The accounting profession is facing a seismic change.
HMRC are aiming to move to a fully digital system by 2020, as part of a wider vision for digital transformation of UK businesses. Just as technology is transforming industries from insurance to banking and agriculture, HMRC are looking to become one of the most digitally advanced tax administrations in the world.
Making Tax Digital (MTD) will come into effect in April 2019, and affect all clients with a taxable turnover above the VAT threshold (currently 85k). We talk to cloud conversion expert Matt Flanagan, on how you can talk about MTD with your clients.
CUTTING THE SIGNAL FROM THE NOISE
MTD has dominated the headlines for months. While some have speculated if the legislation will even go ahead (and indeed, continue) HMRC have confirmed that MTD will come into effect next year. Many see this as a once-in-a-lifetime opportunity for the accounting industry to change the way it operates, give clients more value and increase profitability.
So, here’s what you need to know.
The April 2019 legislation will be the first part of a phased roll-out, focused on businesses above the VAT threshold. In 2020, that is planned to change to voluntarily VATable turnover. However, this timeline could still be deferred
DO YOUR CLIENTS KNOW ABOUT MTD?
Even if MTD has dominated the headlines of accounting and bookkeeping magazines, your clients may not have heard of it. I know of a practice who were yet to tell their clients about the upcoming changes. One of their clients heard about MTD through the Autumn Budget and lost trust in that accounting firm, believing they should have already told them about the change. They switched firms to one that clearly addressed MTD on their website and social media.
As of November 2018, according to the House of Lords’ report here, 40% of businesses still do not know about MTD. And if you are handling their tax returns, your client trust in you and your firm to guide them through the legislation and make sure they are compliant by April 2019.
So, here are some tactics you can use to bring MTD into the conversation.
FOCUS ON THE BENEFITS OF MTD WHEN TALKING TO YOUR CLIENTS.
The path to implementing MTD has been far from straightforward. If you get lost in the details of the legislation, it can very quickly become confusing and a daunting subject for your clients.
To minimise this confusion, focus on the benefits. In the long-run, this legislation should make filling in tax return easier, more effective and efficient. Plus, turning tax returns from an annual occurrence to a quarterly engagement will provide more financial visibility. This should help with budgeting and more accurate forecasting.
Frame MTD in positive terms and your clients are much more likely to stay with you through the change. As their accountant, you play a pivotal role in their MTD experience. By helping them understand the legislation and providing a clear roadmap on what they need to do to become compliant, you are adding value and building trust.
It is crucial to plan enough time between now and April 2019 to ensure your clients are keeping thorough, accurate and timely records of all digital transactions. Matt Flanagan will be hosting a webinar on building a communications plan for your clients and prospects. You’ll learn what you need to advise your clients on and how to effectively deliver this message.
SIGN UP FOR THE WEBINAR TODAY. Watch on-demand