Consultant Glover Stanbury - Chartered Accountants and Business Advisers
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Mating Tax Digital - the countdown to MTD has begun! | AccountingWEB | Image of a digital egg timer

Making Tax Digital: The countdown to MTD has begun

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Welcome to our Countdown To Making Tax Digital series in association with Sage. This introductory article by Kevin Salter covers the current position with MTD and over the next few weeks, further articles and videos will follow that examine specific areas in more detail.

26th Oct 2021
Consultant Glover Stanbury - Chartered Accountants and Business Advisers
In association with
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These topics will include:

  • Timetable for the 2022 MTD for VAT intake and the MTD ITSA implementation now due in 2024.

  • An overview of digital links, client segmentation and needs assessment – who will need the most handholding, and when.

  • Tools and technologies available to fulfil MTD requirements.

  • Communicating with and educating clients.

  • Internal processes and service changes, including pricing.

No delay to MTD for VAT

While the profession largely breathed a sigh of relief following the announcement on 23 September that MTD for Income Tax Self Assessment (MTD ITSA) will now apply from April 2024 (and not April 2023) for unincorporated businesses and landlords with total business or property income above £10,000pa, there was no reprieve for those in the VAT net.

From April 2022, the requirements to keep digital VAT records and send returns using MTD-compatible software will apply to all VAT-registered businesses. The extension means that even voluntarily VAT-registered businesses below the VAT threshold must meet MTD rules. This is the next stage in the HMRC 10-year strategy for the tax system “to improve its resilience, effectiveness and support for taxpayers”.

According to HMRC in September 2021, around a third of those VAT registered businesses with turnover below the registration threshold had chosen to join MTD; however, there is no indication of the numbers this represents and the number yet to join the MTD regime. 

Resource challenges for practices

The Covid-19 pandemic increased the workload for practitioners with new demands for cash flows and forecasting, job retention scheme claims, SEISS claims and so on. But the annual self assessment cycle is still in place and the priority for many in practice over the next 3-4 months will be meeting the 31 January tax return filing deadline. 

Operationally, this will tie up resources and staff time that could be devoted to identifying and speaking to clients who have yet to make the move to filing under MTD for VAT. Those remaining lower turnover clients are likely to be the most challenging and have probably resisted attempts in the past to move them early to MTD to avoid last-minute panics. 

There will be many clients for whom “digital records” are of no interest to them whatsoever. This will be the same, and indeed probably a lot worse for ITSA when it finally arrives – for example, elderly couples with rental income that have never seen the need for computers in their lifetime and don’t want to start now.

From a workflow viewpoint, it is essential to know which clients are already registered for MTD for VAT filing, which clients need to be moved to MTD VAT, how the accounting records are currently maintained and whether these meet the criteria for digital records, and whether agent authority is in place for VAT filing etc. 

The right tools for the job

It will also be necessary to have a range of solutions available to fulfil the requirements – whether this is full-blown accounting software, a bank account that has accounting and filing capabilities built-in or whether spreadsheets coupled with bridging software will be adequate. Practitioners will probably be prioritising VAT filing in the short term, but the ITSA requirements also need to be kept in mind.

Many practice processes and systems will need to change, especially when the volume of submissions shoots up for MTD. Quarterly submissions of summary business income and expenditure information will be required to HMRC ITSA, though there is no requirement to make any accounting or tax adjustments, and it appears no balance sheet information is required at this stage either. 

How will you price your services?

There is also the requirement to consider pricing and methods of charging – as many firms learned during the pandemic, it is very easy to work for nothing!

HMRC estimated just two minutes are needed to submit each quarterly return electronically, but the practice must decide how much the data is checked before the filing button is pressed. There is no requirement for the data to be accurate at this time, though! A fifth filing – the end of period statement (EOPS) will be lodged, and this will include all the adjustments and other tax claims such as losses, capital allowances and so on. How all the MTD for ITSA filings interact with self assessment was covered in a recent article from Rebecca Cave.

Despite all the other work pressures, it is simply not practicable to leave MTD for VAT planning until March 2022. Clients will need educating, cajoling, perhaps even a firm nudge, backed with a lot of training, handholding and ongoing support! So start your planning NOW. 

AccountingWEB's John Stokdyk discussed some of the issues raised in this article in a recent video, where he was joined by Chris Downing from Sage and Sam Mitcham from SJCM Accountancy covering how to assess and segment your clients.

This article is the first 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.

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.

Register now

Replies (10)

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By memyself-eye
28th Oct 2021 13:52

No mention of pensioners with dividend income then?

Good - that's me exempt!

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By GHarr497688
28th Oct 2021 16:22

glad I will be gone - god save out tax system.

Thanks (3)
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By Geoff56
29th Oct 2021 09:14

My resolve to retire before this unworkable burden comes in, hardens with every fresh pronouncement and article that I read.

Thanks (5)
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By Peter-S
29th Oct 2021 11:37

Start planning 'NOW' he says. In the back of my mind something keeps telling me I'm going to be a bit busy for the next three months. If only I could remember why.

Thanks (4)
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By colinstewart
29th Oct 2021 12:24

As I said before, this will only happen with the consent of the practitioners typical of whom are represented on this site. Kevin: Read the posts this week - It ain't got the support! Even if it is in association with Sage! What we need is a Trade Union my freinds, one that tells it as it is, rather than HMRC, professional bodies, software houses and the big firms telling us what our world is like! Sage... is that the software were you can't make a refund payment against a credit balance on the sales ledger?

Thanks (4)
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By Mr J Andrews
29th Oct 2021 13:59

Yet another article advising MTD is a fivegone conclusion.
And yet again, complete ignorance shown regarding Exemption Applications.
Looks like HM Govt are winning on the propaganda front.
Start planning for Exemption Applications now.

Thanks (4)
Replying to Mr J Andrews:
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By GHarr497688
29th Oct 2021 17:41

I devised a great Exemption Supports Tool 100% Success. Ideal for older clients to Technophobes etc.

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Replying to GHarr497688:
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By Geoff56
30th Oct 2021 09:58

Are you saying that you've had 100% success in your applications for exemption, or am I misunderstanding?

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By ireallyshouldknowthisbut
30th Oct 2021 10:27

I find it amazing that MTD is still 3 years away 6 years after the initial announcement that it was 3 years away.

Long may this continue.

I assume its the average time span of senior staff positions. Ie long enough to look like they are making progress and get another role without actually being the fall guys who deliver the project and have it blow up in their faces and splatter their CV with the brown stuff. I don't think any of the original MTD senior lights are still around, all long gone with good reason.

If I look back at my client list from 10 years ago there is a lot of leavers and closed business for one reason or another and I imagine there will be a similar story of my current client list before this ever happens and is mandatory, all of whom will be glad I didn't sing from the HMRC hymn sheet and force digitisation on clients for whom it is not suitable.

Thanks (4)
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By North East Accountant
01st Nov 2021 09:51

HMRC estimates 2 minute per quarter to submit quarterly update....are HMRC advocating that agents submit with no client approval, cos there's no way we could get that in under 2 minutes.

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