Despite Making Tax Digital for Income Tax and Self Assessment (MTD ITSA) being delayed (again), what’s not expected to change is that a ‘one size fits all’ approach is unlikely to work. The reason being that there is such a huge variation of attitudes, abilities and inclinations towards financial record-keeping within the self-employed and landlord client communities affected.
Segmenting clients
The most straightforward way of being able to tackle this is by segmenting your clients. Once you know what you are dealing with, and a sense of the volume of clients, it’s much easier to grasp the scale of the challenge and start to think about your approach.
The master list
Putting together a master list of who will be impacted should be relatively straightforward. At this stage it might be worth considering marking out not only who will be impacted but in what ways. A spreadsheet identifying those who are self-employed, those who are landlords, and those who have income from a jointly-held property should give you a good overall starting point.
Categorisation by ability
Although there are many ways to categorise clients for MTD ITSA, the most pertinent one – from which you can then consider options – is a view on their ability to cope with increased reporting. Anthony Wheeler, director of Newcourt Accountants, has taken just such an approach: “With over 200 clients that are likely to be impacted, we were keen to get on the front foot as soon as possible. We created three ‘buckets’ that we thought best represented what kind of support they would need from us, and then went through every single client and assigned them”. A version of the buckets used by Wheeler are: A grade: will cope fi ne with the technology and the concept of keeping regular records. They should very quickly be able to submit the quarterly updates and will need your input around the End of Period Statement (EOPS) and final confirmation.
B grade: these will get the technology but will require some hand-holding to begin with. They are likely to want you to check over the numbers before submitting the quarterly updates, and to complete the EOPS and final confirmation.
C grade: they are likely to need extensive support and for you to do much of the data recording as well. There may also be some who may have the ability but would prefer to outsource the whole process to you. Working through this list alongside your client-facing staff shouldn’t be too onerous but will likely throw up some ‘interesting’ conversations. And, with the government implying that clients with income under £30,000 will be dealt with differently, that could mean they need their own category (i.e. bucket).
Transactions
Another way to consider how to segment clients will be on the number of transactions they will have to process each month. For example, if you are aware of some landlord clients that have very few transactions each month, then they may benefit from a very simple approach. For those with higher volumes of smaller transactions, then being aware of this will help shape what kind of tech and training they may need.
Bank accounts
Another consideration is something which is very tangible and practical today: whether those impacted have a separate bank account for their business or not. This is precisely an area that Sam Mitcham from SJCM Accountancy has focused on: “Given that half of the battle with record keeping will be ensuring that trade income and expenditure can be efficiently sorted from the personal, I am trying to ensure that all of my clients are using a separate bank account.
Given that these cost very little or even nothing at all, it might be a hassle in the short term, but it could save them a lot of time and effort in the future.” Mitcham’s segmentation of those who are, and who are not, using a separate bank account means that the communication out to those clients can start now, with or without much detail on MTD ITSA. “It doesn’t have to be all about MTD, it’s just as much about good practice, and saving them time and money along the way. If I can get them all there, it will also make my life so much easier as I know I won’t be looking at pulling out their Netfl ix subscription and weekly shopping.”
MTD services start with understanding your clients
Although it seems like a long way away, and we will have more changes to contend with, giving yourself time to put things in place is essential. Starting to think about how you are going to deliver an MTD service starts with a focus on your clients.
Richard Sergeant is managing director of Principle Point and a freelance journalist
