MTD: The Dos and Don'ts

Some Dos and Don'ts regarding complying with MTD for Income Tax

Preparation:

• Do leave yourself sufficient time to prepare how you are going to meet your MTD reporting obligations so you hit the start date with a viable system up and running. If you are a single property landlord with no more than 30 odd transactions a year to report, then planning to comply with MTD is both straightforward and requires only a few months of lead time to get everything in place. You may need a lead time of more than six months to prepare for MTD if you have several self-employed businesses and rental incomes to process for MTD.
• Don't think you can leave MTD compliance planning to the last minute. You will just end up wasting more time and money catching up on the wasted opportunity to plan properly.

Private and business transactions:

• Do keep your private and business transactions and affairs completely separate. It makes preparing your accounting records far simpler and more efficient.
• Don't use the same bank account for your private and business transactions. Firstly it will cost you far more if you rely upon a tax adviser to prepare your returns because they won't know how to analyse and separate the private and business transactions. Secondly, it will prove even more tedious to strip out the private transactions if the automatic bank statement imports most MTD software allow is used. Thirdly, in the event of HMRC opening an investigation into your tax affairs, you will end up explaining away too many private transactions. Even if you have nothing to hide, giving HMRC an insight into your private affairs rarely turns out well.

HMRC-approved software for MTD:

• Do research very carefully the range of approved MTD software available on the market. There are many benefits to be gained by adopting accounting software that goes beyond HMRC's requirement that all MTD returns must be submitted in digital format through approved solutions. At the same time, it is important to understand you can continue keeping your tax records on paper ledgers and spreadsheets and rely upon a firm like MAAP to prepare the necessary digital MTD returns on your behalf. It is likely the costs you save on avoiding having to subscribe to MTD software will be on a par with the extra costs your adviser will charge for doing the extra work, but it is a perfectly legitimate solution to meeting your MTD obligations.
• Don't believe everything the software vendors tell you about why you should adopt their product. We do recommend software to clients, but we also make it clear it will always prove to be an expensive and far more time-intensive exercise than they think to successfully integrate new software into their operations. The payback for a correctly managed computerised accounting solution is always highly valued by clients who have taken a responsible and enlightened approach to the integration process. Even our highly IT trained consultants never expect to download a new accounting solution and start operating it correctly without weeks of testing and trialling how it works in practice.