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MTD: Client segmentation and capability audit – sorting the wheat from the chaff

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Written in collaboration with Sage, as part of our Countdown to Making Tax Digital series, Jennifer Adams looks at how you can split up your client base, and the options for segmenting, because there won’t be a one-size-fits all solution for MTD ITSA. 

15th Nov 2021
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Despite the deferment of Making Tax Digital for income tax self assessment (MTD ITSA), HMRC is determined to make it a reality not least because they have spent too much on their computer systems to cancel it.

In spite of HMRC's pledges that there will be a multi-channel communications plan to educate up to 5m taxpayers, experience suggests that accountants are going to bear the brunt of its implementation. So, the starting point is to change your mindset by thinking of the deferment as an opportunity. An opportunity to get up to date, find out what is going on, what implementation methods are working for other accountants, take stock and plan for your practice's future. 

Think about the type of service you want to offer - and remember that it will change so your pricing strategy may also change.

If you have decided not to retire or are too young or have too large a mortgage then you need to start looking at what type of business you want. That includes what type of clients, how to streamline your business more effectively, whether a collaboration with another practice could be beneficial rather than taking on staff.

The way to do this is to take a hard look at the makeup of your current client list and be realistic about their ability to embrace digital accounting that will mean at least five submissions a year.

Preparation

Take two days off as 'research days'. Listen to AccountingWEB's webinars and attend AccountingWEB Live Expo 1-2 December 2021. Although some of the presenters are from the medium-sized rather than 'one person band' practices, some good ideas are to be gleaned.

Read any publications or announcements from your chosen software provider. Find out how they are progressing with their implementation plans, what they intend to do and when. Investigate their cash accounting software to see how it integrates with your own practice tech stack. Will fully integrated software be the way to go? All the time thinking about how to make the transition as easy and as cost-effective as possible for your clients and, importantly, for yourself and your staff. 

Client segmentation 

Create a detailed spreadsheet of capability and readiness and by the time you finish, you will have a better idea of how many clients are ready, which will show what resources you need to put MTD into place for your practice.

1. List those clients who will be subject to MTD using the £10,000 condition. Check their retirement date. If they are due to retire in 2024/2025 decide how you will deal with these clients, how much will you tell them? If they are the type of client who still gives you a box of receipts but is retiring in 2025 do you tell them to send you the receipts as usual but quarterly and you will deal?

2. Head one column 'Ease of compliance'. Go through the names scoring clients on a scale of one to four - where one is for fully computerised clients and four is for those with no hope.  You should also note which clients need to open a business bank account where they don’t have one currently.

For example:

Score 1: Those for whom you currently do the bookkeeping or who do their own bookkeeping digitally and sufficiently well themselves meaning that they will only have to be advised of the basics of MTD.  Not much 'hand holding' should be needed here. 

Score 2: Those who are computer literate but will need to be advised on how their records will need to be kept (ie HMRC digital links requirements so they can alter their way of bookkeeping to facilitate what is legally required). Slightly more 'hand holding' will be needed.

Score 3: Those who you can see will probably not be able to cope digitally on their own. Decide how you will deal with them eg you charge them for doing all the work, or is there a member of the family who could do the quarterly submissions? Will the information be available from other sources (eg third party data such as CIS information from HMRC's Single Customer Account or obtain landlord rental receipts income direct from letting agents?). A lot of 'hand holding' and teaching but worthwhile as the client is a good client/pays on time etc.  Those who are not 'good' clients should at least be put on the 'to go' list.

Score 4: The 'no hopers' - those who you can't see yourself working with, who you know you will be chasing for information, maybe even submitting estimated quarterly returns, and decide if you need to let them go. However, before you do part company, look at how long they have been a client. Have they been the perfect client and would still be if MTD wasn't coming in? Is there a way that you can do the work cost-effectively or will you have to be brave and say 'goodbye'? Costs for these clients are certain to rise - will they weather the increase? 

How and when to advise

Now that you have an idea as to where to concentrate your resources, create a separate column indicating how and when you will inform that particular client of what needs to change, such as 'newsletter', phone call or a combination?

Look at a client's year end as some clients will have already started compiling their handwritten books for this year and won't take kindly to reviewing previous months. List those who will prove challenging in changing their working methods and decide when to advise (eg subcontractors who do not issue invoices.)

At the end of this research, you should know the type of practice you are looking to achieve going forward. It will also mean that you will think twice about taking on any client and say 'no' to those who don't fit into your working methods.

This article is the third 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.

Register for AccountingWEB Live Expo

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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Replies (58)

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By Hugo Fair
15th Nov 2021 14:45

Thanks for a calm, pragmatic look at what is really 'pre-planning for MTD.

