manage their own software.  

Segmenting clients is also a chance to simplify. With MTD in mind, sole practitioners can review their client base for any overly complex structures and decide whether any clients should deregister for VAT. 

Tregonning offered the example of a business that runs four companies, where they need to decide if they need all these companies or or should the partnership be a company. 

Software challenge

This method matches the advice AutoEntry’s Brian Carolan is giving to practices: analyse your clients and assess your tech stack. “There will be some practitioners set in their ways and looking for side exits, but each practice can settle on a couple of pieces of software to manage the bookkeeping software,” he said.

It’s not going to be easy. There will always be struggles to get clients over the line, but Carolan noted that “breaking down your client base and settling on your tech stack will help to get those clients up and running easily. Then you’ll have to get the others on board and handle that data in the best way possible.” 

Software-wise, Tregonning is keeping it simple for clients with one or two apps. “I’d say everybody will fit into my basic stack, the only difference is which features in the software I let them use, while others need things you can turn on or off.” 

While the goal is to get all clients digitalised, Tregonning keen to wield the data and insights to show clients the value in the cloud software beyond sticking to the MTD regime.  

“What I am trying to do is sell people on the idea of quarterly management reports because you need to manage your business better. The benefit is to put that into the same basket as MTD and say there is a benefit that we can bring proper management accounts,” he said. 

While sole practitioners are getting started on their plans, there are likely to be a few road bumps along the way to April 2023, like the recent abolition of the basis period announcement that sets a new framework around how HMRC expects to organise the reporting workload.

The news means that some unincorporated businesses will have bumper tax bills for 2022/23 and create a significant bunching of workload for accountants. But Tregonning doesn’t see this MTD swerve making too much difference.

The big issue for him goes back to that original challenge: getting clients to keep up-to-date data. “Even with cloud software, some are still behind with their inputting. When the rubber hits the ground, they won’t have the data.” 

In a live MTD bootcamp webinar on Wednesday 4 August, in association with Auto Entry, Tregonning will detail the steps he’s taken to get ready for April 2023. Rebecca Cave will also be on the panel to outline the key compliance milestones for the next couple of years for MTD. 

Replies (65)

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Replying to Latinaid:
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By GHarr497688
03rd Aug 2021 15:23

So refreshing to read this. I am in exactly the same position as you. After years and years of "training" clients most of my Self Assessments are done now - clients know the tax and are compliant. I have educated each client to keep records suitable to their needs and they are all very happy and understand. Often I get thanks. Now these poor dears will be told HMRC are changing the system , making everything more complicated and expecting miracles to happen. I will tell them all to find a new accountant and write to their local MP regarding the gross injustice that has been brought upon them virtually within a dictatorship. I will sit in my sea-view lounge and live a quiet peaceful life far from the madding crowd lol.

Thanks (3)
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By RobertD
03rd Aug 2021 14:47

Sole practitioner steps for MTD for ITSA
Step 1. Pay off my mortgage. ✅
Step 2. Disengage 80% of my sole traders and partnerships. ✅
Step 3. Relax and watch the carnage. ⏳

Thanks (7)
Replying to RobertD:
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By Latinaid
03rd Aug 2021 15:10

RobertD wrote:

Sole practitioner steps for MTD for ITSA
Step 1. Pay off my mortgage. ✅
Step 2. Disengage 80% of my sole traders and partnerships. ✅
Step 3. Relax and watch the carnage. ⏳

Sounds like a plan - can I bring the popcorn?

But seriously - I don't think I could abandon my sole traders at the hour of their need.

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Replying to Latinaid:
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By RobertD
03rd Aug 2021 16:11

To be fair I have given them a year and 8 months, so probably not abandoning them. I am certainly not going to risk my health, sanity and the rest of my business trying to sort HMRC’s mess.

Thanks (4)
Replying to RobertD:
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By GHarr497688
03rd Aug 2021 15:24

what a great idea..well done you.

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Replying to RobertD:
By ireallyshouldknowthisbut
03rd Aug 2021 15:31

@Roberts, I am at Step 1.

I can easily afford to just run my ltd co. clients and live a decent lifestyle.

If tax returns end up like doing the 30 day report and pay returns then it will be time to jack in SA and take up golf.

