The Making Tax Digital (MTD) rollout has been a considerable success to date. Over 1.8 million businesses have now signed up to use the service, and more than 19 million MTD for VAT returns have successfully been filed.
The transition to MTD for VAT has been relatively easy due to filing dates and the frequency of filings being unchanged from before.
However, MTD for Self Assessment and Income Tax (ITSA), due to be introduced from April 2024, will sweep in huge changes.
Until now, only one self-assessment filing needs to be made annually, under MTD for ITSA partnerships, sole traders and landlords will have to make six filings a year. These will consist of quarterly updates, an End Of Period Statement (EOPS) and a final declaration of income.
To prepare for these incoming changes, accounting firms should take action now to automate as many of their processes as possible to comply with MTD and free up resources to deal with this new way of doing things.
Transition to MTD Compliant Software Now
Accountants should switch to MTD for ITSA compliant software now.
Doing so will save time from having to move clients across to new software as the deadline comes closer and enable them to benefit from a number of automation features.
HMRC maintains a microsite which lists compliant MTD for ITSA software. This currently consists of around ten different vendors, including well-known providers such as Xero, FreeAgent and Sage.
Additionally, the page lists around 20 providers who have software in development. HMRC recommends that accountants get in touch with vendors directly if they are interested in using tools still in development.
Most of the approved vendors are cloud-based and include common automation tools, such as importing bank feeds. Accountants should set up rules so that regularly occurring transactions are taken to specific account codes. A typical example of this for sole traders will be taking transactions from Royal Mail to printing, postage and stationery.
Adopt Payments Automation Tools
Running payments for clients can be hugely time-consuming. This often consists of entering data into multiple systems, alongside the risk of human error from manual input.
However, incorporating payments automation, such as that provided by Modulr, will streamline payments workflows and minimise the likelihood of errors being made.
The likes of Modulr simplify payments workflows by integrating directly to core cloud accounting vendors, allowing data and payee values to be automatically pulled across, for maximum efficiency and accuracy.
Efficiency is further optimised by using the Faster Payments network, with transactions clearing in 90 seconds. This is significantly speedier than the more widely used Bacs, which takes three working days to clear.
This saved time can be used to prepare for administration around MTD for ITSA, whether that is transitioning sole trader and partnerships clients across to new software or getting to grips with the new filings required.
Roll Out Core App Stacks to Automate Further
Automation can be enhanced further by connecting core accounting software to directly integrated tools to streamline a range of processes. All the leading providers have their own app directories that list out software partners by category.
Receipt scanning tools, including Dext, Datamolino and AutoEntry, use OCR technology to automatically extract data from purchase invoices, so these don’t have to be entered manually. Accountants can review the output prior to being pulled directly into core accounting software.
There are also several vendors that consolidate group accounts, such as Spotlight Reporting, Fathom and Syft, that go beyond the capabilities of core tools. This saves time from having to consolidate spreadsheets at month-end.
If you have clients operating in specific sectors, such as retail, you should consider adopting integrated EPOS systems (including Vend) that make it easy to manage and retail physical goods seamlessly.
Implement Practice Management Software
Don’t forget to streamline your internal process as well as those of your clients.
Using cloud-based practice management software, including Senta, Capium and Accountancy Manager, make planning, resourcing and monitoring the status of client engagements effortless.
Practice management software connects to the HMRC and Companies House APIs to show visibility of filing deadlines yet to be completed.
Managers can assign jobs to specific staff and monitor their progress. It’s also possible to monitor communications with clients through CRM and email capabilities.
Keeping abreast of upcoming deadlines will become more important with regular MTD for ITSA filings, alongside accountants needing to be extra mindful of avoiding fines for their clients, with HMRC changing their penalties regime for VAT.
Filing for clients is also sped up by being able to request documents for e-signature.
Sign Clients up for the MTD for ITSA Pilot
While MTD for ITSA won’t be introduced until April 2024, it may be possible for you to sign up some of your clients voluntarily.
This has to be actioned through MTD-compatible software, and qualifying clients have already submitted a self-assessment tax return or be registered for self-assessment.
Clients must authorise the sign-up themselves, and accountants who are agents can follow steps on how to do this on HMRC’s website.
Getting consent from clients now to take part in the pilot will allow accountants to get first-hand experience of requirements before they come in, as well as making the transition easier.
Modulr’s Payments Dashboard is a single online portal that brings all your workflows and payments together and automates them. Best of all, the dashboard integrates with you’re the accounting software you already use, such as Sage, BrightPay and IRIS, because we love them as much as you do! Which means you won't even have to consider an awkward breakup just to benefit.
Why Modulr? Well, Modulr is authorised and regulated by the FCA and we’re plugged into the same major payment schemes as UK banks, including Faster Payments, so your payments will clear within seconds, even on a weekend or bank holiday. The Modulr dashboard is secure and gives you and your clients full control and, because you'll be speeding through your payments within minutes, you'll have scope to start pushing your business in whatever direction you want to go.
Speak to an expert today.