Making Tax Digital (MTD) is still hitting the headlines and, despite the government’s removal of MTD clauses from the Finance Bill and the upcoming general election, the pilot program is now underway.
Whilst there are still many unanswered questions, it’s still too early to tell whether the pace of HMRC’s digital transformation will change.
Ahead of the Finance Bill announcement, Thomson Reuters surveyed 564 accountants and found that the majority (69%) are taking steps to prepare for MTD. Those firms already laying the groundwork started with a software assessment (59%), client communication (56%) and a client assessment (54%).
I’ve also been speaking to practitioners at both Accountex and the Thomson Reuters conference about what they’re doing around MTD, and I wanted to share these insights with you. Here are the ten steps firms are taking right now to prepare for their digital transformation:
1. Appoint an MTD Champion
Is there someone within the practice that can keep on top of MTD and keep everyone informed? If not, or if your practice isn’t large enough, try to set aside time each week to keep track on MTD and talk to your professional body and peers.
2. Segment your clients
With the official MTD timeframe in hand, do you know which of your clients will be impacted first? By segmenting your client list in terms of turnover, you have an opportunity to understand which will be excluded and put a plan in place to help those clients impacted first.
3. Review internal processes
Irrespective of MTD, a new digital age is a coming and this provides an ideal opportunity to start looking at your internal processes and the ways in which you could benefit from the use of technology to improve workflow. By considering and reviewing your current internal processes and workflow, you can identify improvements to help your practice adapt to the time pressures that MTD presents.
4. Apply for the pilot
The MTD pilot has started but there are still opportunities available to take part. You can put your own practice forward as a test business and encourage your clients to take part. There’s real benefit in being involved – such as getting early sight of the software, providing feedback and influencing how MTD will work in practice to the benefit of you and your clients.
5. Assess your software
Maybe now is the time to ask some fundamental questions of your software provider – is their solution MTD-compliant? Are they taking part in the MTD pilot? Start looking at available software and start reviewing your choice for the new compliance process.
6. Talk to clients
As an agent, the onus is on you to educate your clients about MTD, even if you don’t have all the answers. In communicating to clients, there’s a great opportunity to start encouraging some clients to take baby steps to digital. MTD could be the excuse you need to explain to clients that paper records will no longer be allowed, and thereby put in place another method.
7. Research and refine
With a more digital tax system on the horizon, interact and talk to your software provider – what sort of MTD software would make your life easier? Are there any simple tools that could help you right now? Can your software provider help you communicate MTD to your clients?
MTD could be a powerful research tool to talk to your clients and find out more about them and their businesses. How are they becoming more digital? Would the ability to use software or take photos of receipts on their phones be helpful? Would they like to call on you for more strategic advice to help them grow their business? Do some research now to help future-proof your practice and provide your clients with the services they need.
8. Embrace change
Seven in ten UK accountants believe that their roles will become more proactive and advisory as a result of MTD. Consider the impact of MTD on the service you currently provide to clients. By embracing change now or, at the very least, thinking about change, you have time to think about how your role could change for the better and take control.
9. Learn by example
Accountancy isn’t the only profession to be impacted by technology and digital change. You can look to other businesses and accountancy practices and learn how they are responding, growing and carving out their own niche. Never stop learning, and look at ways you can incorporate some of your best lessons into your practice, or ways in which you can up-skill for the future.
10. Recognise the opportunity
As MTD becomes more and more mainstream, businesses will be looking for advice. Do they know that they can come to you for MTD support? Showcase how you can add value to their business, and that you understand MTD – that way, businesses and your existing clients are more likely to turn to you for help rather than to your competitors.
A promising 56% of accountants have started to educate their clients about the upcoming changes, and many are recognising that MTD provides an opportunity to provide more value-added services, such as tax planning.
And finally, I’d like to touch on the current timeline. You have two years until the vast majority of your clients (and for some accountants, all of their clients) come under MTD. This sounds a long time, but when you think that MTD was first announced two years ago – it goes quickly.
Personally, I feel the two year pilot gives you a new opportunity you didn’t have a few weeks ago – the opportunity of flexibility and control. You have the choice to engage with the process, and you and your clients get the added benefit of learning what this ‘new world’ looks like.
Mark Purdue tax product manager at Thomson Reuters, has spent over 25 years' working in tax and specialises in Personal and Capital Gains Tax.