The government’s ‘Making Tax Digital’ (MTD) initiative comes with a lot of promises: ‘simplified tax’, ‘reduced burdens for taxpayers’, and the creation of a ‘transparent and accessible tax system fit for the digital age’. In addition, it also represents the biggest change to taxation in the last 20 years.
However, with any change to an existing structure, there needs to be a period of evaluation and consultation to ascertain the path forward. HMRC has repeatedly stated that the MTD system will be more efficient and easier for taxpayers, but there is still confusion around the details of the scheme.
Despite consultation regarding the Making Tax Digital proposal closing on the 7th of November, 2016 – the ambiguity has resulted in anticipation and nervousness from accountants. As a result, accountancy firms need to prepare themselves in order to predict changes and provide support and advice to their clients regarding the new processes.
It’s important to note that going digital isn’t just a replacement of the existing system; it’s a complete transformation of the way financial institutions and processes will work. Currently, many accountancy firms utilise paper-based systems or a single spreadsheet for all their financial operations - the digital transition will require these firms to incorporate very specific software that interfaces with HMRC’s systems.
For accountancy firms to assess the needs of their clients and deliver clinical insights regarding their taxation processes, they need to start from the top – and that means segmenting their clients based on who is and who isn’t digitally enabled. In doing so, they can identify the needs and requirements of their client base and deliver specific assessments and evaluations on that basis. Much of the process will involve helping clients understand whether or not their existing software and systems are sophisticated enough to pull out the required data.
Amidst all the change and transition it’s critical that accountants and firms take this opportunity to engage with and reassure their clients. Regardless of whether your client is digitally enabled or not, it’s vital that you communicate with them and provide education and support, as this will help them to prepare as soon as possible.
Client engagement around MTD is particularly important as relationships between clients and accountants will also be brought into question during the rollout. Some clients may see MTD as an opportunity to remove accountants from the equation if the initiative streamlines existing processes. With this considered, it’s essential that accountants and firms re-evaluate the relationship they have with their clients. The new quarterly structure of the system means that accountants have updated business information available – and this enables them to provide deeper business insights and advice to help drive business growth.
The Making Tax Digital initiative is undoubtedly a complex and comprehensive process, but it also presents possibilities for accountants to provide a more sophisticated, data-driven service. To thoroughly prepare for the structural changes ahead and continue to give customers the education and service they need, accountancy firms need to carefully assess every step of the new process – and develop services orientated around more comprehensive tax insights.
To learn more about the Making Tax Digital initiative and what you can do to prepare, click here to download our eBook.