How Best Accountancy Services (Plymouth Ltd) are embracing Making Tax Digital for ITSA

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With just over a year left to prepare for Making Tax Digital for Income Tax Self Assessment (MTD for ITSA), accounting practices and their clients are getting ready for the future of tax. From April 2024, MTD for ITSA will apply to sole traders and landlords earning above £10,000 annually.

In this article, we’ll take a look at how Best Accountancy Services (Plymouth Ltd) are embracing MTD for ITSA and setting their practice up for success. Learn how they’ve onboarded clients using Xero’s MTD for ITSA product, and the benefits for clients and practices.

First steps

Alexa Whyatt, Personal Tax Manager and Macauley Brammer, Personal Tax Senior at Best Accountancy Services (Plymouth) Ltd) didn’t waste any time getting set up early. There’s still plenty of time to prepare if you’re yet to get started, though.

“We began our MTD for ITSA project in February this year,” Alexa says. “January tax returns were out of the way, so we got our heads together and started with client segmentation. From this, we highlighted ten key clients, a mix of straightforward and more difficult cases – those with shoeboxes full of paper – to test it.”

By segmenting clients and creating a plan of action, the team could move forward with onboarding five clients. Both Alexa and Macauley make the case for frequent, open conversations about the importance of MTD. Bringing Making Tax Digital into everyday conversations with clients can make the legislation feel less intimidating.

Macauley says, “We tried to discuss it as soon and as often as possible, whether that’s through emails, phone calls or face-to-face conversations. We even added short MTD summaries to tax returns. Clients need to know this is coming – communication is a vital part of MTD for ITSA.”

Tackling the tough questions

While the response from clients has been positive, Alexa points out that difficult questions will always pop up. “We often hear from clients, ‘What’s it going to cost me?’ or ‘I can’t do this because I’m bad with technology’.”

These concerns are only natural when facing the unknown. Alexa explains to clients that there will likely be a period where costs are higher, but this initial investment reflects the increased workload for accountants during the transitional year.

Alexa adds, “We’re very engaged with the goal of MTD for ITSA, but that transitional year will be a challenge for overworked practices and clients who will need to pay more, albeit temporarily.”

A path through with Xero

There’s no denying that the road to MTD for ITSA compliance is challenging. But despite the obstacles, both Alexa and Macauley feel assured that MTD for ITSA is a long-term positive change.

After a series of targeted emails, follow-up calls, and plenty of moral support, they onboarded five clients to MTD for ITSA using Xero’s beta.

Macauley explains, “The process of working with Xero and onboarding clients is great – we can already see they’re engaged. Communication has been excellent, and any changes we request are made straight away. The Xero team has been extremely helpful, even speaking to HMRC on our behalf.”

This sentiment is echoed by Alexa, who says, “With MTD for ITSA, you can use a range of products, but we’re keen to stick with Xero. We know it, we understand it, and we love it. Xero does everything we need it to.”

Alexa has a few words of advice for ITSA newbies about HMRC requirements when signing into the agent services account: “This required a lot more information than we expected. We got through it smoothly, but this is definitely something to be aware of.”

When the hard work pays off

After overcoming the transition period, MTD for ITSA compliance can be rewarding for everyone involved.

Alexa explains, “MTD for ITSA means we can process more and take on more clients. There will also be less ambiguity over receipts, while the ability to access real-time figures will help landlords, sole traders and their accountants understand their taxes better.”

Macauley highlights, “For clients, we explain they’ll have a much more immediate handle on what they owe at any time in a year. While this may invite more questions for the practice, it will help them gain a greater understanding of the process.”

And it goes without saying less paper makes for more efficient practice. “Using software, the process should tick along nicely,” Alexa says. “No more shoeboxes.”

So, how much coaxing do clients need to kickstart the process? Surprisingly little, according to Alexa: “No encouragement is needed. We explain they have to take this up, and it’s our job to smooth the process. We have fantastic software, we’re using Xero’s MTD for ITSA beta product, and we’re ahead of the game. We’ve got your back.”

Tips from the ITSA-ready team

Now the team at Best Accountancy Services (Plymouth) Ltd are familiar with the ins and outs of ITSA; they have a few tips for other practices.

“First, if you’re not looking into it already, do it now,” Macauley says. “We’re always amazed to hear practices haven’t started yet. One of our stated aims is to get every client on software by the end of March 2023.”

Before you start selecting software, Macauley notes that a little due diligence on the legislation goes a long way. “You need to be able to offer technical guidance, so know your subject. Also, make sure you have a plan and work towards it. Understand segmentation, what you’ll agree to, and have a set timeframe.”

To ensure all stakeholders are on board, Alexa advises proper planning and full transparency around pricing. “Understand costing. Everyone – your clients, your boss – will ask what this will cost. Do you need more staff, more clients, or new IT resources? This could be a very successful project if you get the costing right. If you get it wrong, it could be disastrous. This is one of the reasons we’re taking part in Xero’s MTD for ITSA beta – it helps us understand how this will look in two years.”

Practices can start preparing for the future of tax today. With MTD for ITSA fast approaching, now’s the time to get clear on the legislation and plan your transition to the new system. Learn more about how Xero can help your practice prepare for MTD for ITSA.

This content is brought to you by Xero.

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