Personally, I'm still more concerned about the lack of detailed info regarding Who collects What? / Who does What with it (upto/including submissions/adjustments)? / Who retains What?
Only then will it be possible to address all the Hows and Whens - necessary to devise new processes (which may well impact on both capacity and pricing within a Practice).

But I applaud your honesty - particularly where you say "If you have decided not to retire or are too young or have too large a mortgage then you need to start looking ..."
In other words, if you have no choice but to learn to live with MTD ... then buckle up for a bumpy ride!

Thanks (4)
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By Moo
15th Nov 2021 14:52

Good advice here to help the accountancy practice facing MTD with some trepidation.
Arguably we should all review and segment clients regularly regardless of changes in regulation so we can sort out those to hold on to and those to let go. An excellent job for February and March maybe when tax returns are all filed.
But, having sifted out the chaff, and gently shown the door to the sub-optimal clients where do these former clients go? There are already reports of accountants either accelerating their retirement or deciding not to deal with some sectors - landlords look like being especially bothersome to deal with under MTD. Also reports of firms already saying that they will not take on new work.
So who is going to advise and act for these people who are not sufficiently elderly or geographically remote to score exemption on the ground of digital exclusion? What do HMRC hope to achieve by ensuring that the taxpayers least able to deal with their tax affairs themselves struggle to find accountants who will act for them?

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Tornado
By Tornado
15th Nov 2021 16:13

"HMRC is determined to make it a reality not least because they have spent too much on their computer systems to cancel it"

Just because HMRC have spent a lot of OUR money on their computer systems is not a valid reason for a determination to make it work. There is overwhelming evidence to suggest that it will not work, at least not in its present format, and just wishing very hard for success is just not enough.

"experience suggests that accountants are going to bear the brunt of its implementation"

There is no requirement whatsoever for Accountants to bear the brunt of its implementation, this is entirely the responsibility of HMRC who have been paid to implement this project. We have been paid nothing at all 'to bear the brunt' and therefore have no responsibility to make it work at all.

Whilst the article is aimed at Accountants, there seems little regard for the millions of people who will have to deal with MTD themselves as their Accountants are no longer interested in them or take them on as clients as they cannot afford the fees. Who, exactly, is going to help them? Hardly a good plan for a universal success of the MTD project when millions of people may be excluded, but I suppose they can rely on the HMRC helpline for good in depth technical assistance.

Jennifer is looking solely from the viewpoint of Accountants and those in similar positions, and this is a good article on that basis, but if anything, this article just reinforces the views of many AWEB contributors that MTD for ITSA is too complex and will leave millions in the the dark (many abandoned by their Accountants) and that this project simply cannot work in its present format.

Thanks (16)
Replying to Tornado:
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By Moo
15th Nov 2021 17:43

'"experience suggests that accountants are going to bear the brunt of its implementation"

There is no requirement whatsoever for Accountants to bear the brunt of its implementation, this is entirely the responsibility of HMRC who have been paid to implement this project. We have been paid nothing at all 'to bear the brunt' and therefore have no responsibility to make it work at all.'

I couldn't agree more, absolutely no responsibility for us to make it work. We run professional practices not charities or counselling services.

Maybe the software suppliers who stand to make money from the whole debacle would like set up a support network for the taxpayers who can no longer find accountants to work with them and cannot afford or cope with software 'solutions'. That way it can turn into a total shambles as the pushers of cloud accounting packages generally seem incapable of appreciating that landlords and the self employed may have other sources of income which utterly negate the promise that their accounting products will also calculate the tax.

I'm taking the coward's way out and retiring.
By 2024 I'll either be growing tomatoes and baking bread or possibly pushing up daisies.

Thanks (7)
Replying to Tornado:
All Paul Accountants in Leeds
By paulinleeds
19th Nov 2021 22:28

I'm sure that bookkeepers, well digital recordkeepers, will take up the surplus not wanted by accountants. Maybe its time to let lower qualified people do what they want to do and leave the experienced accountants to focus on tax and business advice.

Thanks (1)
RLI
By lionofludesch
15th Nov 2021 16:57

Clients who are due to retire in 2024/25 surely have no obligation to comply, do they ?

I would hope that a claim for exception would be favourably received but, even if not, it's unlikely that penalties will be imposed in Year 1 (whenever that turns out to be).

Thanks (1)
Tornado
By Tornado
15th Nov 2021 17:16

As an addition to my earlier post, I would be happy for anyone to tell me that my views are wrong on this and give me good reasons as to why they think I am wrong.

As a further example of HMG Projects that have been very much a waste of time and money, I would cite the case of Tagging Accounts for Tax and Filing at Companies House. Whilst checking the tags on Accounts being submitted to HMRC and Companies House in a typical set of Company Accounts prepared in VT recently, I am reminded of the absurdity of it all when the VT Notes state -

"There are potentially 100,000 different items of data that you could tag with the full UK GAAP taxonomy, but HMRC check the value of only one item in the accounts on submission. A check is carried out to ensure that the company registration number in the accounts (per the Workbook Properties dialog in VT) matches that in the CT600."