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Replying to RobertD:
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By bluebaron
03rd Aug 2021 16:40

I am informing my clients now, and telling them that this is the final year I will be acting for them. It gives them enough time to get a year done with a new accountant, before MTD for Income Tax comes in. A client I met today was that horrified about HMRC's proposals that he is now considering getting a job instead of running his business...although I expect that HMRC would like that!

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Replying to bluebaron:
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By Jimess
04th Aug 2021 13:40

That's probably the knee jerk reaction of most small traders, but if every small businessman or businesswoman shut up shop to get a job, where would all those jobs be found? Large businesses (and most government departments) mainly only want subbies so one way or another they may still get caught up in self employment albeit probably through a one man band company. MTD is not just bad for the self employed but very bad for the economy as a whole.

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By Philip Dykes
04th Aug 2021 09:55

Well....the guy on the QB advert just presses a couple of buttons on his phone and it is all sorted.
So no need to worry then !

I truly believe HMRC will not care whether the information they get is garbage , as long as they get that garbage with the timeframes.

Shocking really.............!

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Replying to Philip Dykes:
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By GHarr497688
04th Aug 2021 12:58

100% agree

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By Mr J Andrews
04th Aug 2021 10:32

''Drawing up Plans'' is a real joke with MTD. Osborne's initiation has created so much hostility and confusion with no one in Government able to advise the practicalities . So it's now left to practitioners to make clients aware of what is to come - before the Govt. / HMRC provides proper guidance. Timetables and half baked manuals with examples of how wonderful life will be with MTD is just about as far as it's come so far.
How on God's earth are the unrepresented self employed or non computer literate OAPs relying on their rental income as their pension expected to cope ?
Harra the HMRC's Chief Exec born in July 1962 will be entitled to his enormous Civil Service pension when the #### really hits the fan by my reckoning. While Jesse Norman , Treasury Minister responsible for HMRC of similar age will either do the same - or move on to a different post for someone else to pick up the pieces before the next General Election in 2024. So it's left to the man at Number 11 to do something positive . Come on Sunak ; your chance of moving next door will be greatly enhanced if you do what is best for your taxpaying public.
The alternative advice for clients as I have said before is to become a member of the Plymouth Bretheren . HMRC accept their ''Sola Scripture'' and refusal to use computers. Or turning this around accuse the Govt of discrimination by accepting one person's beliefs - and not another's.
I'm sure there will be some legal issues and Human Rights campaigns on the way !

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Replying to Mr J Andrews:
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By 0098087
04th Aug 2021 14:21

Pro0blem is, and I can remember back to the Heath government, this is the most incompetent government I can think of. Whilst people can argue about policies of subsequent Labour and Tory governments, at least the people were competent. Howe, Lawson, Blair, Prescott, Brown, Javid but not this shower of crap and it doesn't help, When Michael Gove is so senior you know you are worried. They've created such a culture of incompetence not known in government since Eden.

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By hannahaston
04th Aug 2021 20:45

I use bridging software for quite a few of my clients who can't or won't use digital software. Will I still be able to use this come next April?

If MTD does get rolled out to everyone then I am running for the hills, it's bad enough getting information out of people once a year and if HMRC wants sole traders to do it themselves then god help them. Just wondering how I can retire early at 45 haha.

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Donald MacKenzie
By Donald MacKenzie
06th Aug 2021 09:24

I see MTD for ITSA as an attempt by HMRC to force all businesses to be "digital". Those already using software will see little difference as software providers will create the necessary quarterly reporting functions. I have spoken to VT and they will have compliant software by the time it is required.

I see zero advantage in forcing clients to use "cloud" software instead of desk based software unless they actually use the remote access and create invoices as they go (not likely).

The problems will come for (not from) the smaller landlords and similar who get by just fine with a paper system or no real system. I have a plumber who annually provides me with close to perfect paper records. He earns close to the VAT threshold so may fall into MTD and would have to provide me the paperwork quarterly or learn how to do it on a computer. Carrying numbers into VT quarterly, instead of annually, would increase my time and his costs for no gain to him.

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By North East Accountant
09th Aug 2021 10:13

Until HMRC sets out the rules we are all whistling in the dark.......

Thanks (1)

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