MTD is entering its fourth year of discussion in the accountancy world and is finally coming to fruition. Originally announced in the 2015 Budget, the process was set to modernise the UK’s tax system.
Finally set in stone for April 2019, all businesses with a revenue of over £85,000 a year will need to complete their VAT reporting online and maintain digital accounting records.
At the moment, although nothing is confirmed, it’s looking like April 2020 will throw income (for the self-employed and those with income property) and corporation taxes into the mix too, as well as enforcing the practice for all businesses.
So, what should be on your to-do list?
Any business, even under the £85,000 threshold can choose to opt into the scheme. Have you discussed this option with your clients? If they’re close to the threshold it may be beneficial to get them on board now, rather than prolonging the wait.
If your clients decide not to opt-in they are obliged to perform turnover tests at the end of every month. Once their turnover exceeds the £85,000 threshold, they’ll be enrolled into MTD for the following accounting period.
We’ve already spoken about leveraging MTD to kickstart advisory. To ensure the software and reports are kept clean, tidy and accurate, you’re likely to have far more contact with your clients. This can be a great opportunity to build a relationship with your client and get some insights into the everyday running of their business.
Still working with cloud-phobic clients? Sadly, a survey by software company IRIS found that four in five practice clients are still reliant on spreadsheets. This is a fantastic opportunity to get your clients onto the cloud.
For the cloud, in general, these are some of the benefits you might want to make use of:
Make sure to also add on any platform-specific benefits, eg. data alerts or forecasting. Getting used to cloud-based accounting software will make the transition to MTD much easier. With most software, you have the ability to create bank feeds that will do most of a client’s work for them, as transaction data flows straight into the ledger.
Additionally, some have the option to collaborate by leaving and receiving messages within the software.
You can never start planning too early. Although the date’s not yet set in stone, HMRC has announced their intention to repeat this year’s process next year, with Income and Corporation tax. Using what you learnt going through the training and onboarding process this year to improve your process next year.
Likewise, although not set in stone, it’s predicted that all VAT businesses, regardless of their taxable turnover, will have to comply with MTD by 2020, so starting up conversations with your smaller clients, who are likely to take even longer to get in order.
We’ve noted that you’re going to be seeing your clients a lot more regularly and the implementation of MTD may see your clients needing additional help and services from you. If you’ve only got a small amount of qualifying clients, this may not prove too much trouble.
However, if a large number of clients begin to ask for education on software or help with turnover tests. In this case, you may want to set up a ‘tax package’ as part of your pricing, which can include any services relevant to completing.
With MTD, your clients will have to provide quarterly reports. So, you can breathe a sigh of relief and say goodbye to the dreaded end of the tax year rush. Plus, if they’re using cloud platforms, relevant streams can be created to keep the platforms constantly up to date.
Additionally, work out how you’re going to schedule in the additional meetings with your clients, and how your staff will manage the increase in reporting frequency.