I also wonder how many people actually check the tagging on the Accounts they submit anyway. I am thinking that there is a lot of misinformation being filed with HMRC and Companies House, which clearly makes any serious use of such information very risky indeed.

MTD will be just the same. Terabyte upon Terabyte of useless information gathered just for the sake of it.

Thanks (13)
Replying to Tornado:
RLI
By lionofludesch
15th Nov 2021 17:23

I think you're right.

But the chances are that you'll have to do it anyway.

Thanks (2)
Replying to lionofludesch:
Tornado
By Tornado
15th Nov 2021 18:29

I think you are partly right in that I am now 97% sure that the MTD for ITSA limit will be set at £85,000, although I suspect this will not be done until the last minute.

This does give the project a chance of some success as many people will already be keeping digital VAT records and this would also save the smaller more vulnerable clients from being cancelled by their Accountants.

Thanks (3)
Replying to Tornado:
Richard Sergeant
By Richard Sergeant
16th Nov 2021 10:05

Tornado wrote:

I think you are partly right in that I am now 97% sure that the MTD for ITSA limit will be set at £85,000, although I suspect this will not be done until the last minute.

This does give the project a chance of some success as many people will already be keeping digital VAT records and this would also save the smaller more vulnerable clients from being cancelled by their Accountants.

Do you think we might even see the 'soft landing' approach of £85K, then £55K, and £20K (or whatever it might be) over a number of years?

Thanks (1)
Replying to Tornado:
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By AnnAccountant
15th Nov 2021 18:24

Am I the only one who lets the accounts software tag whatever it likes how it likes?

I just click to generate the ixbrl and that's it. Life's too short for combing through it - or for learning how!

Thanks (7)
Replying to AnnAccountant:
Tornado
By Tornado
15th Nov 2021 18:35

The VT notes do go on to say in effect that you do not really need to bother about tagging and in the case of VT Final Accounts, if you don't do any customising of the templates then the inbuilt tags are just fine.

The point I was making is that this was a grand project to gather masses of information in a similar way to MTD but it is such a failure that it is not taken seriously by anyone and yes, who does actually care about tagging in the Accounts submitted to Companies House and HMRC.

Thanks (6)
Replying to AnnAccountant:
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By Paul Crowley
16th Nov 2021 08:00

I do the same
HMRC and Co house do not care, Why should I?
The accounts are for the client. If client can follow and understand the accounts then I have do what is needed, the client is paying, not others.

Thanks (5)
Replying to AnnAccountant:
By ireallyshouldknowthisbut
16th Nov 2021 09:06

AnnAccountant wrote:

Am I the only one who lets the accounts software tag whatever it likes how it likes?

I just click to generate the ixbrl and that's it. Life's too short for combing through it - or for learning how!

I do just the same - we just let it do its thing. indeed i think anyone who has started filing accounts in the past 10 years is probably blissfully unaware of the whole thing as it just 'works' unseen in the background, well enough to get filed which is all the matters to accountants. Content is irrelevant.

its a bit like those government stat forms, you get no prizes if you spend all day filling in the nth degree recutting your accounting data to fit their requests across 6 divisions vs bashing in any random old tosh in 10 minutes.

Of course with MTD the quarterly data will be, erm, o yes! Ignored completely by HMRC. So no prizes for making the data any good.

Thanks (4)
Replying to AnnAccountant:
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By Cathy Milligan
16th Nov 2021 10:09

Me too

Thanks (1)
Replying to AnnAccountant:
Morph
By kevinringer
16th Nov 2021 10:44

I take no interest in the tags and never check them. Why should I because HMRC aren't interested either. The only intervention I have is when the software flags up an error (eg can't find the balance sheet date!) and won't let me file until it is corrected. I've discovered that if I delete the tag the error goes away and the accounts are successfully filed with HMRC. That proves how little notice HMRC take of the accounts.

Thanks (1)
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By GHarr497688
15th Nov 2021 20:25

After 40 years in Accountancy and being one of the first Accountants to use Sage and other Accounts products also dealing with ages 18 to 80 of the worst affected I think I am well qualified to comment. SAGE and all the other IT's companies historically have over promised and under delivered all the years I have been in business. Basically rip you off until challenged. HMRC can't even answer a letter or answer the phone on time , they cant open VAT and PAYE schemes in time and most staff like robots and yet they are expecting so called "customers" to keep complicated records in real time or Accountants to work harder for less money to deliver meaningless figures. I have moved to Devon and will leave my clients with a larger Firm. I don't believe the new scheme will work for a second. I will let HMRC and anyone who needs to be in Accountancy get on with it. The new system won't work however HMRC will not admit this to save face. So lucky I have the resources to get out of what is going to be the most stressful time for Taxpayers and Accountants alike.

