Tackling MTD as a larger organisation

Here, three large companies explain how they’ve overcome the challenges of MTD, from tech troubleshooting to staff training.

When Making Tax Digital was first announced in 2015, businesses were concerned that keeping digital records and sending quarterly updates to HMRC would double their admin, plus involve splashing out on costly new software and training.

Many larger accountancy firms started preparing early, such as Campbell Dallas, which has eight offices across Scotland. “We recognised this would be a major challenge,” says Campbell Dallas partner Mark Pryce. “We knew the industry was going to fundamentally change and it’d cause a massive shift in the way we do business.”

The seismic upheavals have meant firms have had to adapt accordingly. Which hasn’t been without difficulty in some places, here we speak to three companies who have conquered their initial issues.

The software switch

One of the key requirements of MTD is that all accounting records must be kept digitally and subsequent returns submitted to HMRC using MTD-compatible software.

Although, it has to be acknowledged that, at the moment this is only for VAT purposes and then only for those with VAT-able turnover over £85,000 (the mandated). For most firms, this has meant migrating to cloud-based software.

“Suddenly, the market was swamped by hundreds of providers, offering software from anything from £5 to £5,000,” remembers Damian Shirley, VAT partner, Cooper Parry, which chose Microsoft Dynamics 365 Business Central. “For any firms in the market at the time, it must have been very confusing for them.”

Campbell Dallas opted for Xero, one of the most popular cloud-based accounting platforms, which is used by more than 1.5m people in 180 countries. To enforce the changes, the Scottish firm hired a digital transformation manager.

For information taken from spreadsheets or clients’ in-house record-keeping systems, companies have used MTD-compatible ‘bridging software’ that links spreadsheets with HMRC. Copper Parry uses Abratax (“a very seamless transition,” says Shirley).

Key employer takeaway:

  • If you haven’t done so already, choose your cloud accounting software wisely and make sure it’s MTD-compatible. Check out this list here. Also, ensure all staff are trained up.

Getting clients on board

Once all the tech had been installed and staff trained with the new system, it was time to start communicating MTD’s new digital ways of working with clients. This posed new challenges. Switching to new software was a scary prospect for many small businesses.

Woolgar remembers, “in the first year we had a few issues with clients getting to grips with a new system. There was some unhappiness, as they’d been happy with the way they’d been doing things.”

The key to getting these customers on board? Publicity. In 2016, Campbell Dallas started publishing blogs on their website and hosting workshops. “Half of the workshops would be on MTD; the other half on the benefits of Xero,” recalls Pryce. Meanwhile, Cooper Parry informed their clients about MTD via a series of webinars, while Armstrong Watson delivered training sessions.

Campbell Dallas also segmented their client base in order to contact them about MTD changes.

“We took every single client in our contact list and stratified them into different groups,” remembers Pryce. “We identified those who’d already adopted the cloud. We also contacted those who’d said they weren’t sure about the cloud, and asked them about upgrading. We also had clients who kept manual records who weren’t doing anything. We contacted them to make sure they understood the implications of doing nothing or leaving it until the last minute.”

Key employer takeaway:

  • Notify your clients about MTD. This could be done by publishing blog posts on your website, or social media posts. Try segmenting your client list to identify which clients are affected by MTD, before contacting them to tell them how they’ll be affected and whether they’d need to update their software.

The next steps

“Being MTD-ready has taken us a long time – two years,” says Pryce. “But it’s an investment that’ll pay off in the long run for us. Our clients are ready seeing benefits. Being able to see forecasts through cloud accounting, or have an app that deals with stock is making their lives much easier. Many of them have been forced into this because of MTD.”

Woolgar has witnessed similar changes among Armstrong Watson’s clients. “We’re getting people moving away from spreadsheets and presenting receipts in a bag at year’s end,” he says.

But the hard work’s not over yet. Although MTD is currently mandatory for the above £85,000 annual turnover VAT clients, it won’t be rolled out to other organisations, or widen to include other taxes until April 2021, at the earliest.

“We should be passing the message to clients that they need to be ready,” says Campbell Dallas partner Mark Pryce . “Instead of having receipts down the back of the sofa or digging out old dividend vouchers, they’ll be able to see their personal tax returns on a cloud-based system that’ll make their lives easier.”

“We’re going to be very busy for the next six months or so,” predicts Woolgar. “When the bridging software ceases to work, you’ll see more clients wanting to move. Equally, you’ll see the pen-and-paper brigade who’ve taken MTD on themselves want accountants to take it over.”

Key employer takeaway:

  • Be prepared. Just because your mandated VAT-clients have stated to submit MTD-compliant VAT returns, MTD isn’t over yet. It’s a good idea to keep an eye on where MTD might go next so that you can keep you clients posted well ahead of the next set of changes.

In summary

Given MTD is the biggest shake-up to the UK’s tax system in generations, it’s no surprise that there have been teething troubles for accountancy practices and their clients alike.

However, it’s clear that those firms who remain prepared, both by having MTD-compliant software and ensuring their clients are regularly informed about changes, will fare better than most. For more info, click here.

Christian Koch is a contributor for AAT's members magazine, AT.

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