Making Tax Digital is the biggest change in UK VAT legislation in recent history and means that from 1 April 2019, businesses with a taxable turnover above the VAT threshold (currently £85,000) will need to submit their VAT returns through compatible software. Your clients will be obligated to keep digital records of their accounts, which will impact how you service their bookkeeping needs.
We’ve recently run a series of Making Tax Digital webinars with more than 900 attendees. Based on polls run during these webinars, 73% of those who attended did not feel they are prepared for MTD. Meanwhile, 48% of practices also considered themselves most concerned about moving manual outsourced bookkeeping clients on to compatible software.
We recognise there are accountants and bookkeepers with well-established plans in place for how they’ll get their clients ready for Making Tax Digital. But with 89% of UK businesses needing to find an alternate solution to the way they currently file their VAT returns via the HMRC gateway, the size and urgency of the challenge is substantial.
Making Tax Digital
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Making Tax Digital countdown is on
At the time of writing, there are roughly five months to go until until Making Tax Digital for VAT comes into force. And HMRC has recently unveiled the latest official timeline for MTD for VAT, which is worth taking note of.
Realistically for accountants and bookkeepers, though, the total amount of working days that go into five months could actually work out to be much less. Through decades of working with accountants and bookkeepers, we know seasonality plays a big part in your day-to-day working life and how you forward-plan work in your practice.
So, let’s break down those remaining days:
- Focusing on the upcoming self-assessment period may distract you from getting your practice and clients ready for Making Tax Digital for VAT, meaning you could lose a number of working days during this busy time.
- If you’ve booked a holiday in the new year once the self-assessment period has closed, then more working days may be lost.
- Between now and the beginning of April 2019, there are a number of year ends approaching – December and March, with the latter being the most common. During this time, practices are often busy with managing compliance services.
Taking into account all of the compliance seasonality factors, the shorter the lead time to prepare for Making Tax Digital, the more likeliness there is to create a pressure point for your practice, potentially impacting your number of working days to be ready.
Based on the above assumptions, your number of working days will dramatically reduce – and that’s without year-end work. If you currently have more than 75 clients to migrate on to compatible accounting software, then your Making Tax Digital work rate is going to build up quickly.
Is your action plan geared up for this to make sure your practice is prepared to get your clients ready? Do you know which compatible software will best suit your clients’ individual bookkeeping needs based on their willingness to adopt new or different technology?
4 steps to prepare clients for Making Tax Digital
These are just a sample of the many questions accountants and bookkeepers will face as the race to Making Tax Digital for VAT picks up pace. What’s clear based on the conversations we have with accountants and bookkeepers is that a roadmap to readiness is critical. To help, here’s a four-step plan to put into play:
1. Make time to plan
Develop a Making Tax Digital strategy for your practice, ensure your team are trained and ready, identify a practice champion and review your software options.
2. Segment your clients
What’s their VAT status and scheme, what is their projected turnover and year-end, how are they currently managing their bookkeeping records, how easy or difficult do you anticipate it will be to get them ready for Making Tax Digital?
3. Communicate to your clients
Make them aware if they’re going to be impacted, market your services and start now.
4. Prepare your clients for digital adoption
Line up your onboarding process, software configuration and training, build in reviews and create service plans for your clients.
Be ready for Making Tax Digital
We’ve created a Making Tax Digital toolkit to help you prepare your practice and get your clients ready for HMRC’s VAT changes. You can access free tools, advice and marketing materials to help you get ahead before 1 April 2019, including:
- Making Tax Digital practice pack: guides, webinars, infographics, product comparisons and a client segmentation template are just a few of the tools we’ve created to help your practice build an MTD action plan for your client base.
- Making Tax Digital marketing toolkit: download co-brandable and editable email templates with pre-loaded attachments and client guides.
Making Tax Digital is the biggest change to tax legislation by HMRC. We’re participating in the closed pilot for VAT and already have accountants successfully submitting VAT returns to the MTD portal.
So we’re compliant and here to help you and your clients be ready.
Editor’s note: This post was originally published in August 2018 and has been updated for accuracy and relevance.
Guide to Making Tax Digital for accountants and bookkeepers
Discover what Making Tax Digital means for your practice including the key dates you need to know and the five steps you should take to prepare now.