Thanks (14)
Replying to GHarr497688:
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By johnjenkins
16th Nov 2021 09:50

I've been in the profession since 1965 and agree about Accounts products apart from VT. it doesn't make promises and does exactly what it says on the tin. Prior to VT I used spreadsheets linked to Accounts. Had a few problems with the links occasionally but was good fun playing with it. I love my job, each day is different. However just lately HMRC seem to have totally switched off. It's as though they don't give a monkeys about anything other than trying to sell us a scheme that hasn't got a cat in hells chance of working and they expect us to sort everything out. It is little wonder why good Accountants will fly the nest.

Thanks (6)
By ireallyshouldknowthisbut
16th Nov 2021 09:18

The only clients we are bothering with on this are those which have

(a) an existing interest or bookkeeping need to go to cloud, ie will be doing them anyway.
AND
(b) are highly likely to still be a client in 5-10 years or there is zero point investing time in them (the payback on this has got to be 10+ years of time)
AND
(c) unlikely to be taken out with the inevitable last minute softening.

This is about 10 of our 300 odd clients. For the rest I imagine many will be taken out at the last minute when the threshold goes up. I doubt it will go to VAT, but I imagine it will go to a minimum of £25,000 by either official announcement or simple practicalities of enforcement being virtually impossible below that point as there are just too many cases dropping in/out, many of whom will be barely paying any tax at all.

I also think landlords will be dropped late on as its utterly pointless for all but the larger landlords with 5+ properties, and many rich MP's and other senior decision makers (and their friends) are landlords and once they get wind of this will be doing more than having a quiet word in their friend's ears. Landlords are particularly fiendishly difficult to do given the way properties tend to be held in various holdings do you would be down to almost one return per property in many cases, and yet there is usually only big disadvantages in software so the pain factor is at is very highest here.

Thanks (4)
Replying to ireallyshouldknowthisbut:
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By Paul Crowley
16th Nov 2021 09:52

Agree
Existing software is aimed at trades
Landlords just do not fit, and most properties I deal with are owned jointly in varying proportions
Letting just is not a business. The income is unlikely to be wrong so MTD serves no tax gap purpose
(As if if MTD served any tax gap purpose)

Thanks (3)
Replying to ireallyshouldknowthisbut:
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By johnjenkins
16th Nov 2021 10:18

I am in a similar position to yourself. However we have got all clients on some sort of digital bookkeeping system with obvious varying degrees of success and competence. For our smaller business we use VT cashbook, which is free and very easy to use so these clients can play. I think that HMRC (if this ever gets off the ground) will lower the threshold to £50k to start with, then the following year or two down to £25k

Thanks (1)
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By legerman
16th Nov 2021 10:34

A good article and some very sensible pointers for us to consider.

For me though, it's way too early to be getting involved. At the moment its very much hit and miss as to what will be finally expected, especially the expectation that the threshold will be raised. Personally I'd like to see 50k minimum, until it's been properly evaluated in running so to speak.

I'll play it by ear, but I don't intend doing owt or letting clients know until February 2023, as by then we should have a better idea as to what to expect. My only one stipulation (at present) will be they have a business bank account, and I'll insist that is in place prior to the start of the 23/24 accounting period.

Thanks (3)
Replying to legerman:
RLI
By lionofludesch
16th Nov 2021 10:53

legerman wrote:
My only one stipulation (at present) will be they have a business bank account, and I'll insist that is in place prior to the start of the 23/24 accounting period.

That bit will help even if MTD never applies to the smallest of clients.

Thanks (2)
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By Mr J Andrews
16th Nov 2021 10:45

Yet another article which supports the HMRC propaganda. Specifically the Revenue are doing sod all - but leaving it to the likes of the accountancy profession to implement this unnecessary, burdensome administration called MTD.
Keep these sort of pre-emptive articles coming and HMRC will be delighted. Not to mention Software Developers rubbbing their palms with glee.

Sadly this article omits - for whatever reasons known to the writer - another client ''SEGMENTATION '' Ugh; I despair .
Rather than put HMRC's less able customers on the ''TO GO'' { Ugh again } LIST , I suggest the avenue of EXEMPTIONS is explored before throwing in the towel and let long standing clients suffer.
HMRC have already announced that applications for Exemptions from MTD for Income Tax nay be made if :-
# It's not reasonable or practical to use computers or the internet due to age , disability or location
# Objection is made on religious grounds .
# It is not reasonable or practical for any other reason.
I would say that this third point applies to all of my clients.

