Making Tax Digital

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Making Tax Digital - making you considering getting out faster!

Making Tax Digital for Business (MTDfB) is a government initiative and it’s been put in place according to HM Revenue & Customs (HMRC) to make it easier for you and your clients to manage and pay taxes – you can read more here.

It’s caused many different reactions, but at MyFirmsApp we are hearing from more and more accountants who are thinking of early retirement and selling up rather than dealing with the new regime. Some accountants have clients who don’t yet use any software, they don’t use email and they rely on books! So how are these firms going to respond?

Age plays a small part here but it’s more about understanding the challenge and how simple it can be to respond, and at the same time helping your customers. Some of these changes, despite being somewhat ‘forced’ upon us, may in the medium to long term end up being wholly positive.

Should you ‘get out early’?

This is an important decision, and, as you know there are multiple factors to consider. These need careful reflection and advice from other professionals, family members and friends should be obtained.

However there are a number of MTD specific considerations.

1. Fear of the unknown or resistance to change should not be the reason to ‘bow out’!

Retiring and selling your business is a big decision, and one that should be done (in our view) for the right reasons. MTD does not need to stop you doing what you love, enjoy or wanted to do for a little longer.

There are affordable solutions and companies like MyFirmsApp who have invested huge sums of money, time and effort to develop systems that will take the MTD pain away.

This is achieved not simply by providing software that gathers the data, but by providing an end-to-end system that chases clients for outstanding data and helps with client on-boarding and training.

Firms that embrace MTD in the right way (see point 3) should expect a higher value at exit than those who bow out early.

2. If you have other reasons aside from MTD to get out then there is some evidence to suggest you should do so quickly.

If of course you have clear commercial or personal reasons to get out, then a lot has been published online about the possible benefits of getting out early.

The key points around this seem to revolve around the value of your firm at the point of exit. Historically, multiples have been relatively reliable, and customers loyal, with the trust established between client and accountant forged face to face. But today, that value may be challenged in the following ways:

  • How do you manage your clients digitally?
  • Supply and Demand – in particular the potential for over demand

How do you manage your clients digitally?

During the acquisition stage you will increasingly be faced with questions like:

  • How do you interact with your clients digitally?
  • Who holds the key to these relationships - is it the firm or the software vendors?
  • How do you communicate with clients digitally?
  • How many of your clients are using software, in particular cloud?
    • Do you manage your customer relationships digitally via your own App or give away this control to others?

Therefore, if you have good reason to sell, then selling sooner rather than later could protect your exit valuation.

MTD may affect supply and demand!

In addition to the above, there are suggestions that if we see a rush to exit on a large scale before MTD begins we may see reducing valuations and a substantial increase in supply, while a potentially diminishing demand may result in a price squeeze.

Therefore, the clock is ticking for practitioners who want to sell their practice, at the right price, pre-MTD.

Commenting on the ICPA Supplier page, Tony Margaritelli wrote: “How so very sad that small practice accountants are faced with this dilemma which, if they get it wrong, could cost them thousands of pounds in their retirement.

3. Having your own App gives your client control, a digital response, a proven process and an MTD solution – all things buyers will be looking for and pay a higher multiple for.

We’ve built out, designed and created the MFA ‘Collect’ system, built on the world’s most popular Accountancy App. That means that it’s been designed to take away the fear, concern and pain that MTDfB has caused so many.

This gives you, in one proven solution, the things a potential buyer will be looking for, helping you to get the multiple you want at exit, and removing the unwanted hassle between now and then!

When to respond?

Undoubtedly the time to respond is now; and that’s because responding in the right way is going to take some time to get right. The last thing you, or your customers want, is leaving this to the very last minute, forced to do something in a rushed, pressured manner.

Becoming an MTD ready firm - A suggested implementation timeline looks like this:

  1. Respond to MTDfB and make the decision to launch your mobile App.
  2. Appoint MyFirmsApp (our average design, build and launch takes 6 – 8 weeks)
  3. Start to educate your customers on what’s happened / is happening around MTD using our resource pack that includes pre-written materials such as emails, blogs and resources. (Runs over 3 months drip feeding education).
  4. On-board your customers using the MyFirmsApp automatic on-boarding and training solution (Runs over 3 months drip feeding education).

How to respond?

Over the past 18 months, MyFirmsApp has been working closely with HMRC to ensure that you remain the trusted advisor in this new digital and mobile world, to provide you with a proven, compliant solution that’s simple, intuitive and easy to use, with everything required in one App, one place, in your brand.

This is combined with a roll-out support programme to ensure that all the on-boarding challenges and training of all your clients is fully automated and has full support in place to help and guide your business through the process peacefully and professionally.

The result? MTDfB isn’t something you have to worry about; instead you can turn your attention on how to turn this into a positive for your firm, your clients and your combined futures.

In our view, the very best way to get the summary data is to use a single App in your brand (we make the App look and feel like your creation, matching your branding and logo). An App that’s HMRC compliant and approved, that sits on their device (phone or tablet) in your brand, gathering all this critical summary data automatically, solving painlessly the challenge of digital record keeping, and removing the requirement for *Excel spreadsheets and the need to consistently chase clients for data.

One App, One Place, Your Brand