For Stroud-based practitioner and Tax Faculty member Rebecca Benneyworth, one individual comes instantly to mind when considering ‘digital refusers’: those who are reluctant to use third-party software to file their tax returns.

“I’m thinking of my builder client, bless him,” she says in a recent ICAEW podcast. “He doesn’t use internet banking at all.”

The practical upshot is that Benneyworth’s firm typically has to wait for the gentleman to bring in a paper bank statement that he has ordered through the post. After that, she will collate the statement with his receipts and ask one of her staff to key all the figures into a spreadsheet, or some other type of accounting software, to ensure the data finally takes digital form. “As he doesn’t use internet banking,” she says, “I can’t get a bank feed.”

Winning over the refusers

Benneyworth’s anecdote highlights a problem that many accountants are likely to face in the coming months: how to work with digital refusers in the era of MTD for income tax. 

For Aaron Patrick, Head of Accounts at cloud-based practice Boffix, this watershed provides accountants with a valuable opportunity to step back, reassess and potentially reinvent their business processes, in ways that could help win round digital refusers and engage them with MTD.

With that in mind, Patrick encourages his fellow accountants to do three things. 

1. Challenge your tech stack. “When it comes to software,” he says, “accountants can sometimes be quite stubborn. We like what we like and we know what we know. Lots of accountants are comfortable with the bookkeeping solution they’ve had for years – they’ve relied on it heavily and, because of the cloud revolution, it’s helped them scale their practice. But not all of those tools are going to be fit for purpose for MTD.”

Patrick explains that stark differences exist purely between the major brands. Xero has not yet created an MTD-centric product, but Sage has gone in the opposite direction, launching new MTD-focused tools, including a full artificial intelligence agent designed to guide and automate the entire client journey.

Other vendors, Patrick says, are going “above and beyond” to give accountants what they need to provide services to clients who would love to be able to digitalise, but can’t. Perhaps those individuals are right on the brink of retirement and wedded to legacy systems that are not directly MTD-compatible. “That highlights the importance of bridging software, which can mirror data from a legacy system on a tool that’s actually cut out for MTD,” he says.

2. Explain how the technology could make the process so much easier. “Let’s think about Rebecca’s builder again for a moment,” Patrick says. “For that very situation, QuickBooks has made a system that enables you to feed in PDF scans of paper documents – such as bank statements – and it will just create transactions for you out of that data that you can add to your digital record.”

He notes: “In fact, with QuickBooks Sole Trader, you add your bank account and it auto-analyses everything for you. Then all you need to do is spend a bit of time sense-checking the outputs and that’s you, fully MTD compliant. As long as you submit that data before the deadline, you’re all set.”

3. Be prepared to maintain the ‘shoebox’ routine – with some changes. “Even as someone who does lots of shouting about digitalisation,” Patrick says, “I still have clients who send me shoeboxes full of bits of paper – I’ve been letting it happen for years.”

He notes: “The key is to work with them and say, ‘Look, you’ve sent me this stuff on an annual basis. Now, because of this new compliance regime, we need to do it quarterly.’ And then it’s up to me to challenge myself on how I deal with that material more efficiently and translate it to an MTD-ready format. There are so many opportunities and tools we just didn’t have three years, two years or even a year ago.”

Banking on simplicity

MTD for income tax does have exemptions – but, as Patrick is keen to note, they are narrow by design. The fact is that the overwhelming majority of sole traders and landlords with a qualifying income of at least £50,000 in the 2024/25 tax year will be in scope, so there are ultimately very few reasonable grounds for refusal.

Again, software developers are doing their utmost to ensure that as many people as possible are able to comply. For those who may be nervous about using accounting software, Patrick points out that Monzo and Tide are both piggybacking on white-labelled Sage software that enables you to file MTD quarterly and annual returns straight out of your bank. Plus, Mettle – part of the NatWest Group – has a similar tie-up with Freeagent.

“If apps like those can be the bridge towards getting people MTD-compliant,” Patrick says, “I’m all up for that.”