But to mention such advice in these articles wouldn't be good news to Software Developers. Or am I being cynical ?

Thanks (6)
Morph
By kevinringer
16th Nov 2021 11:00

There have been numerous articles on AWeb over the last several years telling me how I must get ready for MTD. But we've all got enough to do already, especially in these Covid times. And just in case we haven't, HMRC gives us something extra to do such as 30/60-day CGT, VAT CIS reverse charge, basis period reform.

There is always something more pressing than MTD so today I'm going to get on with the pressing stuff, and tomorrow, and the next day. I might have a look at MTD in 2024 but then again most of my clients are partnerships so I'll leave it till 2025. By 2025 there'll be another postponement.

Let's look at Sage. I like Sage and it's my software of choice. Before MTD VAT, Sage could already file VAT returns direct with HMRC through the software. When MTD VAT started, all that Sage needed to do was bolt on the MTD VAT API and interface. There were no fundamental changes to the software or how the VAT returns were filed. But look how long it took the software industry to respond to that small change. And what a cost. Prior to MTD VAT most of my Sage clients would buy a one-off licence for £100 which would last forever. But to get the software with the MTD module my clients had to subscribe for £30 a month! What a massive fee increase for just the MTD VAT module.

Unlike MTD VAT which required miniscule changes to the software, MTD ITSA is massive and will require a huge amount of investment by the software suppliers. If Sage is already charging £30 a month, how much extra can they charge for MTD ITSA? £nil I reckon. So why would Sage make the investment for no income? They won't. Though Sage can handle VAT, many tasks are not automated eg retail schemes, partial exemption, margin schemes. These schemes have been around since 1973 yet Sage has still not automated them (nor have QuickBooks Online or Xero). That's because the software companies have no financial incentive to automate these services. I feel this will be the same for MTD ITSA. The software suppliers have already had all they're going to get because of MTD VAT and the extra they'll get from MTD ITSA will be marginal. And if the software suppliers can't deliver, MTD ITSA won't happen.

So, until I'm convinced MTD ITSA is definitely happening, and imminently, I'm going to stick to the day job.

Thanks (2)
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By 0620115
16th Nov 2021 11:00

I retired at the end of 2020, partly because I didn't want the hassle of dealing with this.
I do wonder what will happen to all the 'no hopers'. I realised early on that MTD would make it very difficult for me to deal with any clients who couldn't get to grips with accounting software themselves and the extra time it would have taken for me to sort them out would have made my fees unaffordable. Probably <10% of my clients fell into this category, having for many years kept their records on paper or a simple spreadsheet. Many older clients said they would retire rather than have to deal with MTD (or pay significant extra fees for someone to sort out for them). One of the many (unintended) consequences of MTD?

Thanks (3)
Replying to 0620115:
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By johnjenkins
16th Nov 2021 11:55

Or "intended"?

Thanks (2)
Tornado
By Tornado
16th Nov 2021 11:47

'Score 4: The 'no hopers' - those who you can't see yourself working with, who you know you will be chasing for information, maybe even submitting estimated quarterly returns, and decide if you need to let them go. However, before you do part company, look at how long they have been a client. Have they been the perfect client and would still be if MTD wasn't coming in? Is there a way that you can do the work cost-effectively or will you have to be brave and say 'goodbye'? Costs for these clients are certain to rise - will they weather the increase? '

I am disappointed with Jennifer and find it difficult to believe that she is writing an article sponsored by Sage that effectively encourages the cancellation of everyone that is unlikely to be able to pay for professional services to help them cope with the requirements of MTD. This seems to be on the basis that MTD for VAT is set in concrete rather than suggesting anything that could be changed or improved in the project to better help the 'no hopers', something that would not be of much benefit to Sage.

The conversion of Jennifer to the dark side is just another example of how this Insidious Project can eventually influence anyone that gets caught in its web.

Thanks (4)
Replying to Tornado:
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By johnjenkins
16th Nov 2021 11:59

We've put our "no hopers" on VT cashbook (free) but it is a case where "show me a dustsheet and I'll paint, show me a spreadsheet and I'll faint".

Thanks (1)
Replying to Tornado:
Morph
By kevinringer
16th Nov 2021 12:03

So the software industry is saying that the 'no hopers' should become the 'unrepresented no-hopers'. I wonder how this will improve compliance? Has HMRC and the software industry the capacity to deal with all these newly-unrepresented 'no hopers'? From an agents perspective, maybe this isn't a bad thing because we'll then have more time to deal with our remaining clients and because MTD ITSA will require so much more time, we'll be able to recover the lost fees from the extra MTD ITSA services we can charge our existing clients. Good luck to HMRC and the software industry in dealing with all these 'no-hopers' cast into the unrepresented wilderness. Maybe they'll just disappear off HMRC's radar?

