After several delays over the last few years, HMRC’s MTD for ITSA project is finally set to have a go-live date in April 2024.
One of the most significant changes to tax law, it affects all businesses and landlords with an annual turnover greater than £10,000. It will require them to make the necessary preparations well before its launch.
Essentially, MTD for ITSA means that all affected business owners and landlords need to share quarterly summaries of their income and expenditure to HMRC by means of MTD-compliant accounting software.
In addition, they will need to submit an End Of Period Statement or EOPS after every fourth quarter with a complete account of all their income sources and a declaration of all other sources of taxable income, such as investment returns.
With this new change coming, accountants and bookkeepers will be in high demand to navigate it and ensure that businesses are compliant from the get-go. Here, we share our top tips to prepare your accounting practice for MTD for ITSA and manage the workload efficiently:
1. Get your mindset ready for digital record keeping
Unlike what many might believe, your practice does not have to have a digital copy of literally every receipt and invoice you work with. You simply need to maintain a digital summary of all business transactions.
Many opt to do this on a spreadsheet tool such as Excel and use a bridging tool thereby, and you can take help from an accounts outsourcing company to do the same. While this is an improvement over paper records, maintaining a spreadsheet requires great human effort and leaves room for errors when manually recording transactions.
By contrast, efficient accounting software will allow you to periodically import bank statements and directly upload all expenses and incomes in one go in the appropriate format.
This will take much of the stress out of quarterly reporting and ensure that everything is accurate. There are several accounting software options in the market — if your practice does not already use one, evaluate your options and pick the one most suitable for your needs and budget.
2. Prepare your clients for the same
By April 2024, you will need to move all of your clients to the use of accounting software in order to be compliant with MTD for ITSA.
Therefore, now is the time to segment your client list as per those who already maintain complete digital records, those who maintain partial or incomplete records, and those who still do things the old-fashioned way on paper.
This will help you identify in advance which of your clients need extra help and training with digital migration so that you can budget your hours optimally.
3. Prepare to benefit from the opportunities offered by MTD
It is natural to view MTD for ITSA as something of an annoyance. It does, after all, mean a lot of extra work for you and your clients over the next couple of years. However, try to think of it as a chance to modernise your practice and offer extra value to your clients.
For instance, quarterly reporting makes filing tax returns much easier, as you already have a lot of the information and can avoid the last-minute January rush to fetch records from your clients.
As an accounting practice, you know the trouble of following up with clients about their records all too well. This way, you need not wait on them to get back to you.
Plus, with up-to-date business records on hand, you can make timely recommendations to your clients about new ways to save on taxes or be eligible for grants or relief.
And there is no denying that every business, large or small, likes to reduce its tax bill. Your clients would like that as well.
4. Encourage your clients for early registration
There will likely be many accountants signing their clients up for MTD for ITSA in April 2024. This could lead to system delays and failures and be unnecessarily stressful for your practice regarding administrative burden.
There is also the headache of rounding up your clients at the last minute and following up with those who will inevitably delay. Instead, consider registering your clients early so that everyone has enough time for their registration to be confirmed.
You can even incentivise early sign-up by offering a competitive package deal for the service for the first few clients to do so.
Over to you
Education plays a crucial role in MTD’s implementation, and without consulting for your good, you would not be able to help your clients properly. Therefore, it is wise for you and your practice staff to speak to an MTD expert and get all the doubts out of the way.
Our team can also create a blueprint for you regarding approaching your clients for MTD registration and what steps you need to take first.
Besides, we can do it all for you and more, from doing end-to-end digital record-keeping to compiling and filing monthly/quarterly VAT returns to delivering periodic business summary and reporting. Click the CTA below to get in touch with us!