Director Principle Point
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MTD 2023: The data collection front runners


The race for solutions to bring the self-employed and landlords into MTD in 2023 is already beginning to heat up. Richard Sergeant looks at the early runners in the race to help collect the essential client data.

19th May 2021
Director Principle Point
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While bluster and noise will be made by the vendor community over the next 18 months, finding the right client-facing tools for MTD for Income Tax is likely to fall once more to the accountant at the coal face. 

Their job inevitably will be to find the most proportionate solution for each client. And while there are good reasons as to why a sole trader may look to take on ledger software, the habit of annual accounting is still going to be hard for many to break. 

At the front of the accountant's mind, therefore, is how they can encourage regular data collection – a routine that is likely to prove fundamental to the success of MTD.

Data collection funnels

The approach in recent times is to make sure that, even if they do nothing else, a business owner could ensure that all accounts payable data (expense and invoices) ends up in the right place. Receipt capture tools like Dext and AutoEntry have revolutionised this area, allowing accountants to encourage a more regular inflow of data, and then build more efficient back end services. 

Thomson Reuters’ On-Balance app has an interesting take. Acting as a transaction recorder, it provides a very simple way to input and record elementary bookkeeping data. Choosing sensibly not to enter into the ledger market, it provides a coherent way of getting information into Onvio where it can be reviewed and filed with HMRC. 

Getting clients to use these tools regularly is still a training issue and missing data is always going to be a bugbear. Therefore tools such as these should at least get a client most of the way there. Given the size and scale of the self-employed market, we can expect more entrants into this market with varying degrees of sophistication. 

The ‘not banking’ apps for collaboration

There’s a lot to say for the amount of thought that has gone into a host of mobile-first related products, tuned to the digital habits of the self-employed, in recent years.

 The two primary approaches being crudely cast as, ‘bookkeeping lite’ and ‘money wallet with bells on’.

Both have proved remarkably popular with businesses and accountants for their focus on understanding the user experience well enough to ensure they are used regularly. 

Coconut, by taking the former approach and integrating banking data from an existing account, has allowed itself to be the invoice and expense engine, providing the basis for straightforward tax estimates. While it’s clear that this is an important efficiency and insight step, it will be interesting to see if they develop more fully the MTD functionality.

By offering an e-money account as well as the transaction recording, their rival Countingup collapses the data into one place. With MTD for VAT functionality launching imminently, the next step to quarterly income tax updates sounds tantalisingly realistic. 

Countingup also provides an interesting view on the interests of Sage (who recently invested in the business), and its particular interest in both MTD and cross over with banking type service providers.

Banks given a helping hand 

Given the wafer-thin line between banking and bookkeeping services that things like Countingup illustrate, it doesn’t naturally follow that banks have the talent or instinct to combine the two effectively. With the notable exception of Starling and its small business toolkit

The complex but logical tie-up with Natwest owned products Mettle and FreeAgent is an interesting case in point. Mettle is not a bank (it’s an e-money account) and replicates some of the core functionality of FreeAgent (invoicing and expense management). 

This is surprising unless it’s the easiest way to handle the route to MTD compliance (where FreeAgent already has extensive experience and of course the long standing focus on the contractor market).

The recent announcement by Sage about their Accounting and Compliance as a Service (ACaaS) platform, initially to Tide (who provide bank accounts via ClearBank) provides an interesting dimension to how things might develop. 

Although the press release is typically opaque, it shows that Sage will be able to provide the review and MTD filing capabilities using the data pulled in directly from the Tide account. 

Not only does this create an off-the-shelf MTD compliance solution for any other bank (or e-money account), but it should allow accountants to work directly with the data in a familiar cloud environment. In other words where they work, rather than in another dashboard and the hassle of further data transfers.

With a surge in new accounts created in 2020, Tide is echoing what is happening with other similar providers, which is that the digital approach for new small businesses is now the default. It waits to be seen whether Sage can translate this platform into a new standard that accelerates the development of other new MTD focused products coming into the market.

But it makes sense that the banking service experts should be enhanced by a provider with such extensive experience in providing bookkeeping expertise.

One way or another, I suspect all the major banks will have to follow suit.

Others waiting in the wings

As an avid vendor watcher, I’ve been keeping my eyes open, and to be honest I can’t quite see where anything particularly exciting and new might come from. The pattern I think is now set, and the technical hurdles for vendors to comply suitably high to keep out too many waifs and strays.

And perhaps that’s not such a bad thing – with MTD providing another looming big change management project, I think the profession will take quality over quantity right now.

Replies (4)

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By JustforDavid
20th May 2021 20:47

I had thought that HMRC would be providing free software to support MTD for smaller businesses. Is this true & if so, is there any news on timing of this ? Thanks. Clive

Thanks (1)
Replying to JustforDavid:
Richard Sergeant
By Richard Sergeant
25th May 2021 14:40

Hi Clive, I'm not aware that they would (or would even want to - it's too complicated!).
There was nothing for MTD VAT and I don't see it happening this time either.

I of course, would be very happily corrected.

Thanks (1)
Replying to JustforDavid:
By Paul Crowley
23rd May 2021 17:35

Reasonable question
When VAT MTD was being sold to politicians and the public, we were all told there would be freeware from the software houses being authorised

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Replying to Paul Crowley:
Richard Sergeant
By Richard Sergeant
25th May 2021 14:34

I remember!
But who actually was going to be supplying this 'free' software was a bit blurry.
Software is never free, and it certainly isn't free to manage, maintain, develop, update, host, distribute....

I'm afraid I have no expectation of any such options materialising. And if it does I'll be both delighted and highly skeptical. Too good to be true...and all that.

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