Thanks (3)
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By johnt27
16th Nov 2021 11:53

Quickbooks have built a neat little tool to assist with segmenting clients if you want to avoid creating your own spreadsheet. Obviously they have a vested interest but they are providing this on an agnostic basis, which for us is helpful, as we're likely to be using Xero/FreeAgent as our tools of choice. It's an interation of a tool that was around in the MTD4VAT times!

The biggest challenge with segmenting clients is getting at the data in the first instance and then cleansing it to make it useful for the intended exercise.

Thanks (1)
Morph
By kevinringer
16th Nov 2021 11:58

If MTD was the no-brainer that HMRC and the software industry say it is, wouldn't we have switched years ago?

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Replying to kevinringer:
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By johnjenkins
16th Nov 2021 12:01

We are switching but on a slow voluntary approach over the years. However I do not see the need for quarterly updates for non vat registered business.

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By tedbuck
16th Nov 2021 12:13

On top of all that has been said with most of which I wholly agree is the basic fact that most people in small business are just not capable of being bookkeepers but are being persuaded by the likes of Xero that it can all be done by them. Press a button and all is well. Press another button and you have your annual accounts so why bother with an accountant.
I shall be retired but one can see where it will lead. Clients who duplicate invoices and payments to the nominal account, who claim all their personal expenses (and reclaim the VAT as well) and generally apply the system in their own favour. We see it , we correct it but if they do it themselves????
Didn't I read that the tax gap from MTD for VAT had widened rather than closed? Is there perhaps something for HMRC to learn there?
They won't listen, they won't learn as they think they know better but ignoring reality doesn't stop it being reality. I shall laugh from my armchair as I enjoy my retirement after 50 years in this profession. Good luck to those who have too deal with an HMRC with no understanding of the real world.

Thanks (3)
Replying to tedbuck:
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By johnjenkins
16th Nov 2021 12:32

Maybe that is the point of MTD. Get rid of all one man band business, whether retired or on PAYE. They do not see the commercial suicide they are creating.

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By North East Accountant
16th Nov 2021 13:34

Imagine the scenario HMRC pops up on 18/03/24 and says we've listened to concerns so we're going to delay MTDfIT until 06/04/25, and then only for £85K or over.

I have used 18/03/24 as it was on the 18/03/20 that HMRC delayed the IR35 changes that were coming in on 06/04/20.......until they were delayed until 06/04/21.

The waste of time and money would be huge........and for the none public sector that matters.

Perhaps the HMRC staff involved with MTDfIT should be held accountable that it will definitely happen on 06/04/24 or they all lose their jobs and pensions.....then we might be convinced it's going to go ahead as billed.

Thanks (1)
Replying to North East Accountant:
Morph
By kevinringer
16th Nov 2021 13:45

HMRC staff are never accountable. They get promotion or knighthoods, leaving a trail of disaster in their wake that we have to fix. MTD was announced by George Osborne but he's long since scarpered. Ok, George Osbourne isn't HMRC but it demonstrates that those that have the power to force these ludicrous regimes on us never have to witness the problems they cause.

Thanks (1)
Replying to North East Accountant:
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By johnjenkins
16th Nov 2021 13:49

It's not the HMRC staff who are causing the delay, it's IT. I suspect that because of the change to IR35 a lot of workers in IT and HGV drivers decided to either call it a day and go elsewhere, or whatever. In any event HMRC have shot themselves in the foot. I shudder to think how much destruction MTD will do when a lot of knowledgeable people (not only in Accountancy) retire or go elsewhere.

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By Ammie
16th Nov 2021 15:08

I agree with much of the comment so won't reiterate.

This will be messy and expensive for all clients that conform and there will be a high number of unrepresented clients many of whom will "disappear", the positive being fees will increase because of the demand for services.

Whether they admit it or not, HMRC have always had a strong desire to cut the number of practising accountants, certainly sole practitioners, and also push more self employed onto PAYE, which I think will succeed to a point.

A large number of my clients will do nowt but instruct me to deal with it. But before that, a chat about the associated costs will, in many cases, stun them and look elsewhere. Good luck I say. Let's hope their contact down the pub is up to speed.

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Replying to Ammie:
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By johnjenkins
16th Nov 2021 15:27

The problem you have is a lot of medium sized business (and some big ones) do not want to employ because of all the hassle employment brings. Hence many one man band business. Some of these go on to bigger things but most stay as they are and earn a reasonable living. MTD for them will be a disaster and will destroy a lot of them. If that's what the object of the exercise is then well done HMRC, you will have achieved it, but to what cost to the economy.

