18 | JANUARY 2019
News
Read online at www.proinstaller.co.uk
MTD AND YOUR ACCOUNTANT
MTD, or Making Tax Digital is going to have a profound impact on
businesses over the next few years. But it’s not only businesses, it will
also make a big difference to the way that accountants support their
clients. Benjamin Dyer, CEO of Powered Now, looks at how MTD will
impact the relationship between clients and their accountants.
With the government
recently reaffirming the
MTD for VAT deadline as 1st
April, 2019, the race is now
on to educate the whole ac-
counting profession as well
as VAT registered business-
es. There was a widespread
belief that the deadline
would be put back further
so many companies put
Making Tax Digital on the
back burner. As a result, we
are probably in for a bumpy
ride and this could be a
painful time for installers.
Recap on Making
Tax Digital
Just as a reminder MTD
is HMRC’s initiative to bring
all record keeping relating
to tax onto digital platforms.
Their argument is that in the
long term it will be better
for honest businesses while
they will collect more tax –
known as closing the “tax
gap”. Critics argue that it
will be much more work for
everyone and is being badly
implemented to boot.
The specifics of MTD for
VAT are twofold:
• All quarterly VAT
reporting needs to be
done through new tech-
nology. The old web
form is being dropped
and software that talks
to the new MTD portal
must be used for VAT
returns. Businesses on
VAT annual reporting
will follow 6 months
later.
• There must be a link
from the individual re-
cords to the VAT return
and these records must
be kept on computer.
MTD is a rolling program
and MTD for VAT is just the
first of the major initiatives
that will end up impacting
virtually all businesses. The
one after VAT is likely to
be quarterly profit and loss
reporting for all business-
es with annual sales over
£10,000. MTD will also
apply to individual tax
returns but that is currently
on hold.
The state of things
AccountingWeb and sys-
tem supplier Quickbooks
undertook a survey of
271 accountants a couple
of years ago and the top
concern, at 35% of respons-
es, was client’s poor record
keeping. The big danger
with data being plugged
straight through to a VAT
return, with little oppor-
tunity for review, is that
the proportion of wrong
returns will soar, at least
initially. Given that errors
are likely to be in both
directions, this is somewhat
worrying. Businesses could
either end up over-paying
which is bad for cashflow
or underpaying and then
getting an unexpected
catch up charge later which
is also bad.
Of course, you might ex-
pect accountants to regard
their clients as incompetent
– it’s a temptation that we
all have. Accountants might
do better to look at them-
selves. A fairly recent sur-
vey of accountants found
that 25% of them hadn’t
even heard of MTD – that
survey was by accounting
software company Xero.
How do you work
with accountants?
The critical thing in
determining the way to ad-
dress MTD is to start with
the way that you currently
work with your accountant
(if at all) and how you want
to work in the future.
There are broadly two
ways of working:
• You submit your own
quarterly VAT return
using the current web
form (or paper return).
• You pass information
to your accountant and
they do the return for
you.
It’s likely that after the
MTD for VAT deadline
you will continue to work
in a similar way. The big
difference is that your
sales and supplier invoices
and expenses must all be
recorded digitally. It will be
against the law to simply
total up the amounts of VAT,
sales and costs and key the
totals into the HMRC web
form. They must be put into
a system by either you or
your accountant. That’s the
big change.
There is one important
point to note which is that
the detailed information can
be entered onto a spread-
sheet and then “bridging
software” can be used to
submit it to MTD. However,
it’s not clear how long this
recent concession will be
available.
How ready are
accountants?
The lack of readiness
of accountants mentioned
earlier is worrying as many
installers are likely to be
looking to their accountants
for how to comply with
MTD.
In fact, there is a further
worry. Accountants are
professionals and charge
by the hour. They are not
set up for lots of calls and a
sudden surge of implemen-
tation work.
Unlike other companies,
most do not have banks of
people to take incoming
calls. Nor are they usually
backed with a great CRM
(Customer relationship man-
agement) system to track
everything and make sure
nothing falls through the
cracks. Given the scale of
change needed, the limited
time and the education that
needs to permeate out into
the market, there is a big
danger that accountants will
simply get overwhelmed.
This also applies to software
vendors, but given their
history, help desks etc. the
issue is likely to be more
manageable.
The role of
accountants Complying with
the law
The MTD system has been
designed by HMRC with
the role of accountants in
mind. In HMRC’s parlance,
they are “agents”. That is,
they can act on behalf of a
business. This means that
they can make VAT submis-
sions under the new regime
on behalf of businesses and
will be able to do other
types of MTD return in the
future too.
One of the problems is
that this is yet more com-
plex to set up. Installers
can authorise HMRC to
allow agents (accountants or
bookkeepers) to both send
and get information on their
behalf. Once that is done,
the agent is able to sign up
the installers business to
any particular MTD service,
and then use their own soft-
ware to interact with HMRC
on the installer’s behalf.
So, there is a two- step pro-
cess while it is a single step
when installers do things
entirely for themselves. MTD requires at least
one system and there are
really only three ways of
complying with the law:
• Run a system under
your control that ena-
bles you to capture all
the information you
need for a VAT return
and submit it to MTD
from your system.
• Use a system to cap-
ture all the necessary
information and send
it to the system used
by your accountant or
bookkeeper, then they
send it to MTD.
• Send copies of all
of your paperwork
to your accountant
or bookkeeper and
they key it into their
system and submit
to MTD from there.
This may come with a
higher price tag and
has the maximum
danger of account-
ants being unable to
cope.