Making Tax Digital for Income Tax Self-Assessment: why it’s going to be much more difficult than VAT MTD!
Making Tax Digital for Income Tax Self-Assessment (ITSA MTD) will be quite possibly the biggest shakeup in UK tax reporting scheme history. It’s set to change the way millions of business owners and landlords report their earnings to HMRC. Switching them from annual filings with a single deadline, to 4 quarterly filings plus 1 annual.…
Making Tax Digital for Income Tax Self-Assessment (ITSA MTD) will be quite possibly the biggest shakeup in UK tax reporting scheme history. It’s set to change the way millions of business owners and landlords report their earnings to HMRC. Switching them from annual filings with a single deadline, to 4 quarterly filings plus 1 annual.
More filing requests, plus the need to digitize the way they maintain and keep their records. For accountants and bookkeepers in practice, as well as their clients, planning is going to be absolutely vital.
The difference between VAT MTD & ITSA MTD
We work with hundreds of UK accounting and bookkeeping practices who use our entirely cloud-based suite, who will be FULLY MTD ready when HMRC’s plans go ahead.
When speaking with accountants and bookkeepers, we’re coming across many practices that are using bridging tools or free making tax digital-ready VAT software. However, there’s a problem! Making tax digital VAT was easy to introduce. The reality is, it’s not too different from the old rules: quarterly filing, same bookkeeping and the same task. The only thing that has changed is that VAT returns are no longer filed through HMRC’s portal.
Will the same Free VAT MTD software, also do ITSA MTD and CT MTD? If not, will you be using multiple software packages to perform the same tasks and duplicate your working efforts?
With self-assessment and corporation tax, it’s a whole new ball game. As an accounting software company, we’re planning 3/4 years ahead and are actively consulting with HMRC on their making tax digital plans. It’s coming to light that it’ll be a much larger task for accountants and bookkeepers than accountants and bookkeepers currently realise.
Here are a few things to consider:
1. Free bookkeeping solutions that are currently VAT MTD ready most likely will not have the resources to perform ITSA MTD or CT MTD. If they do, they may just do the bare minimum without doing the ‘Full’ self-assessment and corporation tax returns.
2. Desktop-based solutions where you perform final accounts, corporation tax and self-assessments do not currently do bookkeeping. Bookkeeping is going to be vital to remain MTD compliant. It’s not that you, the practitioner needs to perform the bookkeeping. It’s that the business owner needs to. So, if they’re using spreadsheets, they’ll need to source an MTD compliant software.
3. Many practitioners I speak with find big-name cloud solutions too expensive for their smaller clients and so still have them on spreadsheets or free software. Surely these big-name providers will produce affordable solutions for ITSA and CT MTD, won’t they? Maybe not. Many of their customer’s clients due to be affected are already on their full-price software and a cheaper solution could ‘cannibalise’ that revenue as they downgrade.
4. Logistically, how will you manage all of the additional deadlines? How will you obtain the paperwork of individuals who traditionally delivered once a year?
A lot to consider, plus there’s so much more! For example, how will you price the services? There’s honestly a lot to roll out, and it’s probably going to be the most significant change/shakeup in the history of UK tax law. However, there’s an opportunity for those willing to make the first move where there’s change.
It’s not all doom and gloom, I do bring good news! I wouldn’t be writing this if I didn’t have some good information. As an accountant who has worked in practice myself, I genuinely care about accountants, bookkeepers, and our profession’s future.
At Nomisma, we’ve developed a fully cloud-based suite that allows you to perform bookkeeping, payroll, final accounts, corporation tax, partnership tax and self-assessment. It’s all inter-connected, so data seamlessly syncs between your compliance work, meaning you’ll be FULLY MTD compliant. We offer a bespoke CRM built specifically for accountants and bookkeepers in practice. Better still, we offer our practice management tool FREE so that you can manage client deadlines, staff tasks and workflow.
“It’s a one-stop facility for accountants and I only wish I’d discovered sooner and saved myself time, hassle and money with other systems!”