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Tornado
By Tornado
16th Nov 2021 16:05

What have we learned from this article -

If you are Chaff you are likely to be cancelled by your Accountant (Goodbye and good luck to you)

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Jennifer Adams
By Jennifer Adams
16th Nov 2021 18:47

.. and what makes you think I have been 'converted to the dark side' - I think its going to be hell ... if it comes off that is.

Actually I'm quite hurt that you think I have been 'converted'.

I doubt many members have watched or attended committee events when this was first mooted.
At one I attended all the MP's did their best to put forward all the anti comments that we have all posted here over the years but the answer they got from HMRC was 'tough'.

We can all hope that it will go away or change (particularly the £10K limit) but we do need to at least 'be prepared'.

Listen to some of the accweb webinars and you will see that many accountants are already going down the route that johnjenkins has taken in getting as many as possible onto cloud if only to make the accountants life easier.

PS... all writers are asked to write about subjects that they dont necessarily agree with. There is also a set limit to the number of words.

On a personal side...some of the clients I work with have been with the firm over 40 years - I am not going to abandon them. Many clients are lovely but I know wont be able to cope on their own. I'd rather take on extra staff to help them.

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Replying to Jennifer Adams:
Morph
By kevinringer
16th Nov 2021 21:26

Jennifer Adams wrote:

At one I attended all the MP's did their best to put forward all the anti comments that we have all posted here over the years but the answer they got from HMRC was 'tough'.


If MPs were saying the same as us and the PBs and just about the entire human race, why are HMRC sticking to their guns? Do they still think MTD is the cure to all their evils? Do HMRC have so little regard for what just about everyone is telling them? When I speak to individual HMRC staff they all seem to think MTD is a bad idea. So how is this project staying alive? Is it a committee within HMRC, or just one director? Or is it like the Emperor's new clothes, no one quite wants to state what is now all too clear?
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Replying to kevinringer:
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By Mr J Andrews
16th Nov 2021 23:15

So we now have another ''CATEGORY'' . i.e. taking on extra staff to cope with the No Hopers.
I give up.

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Replying to kevinringer:
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By Mr J Andrews
16th Nov 2021 23:15

So we now have another ''CATEGORY'' . i.e. taking on extra staff to cope with the No Hopers.
I give up.

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Replying to kevinringer:
By ireallyshouldknowthisbut
17th Nov 2021 13:43

kevinringer wrote:

Jennifer Adams wrote:

At one I attended all the MP's did their best to put forward all the anti comments that we have all posted here over the years but the answer they got from HMRC was 'tough'.

If MPs were saying the same as us and the PBs and just about the entire human race, why are HMRC sticking to their guns? Do they still think MTD is the cure to all their evils? Do HMRC have so little regard for what just about everyone is telling them? When I speak to individual HMRC staff they all seem to think MTD is a bad idea. So how is this project staying alive? Is it a committee within HMRC, or just one director? Or is it like the Emperor's new clothes, no one quite wants to state what is now all too clear?

My experience of speaking up about MTD outside of this forum is that everyone is largely against it, but everyone HMRC side seems to dismiss those concerns and motor on through fingers firmly in ear, and presumably look after their own careers and move on before the problems hit. The House of Lords Select Committee on MTDfVAT was a case in point. HMRC put in zero effort (putting up some low grade staff hugely out of their depth, I think one was in tears at one point as they didn't have a clue and couldn't defend their position) and completely ignored all the recommendations.

I think Jenifer's article is pragmatic, but highlights the reality. Load of extra work, sacking good clients to make room (and you can bet few firms will be able to take them on) and/or hiring additional staff (when there is simply not any around, and staff who's shift pattern would be most odd with all the work loaded into every 3rd month so you would have to have them working all hours every 3 months and then time off in lue of something for the others) All to bung 4 unread reports to HMRC. Which might well be canned anyhow once the penny starts descending.

The utter farce from the VAT element is still being felt. Tax take down due to low quality records and huge costs of implementation. And all they have really done is replace one digital filing method with another at huge expense for UK PLC.

Utter madness, but it continues. Or at least it continues to be put off to about 3 years from now. Hopefully indefinitely.

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Replying to Jennifer Adams:
Tornado
By Tornado
17th Nov 2021 09:44

"PS... all writers are asked to write about subjects that they dont necessarily agree with. There is also a set limit to the number of words."

The title of the article is inflammatory to start off with - Sorting the wheat from the Chaff - (our clients) - and is also sponsored by Sage who many believe to be one of the companies that have promoted the MTD project, and who are destined to make huge amounts of profits from it. (Chaff - not of any use and to be thrown away).

Not a good start.

The article is also something that I would not expect from Jennifer Adams, and as you have now implied, it does not actually reflect your own views. Possibly the views of Sage, but definitely not entirely your own views.

Writing something like this that you 'dont necessarily agree with' is not good reading and looks as through you are just saying the words of others who do not have the same values as yourself. It shows in your words.

