With MTD ITSA (Making Tax Digital for Income Tax Self Assessment) just 18 months away more accountants are offering a bookkeeping service. They believe it will make submitting the quarterly returns more straightforward as they won't have to correct or re-do the accounts prepared by the business.
There is another option though! We have provided bookkeeping services to businesses for nearly 20 years and we have always provided tidy, accurate and complete accounts to accountants at year end. MTD ITSA will not change that. We already produce monthly or quarterly management reports for our clients and we will continue to do the same for the sole traders and partnerships we work with who will have to have quarterly returns submitted from April 2024. We produce VAT returns well before the due date so that our clients know how much VAT is due and where we work with them on a monthly basis if they want to know we tell them how much VAT is due each month so they can plan.
Our experience of accountants is that they don't complete annual accounts promptly. Our clients just want to know what tax they need to pay and it is frustrating for them when they find that out just a couple of weeks before the payment is due. Of course if you are one of the ones who hand everything over to your accountant in January then you can't expect anything different, but we hand over accounts to accountants within 2-6 weeks of the end of the financial year but it is often more than four months before they access the information we have sent. Just today I became aware of an accountant working on a client's accounts which had a year end of November 2021. That's 8 months after year end and just one month before the statutory documents have to be filed and the corporation tax paid. No wonder accountants have been asking for extensions to filing dates. They don't have the capacity to deal with compliance promptly.
So why would accountants want to add bookkeeping to their service offering.? There are lots of bookkeepers who work directly with businesses who can provide this service and will be able to support sole traders and partnerships with their quarterly MTD tax returns. This leaves accountants to file the fifth return up to 9 months after the year end. That fifth return will mop up any amendments needed to the 4 quarterly returns for the year and will be no different to what they do now with tax returns.
What is most important for these businesses is that their accounts are kept up to date and that all income and all expenses for the quarter are included in the return. Tax will be calculated based on what has been submitted each quarter so if you haven't bothered to include all your expenses you will have a tax bill based on your income. If you have included expenses which are not allowable these will be amended within the fifth return by your accountant and you will have a higher tax bill than you were expecting. It will be more beneficial for you if accurate quarterly returns are submitted with just some final amendments relating to depreciation or work in progress.
As bookkeepers we know what is allowable and what is not and we will ensure we have as much information as possible before preparing VAT returns and/or quarterly accounts.
Quarterly returns will increase the workload of both bookkeepers and accountants, especially as the quarterly returns will be for the same period for each business - April to June, July to September, October to December, January to March. So if you feel you won't be able to do your own accounts for each quarterly submission now is the time to consider outsourcing because good bookkeepers may not have any capacity the nearer it gets to April 2024.
Now is the time to consider outsourcing your bookkeeping whether you are VAT registered or not. Not only will you have accurate accounts but you will also get a regular true picture of how your business is doing. Contact us to see if we are able to help you. Don't feel swamped or under pressure to meet the deadline (you will have just one month to submit each quarterly return). We will meet the deadline for you. Telephone 01722 341820 and talk to one of our bookkeepers.