How will tech companies help accountants with Making Tax Digital for business?

Are software companies ready to help accountants with the next phase of Making Tax Digital?

When HMRC was preparing the finance industry for Making Tax Digital for VAT, one of the stumbling blocks for accountants was the there was no software.

They, therefore, found it had to visualise how their work processes would change. We asked software companies how HMRC’s new plan will impact the industry and what they will do to help accountants prepare.

Adam Prince, VP, Product Management, Compliance, Sage

What will this mean for the accounting and finance industry?

The announcement can be divided into three separate pieces: a date for when organisations that have voluntarily registered for VAT need to adopt MTD digital journeys; a mandation date for MTD for income tax (for self-employed businesses and landlords);  and an announcement that the Government will start the long-awaited consultation on making corporation tax digital. 

Software companies will be well-prepared for MTD – and this announcement. Along with the roll-out of the end-to-end user journeys later this year, the industry will have time to work with businesses and their advisors to create solutions suitable for MTD obligations. 

Businesses that digitalise their accounting gain many benefits. One timely example is improved visibility of operating metrics, which be leveraged into better control over cash flow. Another is more timely and accurate information, enabling better businesses decisions. Digitisation also makes it easier to share accurate information. 

Businesses that also adopt cloud-based solutions amplify these benefits through collaboration with advisors and colleagues. It also reduces the need for the business to worry about IT infrastructure (back-ups, security etc) as it is digitised.

How will software companies help accountants adjust?

Initially software companies are likely to consult with their key users to test and iterate solutions to experiment with different ways to simplify the compliance and reporting journey. Being mindful that businesses will be facing change fatigue from COVID-19 and Brexit

HMRC will engage widely with stakeholders. As we have seen with the roll-out of MTD for VAT, the rules will evolve as the different user journeys and desired behaviours are better understood. 

Sage will engage with our businesses and accountants to fully understand how to deliver the best solution, and will then release solutions, advisory content and education content in a timeframe that lets users adopt and embed the new ways of working.

We will do this without overloading them at a time when they will be recovering from Brexit and any subsequent changes that later trade agreements deliver.

Damon Anderson, Director of Operations, UK & EMEA at Xero

What will this mean for the accounting and finance industry?

The move to make MTD mandatory for all VAT registered businesses by April 2022 is the next logical step in HMRC’s plan for a digital tax system and one the accounting industry was expecting. 

Over the last few months, accountants have been focussed on their own survival as well as that of their clients. However, even during these times, we’ve seen firms making changes to their business models and processes through digitisation.

Covid-19 is already accelerating transformation. This move from HMRC will increase the pace further and broaden the scope to tax processes too.

Change is always daunting, but it’s an opportunity for the industry to level up and for accountants to guide businesses through these new processes as they come into effect. In the longer term, it will mean less paperwork, fewer mistakes, and more time for accountants to focus on advising clients. 

How will software companies help accountants adjust?

Our MTD for VAT software is already available to those under the VAT threshold. The Government estimates that 30% of businesses below the threshold have already converted to MTD. We’ve seen many of our accounting partners voluntarily submitting clients’ returns digitally, whether above or below the threshold.

We’ll be continuing to work closely with accountants to support them through this next phase of MTD.

This year we launched Xero Tax, a cloud-based accounts production and tax filing solution, designed to save time, reduce errors and cut costs.

Xero is developing a self-assessment filing module, planned for general release to our UK accounting and bookkeeping partners for the tax year ending 2021. We’ll also be working with HMRC to provide a solution for Making Tax Digital for income tax ahead of the April 2023 deadline.

David Nunn is Content Manager at AAT.

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