Making Tax Digital (MTD) is HMRC’s plan to make it easier for businesses and individuals to get their tax in order and manage their finances – spelling the end for the annual tax return. By 2020, the government wants the UK to be the most ‘digitally advanced tax administrations in the world’.
However, the speed at which HMRC intends to implement MTD has been a shock for some firms, with many voicing their concerns regarding new types of software and timing. Alexander & Co, a Manchester-based accountancy firm are an example of a practice who have embraced MTD and they are here to outline how other firms can make it benefit them, too.
Better for the client’s business
All tax professionals should be encouraging clients to monitor and manage their finances continually, and to be aware of the current health of their business. Making it easier for them to keep their records digitally is just as much about doing what’s right for the client’s business as about complying with HMRC’s requirements. Having a steady flow of information on the client’s business, its cash flow, overheads and debtors makes it easier for accountancy firms to keep clients on track and take remedial action before a problem escalates into a crisis.
Tax professionals worry that they may be facing a future of rising workloads in tandem with falling fees. Clients expect their accountant or tax adviser to keep them compliant. In their eyes, compliance is simply a tick in a box. If transactions are captured digitally in the daily course of business and that data can feed into the tax professional’s own accounting systems, a massive amount of manual data entry is eliminated and the whole process is accelerated. Reporting to HMRC then becomes almost automatic.
Where the time used to go on sorting out clients’ records, it’s now a streamlined process. With data flowing in from the client’s business into an accountant’s production software, it’s much more efficient.
Adding more value for clients
There is another factor that makes digital record-keeping a sensible strategy. Accountancy is becoming a commodity, rather than a service. Market data backs this up, showing that growth in audit and accounting compliance work is set to plateau over the next five years, while demand for consultancy will rise and drive practice growth. In this climate, practices need to lock out the competition, deliver outstanding service and build ever closer ‘added value’ client relationships. Rather than dedicating expensive resources to routine compliance work, you can free your team to become trusted business advisers. MTD works with the way clients increasingly prefer.
Work the way your clients prefer
The ‘pull’ for working electronically often comes from the market, with increasing numbers of clients expecting to exchange information with their advisers in real-time. After all, from social media to online retail to messaging apps, owner-managers already manage their busy lives on their smartphone: why not their business? Working online suits the preferences of an increasing proportion of clients. Clients also find it easier to generate estimates and invoices and log receipts on the move using apps on their smartphone, rather than have to ‘climb up paper mountain’ every time they return to their base.
Expand with MTD
Historically, accountants and tax advisers were based on the high street and served businesses and individuals within a defined locality. Today, with the cloud and the ability to exchange information and business data online with clients, they can extend their reach beyond their immediate neighbourhood. You will be able attract clients running a UK business from all over, which of course, is big advantage.