MTD: Choose the right tech for your practiceby
In the fourth article in our Countdown to Making Tax Digital series in collaboration with Sage, Kevin Salter looks at how to choose the tech you'll need to make sure your practice and your clients are ready for Making Tax Digital for income tax self assessment (MTD ITSA).
There will be “challenges” to implementing MTD – and the majority of these are likely to come from clients that have no wish to join the MTD club. They might have sent in handwritten records of rents and expenses for years and years, and now, in their later years, never having interacted with any IT beyond perhaps a basic mobile phone for telephone calls, have to keep digital records and file information with HMRC. Telling them they must do so will be like a red rag to a bull for some!
Client education is key – and letting them know you can help them be compliant – but MTD ITSA will mean there will need to be more than the current once-a-year interaction at a time that suits them (and you).
You’ll likely have a wide range of clients affected – at the bottom end there will be those with just one letting property, with perhaps everything being handled by a letting agent, and it scales up from there.
Your practice needs to have a “toolkit” of different client solutions for MTD and the ability to identify the right tool for the job – horses for courses. What is certain is that there is no software that is a “one size fits all” solution for the huge variety of clients out there.
Full-blown accounting software is likely to be overkill in some cases – so what options are there?
In the example of the single let property, it may be possible to obtain access to the letting agent’s systems and download monthly statements and populate a spreadsheet and file data with bridging software. Failing that, a simple summary may have to be manually constructed each period.
A business may have dozens of purchase invoices in a period and still be supplied in the old-fashioned shoebox or carrier bag. In the practice, the use of tools such as AutoEntry from Sage to capture the data, extract the relevant information and then export into CSV format for import into either a spreadsheet or other software, or perhaps into the AutoEntry AccountsPrep tool is an option. A further option is to link the extraction tool direct to accounting software – but it will depend on the type of business and number of transactions.
The bank account option
The demarcation between bank accounts and accounting is blurring significantly, and several banking products now allow the production of simple bookkeeping, some accounts, VAT returns and filing with HMRC. This would be another option for those that are willing to embrace the technology without getting too bogged down in the strange world of accounting. CountingUp is one such product offering the business current account and simple bookkeeping and accounting tools in one app.
It might be that fully-featured accounting software is the best fit and will also offer additional benefits to your client beyond simple compliance. Again, there are flavours of software – a cashbook style receipts and payments may suffice, for both reporting accounts and MTD reporting, or the use of purchase and sales ledgers might be a better option. The use of automated open banking feeds again takes away a significant amount of pure manual entry.
Whichever option is chosen and recommended to clients, this surely represents an opportunity for the practice and additional fees? It may be just setting up a simple system or spreadsheet for clients to use, or it might be that clients’ whole bookkeeping and reporting function is brought in-house at the other end of the scale.
The importance of segmenting clients
How many clients will file the quarterly information themselves and how many will look to your practice to file on their behalf? This responsibility will need to be clearly determined at the outset. Where your practice is to file, systems will need to be put in place to record the fact that submissions are due (and when) and also that they have been filed. You may have systems in place already where VAT returns are prepared and filed, but the numbers of filings are likely to increase substantially once MTD ITSA in its full glory is up and running. Who wants to pay any financial penalties for late filing or non-submission?
Questions – questions – questions!
There are a number of important questions that you need to address for your practice. These include:
- Will the in-house spreadsheet really be up to the task for this monitoring task, or does some form of CRM or practice management solution need to be implemented?
- What reports will be needed internally?
- How will you “chase” clients? How can this chasing be automated?
- Will clients formally approve quarterly submissions, or will they just be filed and only need to approve the final submission?
- Will your practice monitor submissions that clients are making themselves so that you can offer assistance if they are seen to be falling behind?
The 12-month delay gives you time to think about processes and procedures that you’ll need, rather than inventing it on the fly at the very last minute.
As we all know, time flies by, and planning needs to be put in place, despite the pressures of forthcoming self assessment deadlines and all the other issues that crop up on a daily basis.
This article is the fourth in a seven-part series from AccountingWEB sponsored by Sage. You can access all of Sage's MTD resources and support on the Sage MTD Hub.
Want to keep up with the debate around MTD? There are over 60 panels, workshops, seminars and lectures at AccountingWEB Live Expo this December, covering MTD, Autumn Budget and much more - many with CPD attached. Sage will be exhibiting at stand E1 and will also be hosting two tech talks.
AccountingWEB Live Expo takes place on 1-2 December 2021 at Coventry Building Society Arena, Coventry. Registration is now open. A full content programme was announced in early October enabling you to register for specific sessions. Please visit the AccountingWEB Live Expo website for full details and to sign up for our newsletter.
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Semi retired(!) apparently - after 42 years in the same practice, now a consultant with the practice, as well as working with 2020 Innovation Training Ltd - responsible for producing and updating 2020 Tax Tips and Tools and Forms Letters and Tools, and a director of my own consulting firm BBS Computing Ltd.