|, MTD, Digitalisation|What you need to know about ‘digital record keeping’ under MTD

What you need to know about ‘digital record keeping’ under MTD

‘Digital record keeping’ is a key concept for Making Tax Digital (MTD). So what is it, how do you know whether your clients are already doing it, and what do you need to do to help those who aren’t?

What is digital record keeping?

Put very simply, digital record keeping under MTD is the requirement to maintain financial information digitally so that summary figures can be reported to HMRC quarterly.

Our research suggests that around a quarter of a typical practice’s client base currently use some kind of accounting software to manage their finances. This group already meets the criteria of digital record keeping for the purposes of MTD.

But that still leaves around three quarters of clients not yet using financial software. Our research indicates that these clients are likely to do one of the following:

  • Keep track of their finances using a spreadsheet
  • Rely on the advisor to prepare their books
  • Maintain manual records

Clients who use a spreadsheet are also likely to be meeting the requirement for digital record keeping under MTD, read more here.

Who is responsible for digital record keeping?

Clients who rely on their advisors to prepare their books will also be meeting the criteria of digital record keeping for the purposes of MTD. The important point here is to ensure that your engagement terms make it clear that it’s your responsibility to maintain digital records and make the quarterly submissions on your client’s behalf. Consider how any additional MTD-related work might impact on your fee structure and make sure you communicate this to affected clients.

What tools can be used for digital record keeping?

Clients who currently keep manual records do not meet the criteria for digital record keeping under MTD, so think about how you will manage the migration of these clients to some form of digital record keeping.

Questions to consider at this stage are:

  • Could your client maintain digital records using dedicated software, such as Xero, Quickbooks or Twinfield online accounting system? How would clients moving to one of these systems get training and ongoing support?
  • Would some clients find it easier to use a simple spreadsheet as a step towards digitalisation? Again, how would they be trained and supported to do this?
  • If you take on additional digital record keeping and quarterly reporting responsibility for some of your clients, what additional resources will you need? This might include extra staff and additional software.

We’ll be looking in more detail at the roles and responsibilities that you and your clients need to perform as part of the transition to MTD and how that impacts on digital record keeping.

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2018-11-21T18:09:21+00:005 July 2017|Categories: Practices, MTD, Digitalisation|Tags: , |