Many accountancy practices have “quite a bit of work to do” ahead of the introduction of MTD for income tax, according to speakers at ICAEW’s recent MTD Live event.

It is estimated that around 860,000 taxpayers will come into MTD for income tax in April. Of those, around 65,000 are currently signed up, according to figures from HMRC. The pace has started picking up in recent weeks as 6 April approaches, but the majority still need to go through the sign-up process.

Polls taken at the beginning of ICAEW’s event found that just over two-thirds (68%) of the 115 attendees hadn’t started signing up clients, and that almost half the audience (44%) still had to choose software. While this is not a representative sample of agents, it does give an indication of the split between those who are planning ahead and those who are waiting until nearer the deadline.

“We really have got to focus on getting clients ready,” said Rebecca Benneyworth, MTD expert, tax consultant and Principal at Benneyworth and Co Chartered Accountants. “The polls indicate that a lot of practitioners have still to sign their clients up to MTD, so they need to really think about getting on with that.”

Inevitably, a lot of unrepresented taxpayers will sign up from 6 April, causing a bottleneck, added Benneyworth, speaking to ICAEW’s Accountancy Insights podcast. “I think any practices out there that have got the opportunity to crack on with this now in the next months and get their clients signed up before the great rush, if you like, the migration of wildebeest starts, and you get crushed in the stampede.”

She stressed that HMRC has incorporated a ‘soft landing’ on penalties, which will provide some slack in the system and a period of grace in which practices and taxpayers can adapt. However, “there's a lot to do. It's not just signing clients up: it's quoting them for the new fee structure, it's new letters of engagement. And certainly, what I've had to do is look at each client individually, at what software they're already using. I've got one client who's fallen out with this software in the last few weeks and wants to move to something else, and all of that's got to be tailored to the individual client’s needs. That is a lot of work.” 

Craig Ogilvie, HMRC’s Making Tax Digital Programme Director, spoke to ICAEW’s tax specialist podcast, The Tax Track, about the progress that’s been made so far. He said that there had been an uptick in progress over the past couple of months. “Is everybody ready right now? No, but we expected that. What’s important is that so many more people are ready than were a few months ago. I think we're making really strong progress.”

Building on that, he encouraged practitioners to take a proactive approach and start with client sign ups now. “Don't wait for the letter [from HMRC], I would suggest. You can know, based on the details of the client, who's likely to be in…Ensure the new agent service account is ready. For each client, you then have to sign them up using the sign up service on gov.uk. It takes roughly four minutes per client.” 

How to prepare

Hannah Miller, Director of Chipperfield Accounting, and Nikhil Sangani, Chartered Accountant at Sage & Co, are ahead of the game when it comes to preparing for MTD for income tax. Sangani’s firm started its preparations a year and a half ago, determining which clients would be in scope and starting the communication process. 

“The main focus in the past six months or so has been educating clients about the fact that the process is coming, and also, based upon their most recent information, the requirements that will be there and how tax is changing,” he said. “From there, we then look to understand their existing setups, what their intentions are as to how to navigate more timely submissions of, and provision of, information to us. Also think about how that relationship can enable other elements attached to planning and business focus and forecasting, which perhaps under the current system and setup that exists, is slightly more challenging to do.”

Small practitioners have played a critical role in spreading the word about MTD, said Miller. “Last April, we had already sent out all our communications to all our clients. We had an optimistic outlook. At that point. We were hoping that everyone would start on software from April 25.” 

Miller is now preparing to send engagement letters out to clients. Processes with clients are already agreed, and software selected. “We have been prepared for years, and obviously we've gone through the journey for VAT. But yeah, we knew it was coming, and I've spent a lot of time getting to know the rules and keeping our clients up to date.”

Both Sangani and Miller were clear that getting fully prepared for MTD income tax was a lot of work, involving considerable back and forth with clients to agree software and processes. But while now is the time to act, you’ve still got time, according to Ogilvie, who said that HMRC would be guiding agents and taxpayers throughout the process. “We want to be supportive and help people get this right.”