MTD ITSA: Tips and tricks for accountants to segment clients (KYC)

Introducing Making Tax Digital for Income Tax Self Assessment to clients means having some difficult conversations. In this article we look at the things you can discuss to get the best MTD outcome for everybody.

Keir Thomas-Bryant
Keir Thomas-Bryant

Accountants need to prepare now for the start of MTD for Income Tax Self Assessment (MTD ITSA) in April 2024.

This means segmenting clients into lists to assign practice resources, and also deliver the very best client experience. For example, there will be those who are technically savvy, as well as those to whom MTD ITSA will be a shock to the system. What each requires from you will vary dramatically.

Know Your Client (KYC) checks are the way forward. Accountants and bookkeepers are very familiar with the need to perform them as a way of verifying identity when onboarding clients. As clients are serviced, accountants get to know them and their businesses even better, even if they're only seen annually.

But what do we really know of client attitudes and behaviours towards technology, and specifically how comfortable they might be in using tech to help with their financial admin?

Here’s what we cover in this article:

  1. How to discover client technology needs
  2. Three questions to ask clients about technology
  3. Understanding what clients want and need

MTD ITSA: The basics for clients

Here’s a reminder of which clients we’re talking about there being a need to contact.

As of its introduction in April 2024, MTD ITSA becomes a legal requirement for sole traders and landlords that earn over £10,000 per annum. These clients will already be using Self Assessment.

The £10,000 per annum threshold is combined across the individual’s businesses. So, if they earn £6,000 from sole trader income and £5,000 as rental income then they fall within its scope.

Accountants can administer MTD ITSA for clients using their Agent Services Account (ASA), much like they already do for MTD for VAT.

It’s not possible to opt out of MTD ITSA, but it might be possible to apply for digital exclusion on the grounds that the client cannot follow the rules. They might live in a location without internet access, for example.

Clients can start with MTD ITSA today, if they wish, by joining the MTD ITSA pilot scheme.

MTD ITSA: How to discover client technology needs

Every accountant will be able to flick through their mental rolodex of clients and pick out those that they are sure will have no interest whatsoever in change, and some that might be ready to go.

But can you be certain?

MTD ITSA is bringing this into sharp relief. Clients will either need to adopt digital record keeping themselves, or will become reliant on you to do it for them (although may still need to keep digital records for things like invoice-level data).

Either way, knowing what your clients are prepared and able to do on their own is going to be important so that you can target the right services to them in the not-too-distant future. And considering basis period reform might also be required, then your help for the client might be needed surprisingly soon.

The benefits might not necessarily be clear cut as far as the client is concerned, and MTD ITSA isn’t an easy sell for many. The fact it is mandatory gives clients little choice. However, we shouldn’t confuse resistance to change with a lack of ability to change.

The reality is that it is too easy for us to underestimate how used to technology many small business owners are. And while it is clear that there will be a proportion of our client base who will need a lot of support, tackling those who could get there quicker will lighten the load from a practice perspective.

MTD ITSA: Three questions to ask clients about technology

In order to KYC for MTD ITSA, start by asking them these three questions at client contact points, such as informally during a phone call, or even by sending out an online survey using something like Microsoft Forms or Google Forms:

  1. How comfortable are you with keeping your bookkeeping records digitally, so that they can be submitted at least each quarter to HMRC?
  2. Would you be happy to use your work phone and computer to send us your receipts and invoices when they arrive so that we can help?
  3. Our fees will be increasing to meet the extra work that MTD ITSA will create. Can I show you how we might minimise the impact on your bill?

Obviously, these questions should follow earlier communications about MTD ITSA so that the client isn’t entirely confused.

MTD ITSA: Understanding what clients want and need

The first question above should establish if the client feels comfortable and confident enough already. If they are, then it could be that you are pushing on an open door, and helping them make the move to being MTD-ready is something that you can prioritise now.

A negative answer is probably an indicator that they will need more help and assistance, perhaps because they don’t know what it entails. Or, it might be a lack of confidence.

The second question above is designed to see what technology they have to hand, and if they are willing and able to use it to help get information to you. By framing it as an easy-to-do task—just ‘send us your receipts and invoices’—it allows you to position the effort as being something taken on by you, rather than themselves.  

A negative response here will allow you to dig further as to what might be holding them back. For example, they may not have either kind of device, or have another reason that prevents them from doing this easily—perhaps a disability, for example.

A positive response on the other hand should be taken as an opportunity to present your solution. You can also already hear those who will answer with, “Depends on how much it costs!”. So, the next question here should help.

The third question above takes on board the hard reality of MTD ITSA.

In order for you to provide a scalable and sustainable service it is very likely that your fees will need to increase. Helping clients to minimise those costs will largely be down to them doing more of the work themselves, or working in the most efficient way.

Taking the opportunity to frame potential cost increases now (without having to be too specific) will reduce any shock further down the line, while the offer to reduce their own personal impact should appeal to many.

Those who are positive when answering the last question are giving you permission to show them how doing some of the work themselves will reduce the reliance and cost of doing the full bookkeeping service.

Conclusion: Getting a head start with clients and MTD ITSA

MTD ITSA is all about using technology but doing it right is about more effective use of technology. It’s no longer permissible to lag behind when it comes to fully utilising tech in order to benefit your practice and your clients.

AutoEntry is a key tool that will help each of your impacted clients on their MTD ITSA journey. It makes the legally-required data digital gathering so easy that it’s almost an afterthought.

It should be step one in helping them become compliant, and for you to build up a consistent and scalable service offering. AutoEntry is one way you can help reduce the impact of MTD ITSA on your clients—and your workload.

Using the above questions you can get to Know Your Client in a way that will allow you to identify how best to introduce them to technology that will make a real difference, based on the way they work, their confidence, ability and motivation.

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