MTD: Opportunities in the digital ageby
While the challenges of Making Tax Digital are substantial, many accountants have used the change as an opportunity to modernise their firms and bring their offerings in line with the demands of the digital age.
After much public discussion and great uncertainty, HMRC’s Making Tax Digital for VAT initiative has landed. Over the next two years or so, further change is on the horizon as the UK’s tax regime goes digital by degrees.
The deadline for the first quarterly VAT filing has now been and gone, and after a bumpy start, attitudes in the profession have softened towards the change. For example, in a survey of over 100 accountants conducted by cloud accounting provider FreeAgent, it was found that found that 50% felt positive about MTD.
Although tax digitisation inevitably poses some challenges, accounting firms with MTD-ready software have managed the shift more comfortably since the technology does all the compliance-based heavy lifting in the background.
Easy does it
Sophie Tyler, accounting team manager at Dolan Accountancy, says her firm has been at ease with the transition mainly because of the support from FreeAgent.
“When it comes to MTD, the communication has been good with FreeAgent, our main software partner. There was an MTD webinar in February this year so we knew what lay ahead, which we found useful. The communication from HMRC has sometimes been lacking, but we felt we were in safe hands with FreeAgent as our intermediary.”
It’s a sentiment that’s broadly shared by others. Sarah Solo, head accountant at PaperRocket Accounting, says Making Tax Digital hasn’t been a burden for her practice because it has predominantly rested with FreeAgent.
“We have enough on our plate supporting clients. So we love that this kind of compliance obligation is in hand. We also don’t have to persuade clients to migrate ahead of the deadline, as they are on board already. It’s so refreshing not to have it on the table as a challenge to face.”
Harder for some
While some accounting firms are almost exclusively engaged with software-based accounting tools, others have a more complicated mix of systems to navigate.
Peter Edwards, a partner at Warr & Co Chartered Accountants, says the firm has always been enthusiastic about tools like FreeAgent but its clients are using a myriad of tools and systems.
“Fairly obviously, the MTD obligation mostly impacts clients who are still on spreadsheets. We have run a concerted campaign among this group and other manual-minded clients to move to a cloud package.
“It’s an opportunity to improve client records and efficiencies, so most understand that it is good for business – but some still find it painful. It doesn’t come easily to all, even if it’s mostly a mental leap – the software tools are easy to learn, after all.”
Pilots and promise
The pilot projects that ran in the months leading up of MTD’s 1 April start date were a boon to some firms and business owners, but others say they felt slightly in the dark as the transition date loomed.
“We found it quite challenging to engage with the pilot phase,” says Michaela Rees, founder of Sterling Rees Tax & Accountancy. “One client of ours wanted to be involved but didn’t fit the bill exactly, so they – and we as a firm – had to watch and wait on the sidelines.
“It was a shame to miss out, and at times we don’t think the information has been presented well, but we are also confident that the likes of FreeAgent essentially have things in hand. We have always known that at the go-live point, the software would be compliant and deliver. That much was certain.”
Rees says it’s also good to have a positive message to take to the firm’s clients.
“Over time, MTD will make things easier for business owners. Digital systems mean our time input will go down and the business owners will have more control. It’s up to us to turn that into a positive and develop more of an advisory relationship with clients, as the day-to-day digital bookkeeping becomes simpler and more automated.
“Self-service is the aim here, as well as visibility of liabilities to make planning easy for company owners. It’s a good-news story, even if getting there will be hard for some. Change always brings its challenges – and opportunities.”
Find out more about the challenges and opportunities provided by MTD as well as other compliance issues in our guide, 5 compliance conversations accountants can master.