Last month, I provided an overview of our involvement in the Making Tax Digital (MTD) pilot to date, and the various streams of work we were undertaking to prepare. This month, I will cover an update on the progress, and why you should start thinking about engaging with clients, when the time is right.
The pilot has now re-started and if there is an appetite in your firm to take part, the initial concern at this stage is around digital recordkeeping. All clients taking part in the pilot need to be keeping records digitally. For some clients, particularly those who are VAT registered, this is already a done deal. However, the entry point for MTD for income tax is gross trading or rental income above £10,000. This is going to introduce digital recordkeeping to a new tranche of clients. For some, keeping records in a spreadsheet will be their preferred option.
Small traders and landlords with transactions recorded in a simple spreadsheet are our initial focus and the team have been working hard to meet our goal of supporting this client type.
In addition, we have introduced a simple recordkeeping tool, OnBalance (for clients with no VAT nor invoicing requirements), which integrates directly into the Onvio solutions. In this month’s Onvio Quarterly Review, I demonstrated the process of importing client transactional data from OnBalance, collating this data, and submitting to HMRC as part of a pilot submission.
When you are thinking about the pilot, it is important to not just onboard clients who have coped well with MTD for VAT. It is easy to assume these clients would be a ‘sure thing’ for the income tax pilot. However, on-boarding a selection of clients, including those who may initially struggle, will be an important learning experience for your firm. By engaging this selection of clients during the pilot, it will help to better shape your offering for similar clients before April 2023 mandation.
Talking about MTD to some clients will be tricky. However, it’s important not to delay the discussion for too long. If we accept the inevitability of MTD, and the struggles it may cause for some clients, engaging with them early and offering insight and reassurance will be seen as a positive step rather than negative. Over the next couple of months, I will provide more information on the importance of keeping engaged with clients on this sensitive topic.
As MTD for VAT has been running for a couple of years, the focus is now shifting to MTD for business. We are interested in gathering your views of how you feel about MTD and the impact it will have on your firm and clients. To help us, please complete our survey and you will be entered into a prize draw to win an Amazon voucher worth between £20 and £100. For terms and conditions click here.