How MTD is reshaping accounting practice

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Making Tax Digital may be taking a slower road to online compliance, but data from this year’s Software and Practice Excellence Awards entries show that the initiative has already had a profound effect on the profession.

Olly Evans at 2017 Small Firm of the Year award winner Evans & Partners saw the writing on the wall in 2015 and has reshaped the entire practice away from low value compliance work to focus more on advisory services.

“MTD is a great catalyst for change in the profession,” Evans said. “The challenge for us is around data collection. If we say to clients that we need them to use cloud tools so we can have the data to advise them on – it’s all good.

“If we get to ‘real-time accounting’ they won’t have to worry about paper so much and they’ll get the relationship they want, where we’re there to help them day to day. It happened in Australia and New Zealand. There may be a lot of naysayers here, but we just need to get on with it.”

Numerous other entries reflected this stance, including AccountingWEB member Glenn Martin, who along with Olly Evans played a leading role in February’s review of new generation practice management tools.

They both agreed that the biggest challenge of MTD is going to be collecting the data for submission to HMRC. Client communications will be crucial and good practice management tools will be essential to manage those processes going forward, said Martin.

The MTD model touches on most of the functions that a good practice management system will cover: a clear overview of client characteristics and disposition; a way to steer appropriate messages to them at the right time, including triggers to get them to provide tax documentation, and mechanisms to streamline and track their work through the practice.

Practice management and customer relationship management systems have risen visibly within the Practice Excellence community since 2015, but our Software Excellence Award survey data confirms that MTD has already seen wholesale adoption of online software systems:

The cloud growth rate was close to 50% over the past year and has nearly doubled since 2015, with the result that more than four out of five AccountingWEB practitioners have accepted cloud tools into their working lives. They may not be support all - or even a majority - of their clients online, but the trend is unmistakable:

Practice Excellence cloud software trends 2013-17

Source: Software Excellence and Practice Excellence Awards survey data 2006-17

Even the downward trend seen in the proportion of entrants offering virtual finance director services can be explained by the MTD effect. As the population of second wave cloud adopters exploded, The overall number of practices offering more sophisticated advisory cloud services has risen, but their percentage of the overall Practice Excellence entrants has fallen.

Expense capture apps

The adoption of cloud add-on apps has surged in parallel with wider cloud use over the past two years, but a look at the third line on our graph shows yet another parallel trend – the use of mobile expenses capture apps like Receipt Bank, AutoEntry, Expensify, Concur and datamolino.

AutoEntry CEO Brendan Woods confirmed that the timing of George Osborne’s conversion to the cause of digital tax just as AutoEntry was gearing up for a UK relaunch couldn’t have come at a better time for his company.

Ironically, the market is more uncertain for products specifically designed for MTD. Receipt Bank was first out of the traps in this category with 1Tap – but that only addresses data capture end of the MTD process. BTCSoftware, IRIS, Gbooks, Thomson Reuters and TaxCalc and other specialist developers devoted considerable time and money to extend MTD functionality and application programming interfaces (APIs) into their core products during 2017 – but then the government changed tack in July.

As Rebecca Cave explained in the Practice Excellence Live MTD webcast sponsored by Thomson Reuters, the draft Finance Bill 2017-19 clauses set out the requirements for income tax. No draft legislation, guidance or technical specs have yet been set out for the MTD version of VAT, which is now due to come into effect from April 2019 (original article corrected - see comment below. Ed).

That change of tack will send practitioners and software developers alike back to the drawing board VAT, but we can be assured that the shift to digital taxation systems will continue. How exactly the shift will play out in the profession’s software habits will be something we watch carefully in the next couple of years.

A full summary of the 2017 Software Excellence Awards results will be available for download shortly  and the Practice Excellence Live MTD webcast is available to view again on demand.

About John Stokdyk

John Stokdyk is the global editor of AccountingWEB UK and AccountingWEB.com.

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26th Oct 2017 10:45

Nice overview, John.

The trends don't lie! It's great to see this kind of data over the years.

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26th Oct 2017 12:41

John, obviously there will be a challenge in communicating with our clients, however I think the biggest hurdle is going to be the software. I watched your video on MTD and quite honestly we are still where we were a year ago with HMRC not answering the important questions. Probably because they don't know the answers. This really is very worrying. I know you will say the answer is get all tooled up on the cloud but you're dealing with a lot of good business that aren't computer literate and don't want to be. I see this whole MTD malarchy as nearly a failure as Universal Credit. Idea good, in practice, crap.

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26th Oct 2017 23:30

Cloud ? I work from home in a rural area. Our broadband went down on Monday morning and has just come back this evening. Fortunately, though, the practice software works without any need to be on line. Other than for actual filing, of course, so here's hoping it doesn't go off again on 31st Jan !

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By Briar
to Eddystone
26th Oct 2017 23:43

How I agree with you! Not only very slow broadband speeds in rural areas but also little or no mobile signal (whither 2sv?). There need to be much more investment by OpenReach (from the Govt) before MTD has a chance of succeeding. Maybe, there should be another "excuse", or reasonable excuse expanded for those that just cannot comply due to very poor internet facilities (even micro wave broadband doesn't work then it rains!)

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to Briar
27th Oct 2017 00:04

Yes, exactly ! Our mobile signal's pretty marginal too, some days the phone only works outside or upstairs.

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to Eddystone
27th Oct 2017 08:47

I have top of the range broadband at office and home. Am very close to exchange. Everyday (not some days) our broadband goes off a minimum of twice, sometimes 4. It automatically comes on again. When I confronted BT they said it could be anything. Now I know sunspots can have an effect on waves but could that be used as a reasonable excuse?

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27th Oct 2017 12:45

On e question about the dates - according to this article (https://www.gov.uk/government/consultations/making-tax-digital-reforms-a...) it is 2019 not 2020 for VAT

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to davidakime
27th Oct 2017 14:20

You're right David. My mistake. The article has been corrected. Many apologies - in the back of my mind was the reference to making no further decisions about MTD until 2020.
The thinking in software circles is that HMRC will revive its plans to go ahead with MTD for income tax then.

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to John Stokdyk
27th Oct 2017 15:24

Phew - I was panicking a bit having just started informing my clients

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