Articles have more meaning and effect when they are written from the heart of the author and you are capable of writing an inspiring article that says exactly how you really feel and what needs to be done to save us from your "I think it is going to be hell" opinion

It is not good enough to accept HMRC telling us it is 'tough' and we have to get on with it. Those are the words of arrogance and ignorance and only inspires us to show them and others just why we do not have to just get on with it and will not do this if we do not think it is right. HMRC and the Government as a whole work for us in a democracy and we do have a say in what goes on and need to express our real feelings freely. I would add that I have been representing clients for over 50 years and my opinion of HMRC as a competent body is currently at its lowest level along with my respect for that body.

Although very laudable for you to suggest that you might need take on extra staff, this is no answer and it would cost you dearly to do this. Much better for you to work towards eliminating the need for such a necessity in the first place and campaign for changes in MTD proposals so the 'Chaff' can carry on as they are. This is a far better solution than taking on extra staff to service clients who are unable to pay for such services anyway.

Jennifer, give us an article that has fire and informed reasoning that sums up your real feelings and the alternative solutions that you think would help us move towards a more digital tax and accounting environment in a properly planned and timed conversion, always taking into account the practical needs of the 'Chaff' in particular.

Be true to your own feelings and write articles that make us sit up and really appreciate what YOU are saying .

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Replying to Tornado:
Richard Hattersley
By Richard Hattersley
17th Nov 2021 16:23

Tornado,
You are more than welcome to express your opinions about the roll out of MTD but it is unfair to target and criticise the author of the article.

The aim of Jennifer's article was to provide practical advice for accountants managing the transition. And the article did exactly that.

It was not intended to be an opinion piece, it was a 'how to' article. I would also say that client segmentation is a worthwhile exercise for any accountancy firm beyond the looming deadline of MTD.

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Replying to Richard Hattersley:
Tornado
By Tornado
17th Nov 2021 17:38

Hello Richard

I am prepared to stand by everything I have said. I think I have made valid points, and you can see that others agree with my comments. Also note that it was Jennifer who effectively said that that she did not necessarily agree with what she had written.

Yes, I can agree that taken purely as a factual article about client segmentation, then it does do that, but if articles like this are just meant to be read, why add a comment box?

I have read Jennifer's articles and posts for a long time now and do appreciate and mostly agree with what she says.

I am happy to apologise to Jennifer if I have caused any personal offence, but it was not the intention. I would genuinely like to see more articles from her, but with more of her own thoughts and opinions.

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Replying to Richard Hattersley:
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By Paul Crowley
20th Nov 2021 23:10

Richard
Aweb is not balanced
Articles on MTD are all sponsored by the industry pushing it.
Try reading the Comment section in the Taxation magazine by Alan Poole, Magazine dated 18 November 2021. Three pages of the exact same points that I and most responders are making on all MTD threads.
He omits one significant point that I have made. MTD brings in a two tier system that serves zero purpose
MTD tax returns, and non MTD tax returns, with the latter being available as paper, HMRC freeware that taxpayers can use themselves or the software we buy as agents (no freeware for agents)
No HMRC freeware for MTD so taxpayers MUST pay subsciptions and MUST pay for all support and MUST pay for learning how to operate the software.

I note that not one of my clients with income exceeding £100,000 will need to engage with this and need to buy software.
The costs will be bourne by clients who pay no tax, very little tax or basic rate tax
A significant part of that increased cost goes to your sponsors.

I have a client who is a bookkeeper
Trades as a bookkeeper, and has one let property
She tried to put of her tax stuff onto Sage
It was a complete pig's ear
I suspect the Sage answer would be that she needs 2 different software products, 2 different subsciptions, and that it just does not work if she uses the same bank account.

Another client coped adequately for VAT on the old system
Tried Sage for VAT
Could not figure it out at all
Sage charged £800 trying to teach her, but just gave up (Sage gave up on her)
I think she felt guilty as she had previously used up so much of our time
We now do the bookkeeping that previously she was capable of before MTD
Basic bookkeeping is just wtiting figures on paper
No need to understand double entry, we did all that. We did not usually find any errors in the way she did it before.

You have commentators suggesting that any accountant that does not like MTD should go out and get a different job

I consider your comment that the author has been targetted to be perhaps unfortunate
Wheat from Chaff? Not exactly inclusive when clearly a significant number of my clients fall to be defined as chaff

So not exactly an article that I could look to draw my clients' attension to
Overall are articles and webinars on Aweb simply say accept it now, start digital now despite knowing full well that it is still in flux and timings and limits quite likely to get Kicked down the road

Still no idea on anything but the most simple of partnerships yet
HMRC and IT just cannot be trusted to deliver on time
Pilot for Landlords with shared properties anytime soon?

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