MTD preparations: ‘Break it into manageable chunks’by
Find out how Sam Mitcham from SJCM Accountancy is segmenting her client base and planning a programme to bring them into MTD ITSA in different phases.
Even with the extra 12 months granted by HMRC, the introduction of Making Tax Digital for income tax (MTD ITSA) in April 2024 is going to place a burden on small businesses and their accountants.
To cater for the unceasing need for clear guidance on MTD, AccountingWEB teamed up with Sage to create a series of short, 15min videos looking at different aspects of preparing for MTD.
Video 1 in the series introduces Sam Mitcham from SJCM Accountancy and Sage product marketing director for accountancy and tax, Chris Downing, who tackle the basic compliance requirements and the transformational nature of the MTD project.
What we know so far
The September legislation release clarified some issues and put back the MTD ITSA go-live date to April 2024. But it’s still very important to recognise and plan for the discrete steps accountants will need to work through with their clients by that deadline, Downing explained.
Ahead of 2024, around 4m self-employed people and landlords with income over £10,000 will need to keep digital records and prepare to update HMRC every three months rather than every year. Before then, VAT-registered businesses turning over more than £10,000 that have not yet entered the MTD filing regime will need to start submitting quarterly updates from April 2022.
“This is a massive transformation change for every accounting practice,” said Downing. “Accountants need to be thinking about creating awareness with clients, and for larger firms for all colleagues… [and be] mindful that processes need to be adapted.”
One step at a time
For Sam Mitcham, “It’s all about baby steps for the cilents… giving them stepping stones rather than bombarding with huge changes.” Her firm has already segmented clients into different groups such as sole traders and landlords and assessed their technology proficiency and whether they have separate personal and business bank accounts yet.
Then she divided clients into those who want to deal with the quarterly submissions themselves and those who want her firm to do it for them.
“I intend to deal with the clients I know are hard work first, so they’ve got a longer timescale to get used to what’s happening,” she said. “Then I’ll have some leeway to work on areas where they need further training before the point where their submissions need to change.”
SJCM still has a few clients that are not yet on MTD for VAT who will have to go in by April 2022. “I’ve been trying to move them over, just so we don’t have another mad rush,” she said.
Looking at the bigger picture, Downing noted how all this client training and onboarding needs to fit around the normal accounting calendar of payroll, the 31 January self-assessment deadline and quarterly VAT returns. The objective of the exercise is to manage the next stages of MTD so the accountant has control over client awareness and getting them onto the necessary platforms, including the MTD agent services account (ASA).
“Technology can be used to automate as many processes as possible,” he added.
This video is the first in a four-part series. You can access all of Sage's MTD resources and support on the Sage MTD Hub.