What is MTD and what impact is it going to have on accountants?
In an increasingly digital world, governments across the globe are embracing technological advancements to streamline processes and enhance efficiency. One such initiative is the implementation of Making Tax Digital (MTD), a UK government program aimed at digitising tax records and reporting. However, a recent study conducted by the Institute of Chartered Accountants of Scotland (ICAS) suggests that a significant number of accountants may not be adequately prepared for MTD for Income Tax Self-Assessment (ITSA).
In this blog, we will explore the findings of the ICAS study and delve into the implications of MTD on the accounting industry.
The ICAS Study of Making Tax Digital
According to a report published on Accountancy Today, the ICAS study revealed that 70% of accountants surveyed were not adequately prepared for MTD ITSA. The survey assessed the readiness of accountants to comply with the digital requirements of MTD, such as maintaining digital records and using compatible software for tax filing. The findings raise concerns about the readiness of the accounting profession to adapt to the digital transformation brought about by MTD.
Understanding Making Tax Digital
To gain a comprehensive understanding of the MTD initiative, MTD aims to digitise tax processes and improve accuracy by requiring businesses and individuals to keep digital records of their income, expenses, and other relevant information. This information will then be used to populate and submit digital tax returns using compatible accounting software.
What Challenges Do Accountants Face When It Comes To MTD?
The implementation of MTD presents both challenges and opportunities for the accounting industry. While the transition to digital record-keeping and reporting may require an initial investment in software and training, it also opens avenues for increased efficiency and reduced administrative burden in the long run.
However, the ICAS study sheds light on some of the challenges faced by accountants in adapting to MTD. Many accountants may lack familiarity with digital record-keeping systems and compatible software, leading to a steep learning curve. Additionally, smaller accounting firms and sole practitioners may face resource constraints in terms of investing in the necessary technology and training.
We have already made the digital transformation for our clients’ accounts through a combination of FreeAgent and Dext.
What are the benefits of Making Tax Digital?
Despite the challenges, MTD offers several benefits to the accounting industry. By digitising tax records and automating the reporting process, MTD has the potential to minimise errors and reduce the time spent on manual data entry and reconciliation. Accountants can shift their focus from mundane administrative tasks to providing value-added services such as financial analysis and strategic advice to clients. Also, by providing faster services, accountants can ensure businesses remain tax compliant.
How we have prepared for MTD as accountants
To ensure a smooth transition to MTD, our accountants have been taking proactive measures. This has included investing in compatible accounting software, providing training and support to all staff, and collaborating with clients to encourage digital record-keeping practices.
Embracing technology and keeping abreast of MTD updates is crucial to running your business smoothly.
How to prepare for MTD as a business
As the UK government pushes forward with its Making Tax Digital initiative, the accounting industry must adapt to the changing landscape. If your accountant is still processing information old school style, then it might be time to make the switch. You will notice differences such as:
● Accountants and files processed quickly with all deadlines met on time or in advance.
● An accurate history with an easier ability to review past accounts.
● Reporting availability for finance and making business decisions.
In conclusion, the ICAS study highlights the need for greater preparedness among accountants for MTD ITSA. While challenges may arise during the transition for many accountants, embracing digital record-keeping and reporting can bring long-term benefits to accountants and their clients. By investing in the necessary resources and staying updated with MTD guidelines, accountants can navigate this digital transformation and thrive in the era of Making Tax Digital.
So why do we use FreeAgent at Acumenica?
At Acumenica, all our clients receive access to our award-winning cloud software package, FreeAgent. You will be able to raise invoices, manage your expenses, and reconcile your bank 24/7 or anywhere you like using the mobile app.
We are proud to have been FreeAgent’s first platinum partner in Scotland and we continue to work closely with them. The whole team is FreeAgent certified and able to provide you with an unparalleled FreeAgent accounting experience.
FreeAgent is super user-friendly, with the ability to track and monitor your accounts, review past accounts, make quick changes and reviewing finances for making business decisions. By using FreeAgent we can provide the very best service to all our clients.
However, if your business has more complex needs, we are also certified partners in Xero, Dext and a host of other solutions.
Contact the team at Acumenica today to discuss your requirements.
