For businesses already using MTD for VAT compatible online accounting software to submit VAT returns, the message is simple: you’re ready! But for the businesses still dragging their feet on desktop, or nothing at all, the pressure is on and it’s real.
As we draw nearer to the deadline, the requirement for accounting firms to bring their practice and their clients up to speed on digital tax is vital. While the onus on compliance lies with the business owner, more than a million businesses around the country will be affected and many will be looking to their advisor for support.
What does it mean for accountants?
While hundreds of thousands of UK businesses are already safely set up with MTD for VAT compatible software, hundreds of thousands more using desktop software or no software at all will need advice on what technology to choose and how to get set up. This provides a huge opportunity for the pacesetting practices that are comfortably offering online accounting support for businesses already, but for the many firms still getting up to speed, there’s still time to act – but acting now is vital.
Training staff on the regulation and the solution
As with any regulatory change, there’s no shortage of information to read and understand, with MTD being no exception. HMRC has published guidance on MTD for VAT that accountants, many of whom will be acting as agents for their clients, should read and understand.
Damon Anderson, director of partner and product at Xero, recommends dedicating resources within your practice to research and understand both your firm and clients’ requirements. It is also a good idea to get familiar with HMRC’s guidance documents, interpret and share key points across your team. This is allow for an internal set of FAQs to be devised, which will help support both your internal team and clients, readying them for the 1 April deadline.
Using it as a marketing opportunity
“Making Tax Digital might feel like hard work, but it’s an excellent opportunity to build stronger relationships with your clients and to provide more consulting services,” says Paul Bulpitt, founder of The Wow Company.
Once a client has been through the transition to digital tax and been prepared for this piece of regulation, it is a great opportunity to consider how this new level of engagement could be used as a way to promote a wider range of services. When the clients are on the software, they can be introduced to dashboards and other software tools, such as automatic invoicing and accounts payable. This increased use of online accounts can leave more time for accountants to think about building advisory services to their firms.
Preparing clients for the change
UK businesses that are VAT registered and above the VAT threshold will need to use some form of software to store their records digitally and file VAT returns. While business owners that move from something they’re comfortable with or know well can feel like they’re out of their comfort zone, once they’re up and running on online accounting, most will find the change a positive one.
Paul recommends considering these businesses as new clients and who may be overwhelmed, and to try put their mind at ease. It is important to note that online accounting won’t just allow businesses to be compliant, but also have a real-time, accurate view of their finances throughout the year.
Businesses affected by MTD for VAT will need to make a decision about their accounting software as soon as possible so they can plan and manage their adoption of MTD. Those using desktop software should check that it will support MTD for VAT and whether there are any costs involved in upgrading.
“HMRC has a list of software suppliers supporting MTD for VAT, which includes Xero,” says Damon Anderson.
Xero have been closely working with HMRC to build an upgraded VAT submission function to support MTD. Using a private beta programme, from HMRC, a select group of Xero users have successfully submitted a number of VAT returns. This means Xero are well on track to support eligible businesses after 1 April 2019. Xero are committed to making this experience easy and simple, based on incredibly positive feedback.
Xero customers will be able to submit MTD VAT returns at no additional cost and with no need for upgrades – the functionality will be rolled out to all VAT-compatible plans free of charge.