Mark Purdue tax product manager at Thomson Reuters sees Making Tax Digital as a possible advantage for accountants.
The consultation stage for HMRC’s ambitious ‘Making Tax Digital’ (MTD) initiative ended on 7 November 2016.
You could assume then, that the next stage is to await the outcome of this.
But the fact is, despite industry concerns and calls for delay, MTD is coming and is in fact already happening if you take into account that more than 3.5 million individuals have already accessed their Personal Tax Account.
So, if you work in the profession, I’d argue that we should tackle the associated issues now rather than wait. MTD is one of the biggest changes to shake up our industry, and we are all responsible for bringing business tax into the digital age.
With the Autumn Statement looming, followed by Christmas, and then the inevitable January deadlines, those in the profession know only too well that we are coming up to the busiest time of the year. I would suggest that some of the key issues our profession faces are rooted in bottlenecks of work and in poor communication with clients.
Earlier this year, Thomson Reuters surveyed over 500 accountants working in practice to get their perspective on January’s ‘busy season’. 85% of respondents said disorganised or last-minute clients were the main culprits for the heavier January workload – 48% of the total number of returns were submitted during January. When asked what they’d do differently in future, the most popular planned resolution was to improve client management:
- Chase client information earlier and more frequently – 46%
- Introduce higher fees for late information – 39%
- For severe cases, sack the client – 32%.
So I propose that the frequent accounting updates, which MTD necessitates, could well be a good thing for our industry. Wouldn’t it be nice to get everyone’s records in, in a timely fashion, rather than getting everything at the eleventh hour?
Fortunately, we can take some key steps now to help make this happen, or at least start doing things differently.
Firstly, communicate with your clients about MTD. Are there any steps they can take to reduce their reliance on paper? Start talking to your clients about the potential impact of MTD even if you don’t have all the answers yet – it’s fast becoming more of a mainstream talking point so your clients may expect information from you.
Some clients, of course, are more resistant to change or to technology than others – but baby steps can be taken by each and every one of us. Whether that’s setting up more frequent email reminders, enabling digital signatures, or encouraging clients to use your bookkeeping service, by working together we can make change happen.
It’s worth mentioning that there are benefits to cloud software, too. For instance, multiple users can access information at the same time, and updates can be provided in real time. HMRC has been engaging directly with software developers. I believe that MTD will push people towards the cloud and that, in many instances, a cloud-based solution is the most appropriate way to go.
For now, talk to your professional body and software suppliers, consider volunteering for software beta testing, and aim to automate as much as possible. Look at your workflows, and speed up your processes. Encourage your clients to do the same. This is the ideal opportunity to become a more efficient and profitable accounting practice.
There’s no doubt that accountants will be taking more of an advisory role in the future for their clients, and with business owners gaining insights into their business accounts more often, they may well be much more open to strategic advice.
HMRC is running a public beta of MTD in 2017. By the end of 2018, it’s predicted that businesses will update HMRC quarterly for their income tax and National Insurance obligations through their online accounting software. The roll-out will start in 2019 for VAT, and then in 2020 for corporation tax. The plan is for MTD to be in full force by 2020 – but we need to start preparing for it now.
Some sectors may struggle and need more support than others, so map out your client base and identify these people now. Accountants will be at the forefront of MTD and will be expected to support their clients in this transition.
While we have roughly a two-year time frame to get clients on-board with the changes, only those firms that actively embrace MTD will be able to move into the more proactive, business advisory market relatively seamlessly. And if you’re not currently planning to offer more value-added services and an innovative way of working with your clients, you can be sure that other firms will be.
Take time to outline where you want to be in three years’ time and what your practice will look like after you’ve made the changes. Be prepared to be flexible, and train your teams.
Then, perhaps a few Christmases from now, we’ll be relaxing, glass in hand – rather than sitting down to submit clients’ self assessment returns, knee-deep in routine accounting bottlenecks we have all become so used to. The MTD agenda provides an opportunity to provide continuous tax and business planning throughout the year. Cheers to that.
Mark Purdue tax product manager at Thomson Reuters, has spent over 25 years' working in tax and specialises in Personal and Capital Gains Tax.