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HMRC trends report ignores small practitioners

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28th Oct 2015
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Mark Lee takes a look at HMRC’s report on Trends in the Tax Agent market and finds it somewhat underwhelming

In July 2015 HMRC published a 30 page report prepared for them by IFF Research. The research was intended to help HMRC “understand how the professional tax agent market has changed over the past five to ten years and how tax agents perceive it will change further in the next five to ten years.”

Is there anything in this report that warrants the attention of AccountingWEB readers? I would offer a qualified ‘yes’ – if only for it’s entertainment value. To summarise: Some people said this and some said that but we didn’t talk to enough people in smaller firms to draw any valuable conclusions here.

As many of the report’s conclusions are obvious and thus barely 'news' it makes for an amusing read. This is especially the case where it betrays a limited understanding of the marketplace.  Who knew, for example, that some firms with 50+ employees have more than one principle area of activity? Or that some top ten firms’ main business activity is ‘accounting and auditing’ whereas others’ main business activity is ‘tax consultancy’?

Despite the report’s title and stated objective it would seem that HMRC’s attention and interest was focused more on the larger firms and on pure tax consultancy practices than on the far more numerous smaller practitioners.

HMRC seems to think that the larger firms “represent the majority of clients” (para 3.5). This is one reason why the "larger [tax and accounting firms] were deliberately over represented in this research." Despite reference in para 5.7 to screening the respondents from such firms to ensure they were sufficiently senior you do have to wonder whether appropriate people were being interviewed as 2 of the 9 firms with 50+ employees apparently have a main business activity of bookkeeping!

I am also surprised how many small bookkeeping practices were interviewed as compared with smaller accounting and tax focused practices. The report also notes a bias towards ICAEW registered accountants (para 5.2).

In the report the results of a handful of conversations with small/micro firms have been aggregated with those from people in larger firms (and reported as the views of "small and medium sized practices").  In total just 40 qualitative in-depth interviews were conducted by telephone in February/March 2015. Of these only one seems to have been conducted with a typical general practitioner running their own firm.

There were also three interviews with sole practitioner bookkeepers and six with sole practitioner tax consultants. It is not obvious from the research questions (which are included in an appendix) who determined the main business function of each interviewee. It may just have been taken from the recorded SIC code in the original Dun and Bradstreet database.

The three trends explored in the research were technological change, changes in types of clients and changes in the services offered by tax agents. Generic conclusions include:

  • General advances in technology and the information available online means clients are often better informed (and getting younger, given the popularity of online information amongst younger age groups).
  • An increase in email, mobile technology and Cloud computing means clients expect a more ‘real time’ service
  • Use of more automated services opens up time for more profitable advisory work [among larger firms more than the smallest ones in my experience]
  • Some firms talk about using more automated technology to provide some services very cheaply
  • Services offered are driven by client needs (which are often affected by changing legislation, and trends such as higher instances of working abroad and self employment)
  • Many [larger] firms speak of expanding their offering to provide a more complete service.

It must be disappointing for HMRC that “The Agent Online Self Service Tool was not mentioned by large numbers.” However, “those that did [mention it] saw it as a positive step.” To no great surprise “it is used by some agents to authorise clients and change codes themselves rather than going through HMRC.”

Looking at trends in tax legislation

Unsurprisingly tax agents feel that legislation has become more complex over the past five years. And, believe it or not, “that the quantity of legislation had increased (and would continue to so in the future)”.  The resentment felt by smaller firms was underplayed I thought re some of their frustrations. Such as feeling that they have to bear the costs of keeping their systems and working practices up to date re fundamental tax changes such as RTI.

Looking to the future, smaller firms feel they may require more training to help/support them offering more specific advice, more investment and improvements to their IT systems and more access to tax specialists whether in-house or on a consultancy basis.

Trends in relationship with HMRC

There is little news here. Some felt the relationship had improved, some that it had deteriorated and some said it was variable. Quelle surprise!

Of course the conclusions were again skewed by the inclusion of larger practices that can speak to clients’ CRMs within HMRC and to technical specialists.

Going forwards there were also no surprises as to what is sought in the future:

  • Faster and more reliable communication with knowledgeable staff who had the authority to make decisions;
  • More (particularly digital) information sharing and self-administration, more consultations and testing of new technology / systems; and
  • Specific changes around transactions such as RTI and payroll.

In each case the suggestions made will be well known to readers of AccountingWeb.

Conclusion

Research like this will always suffer from the constraints posed by the questions asked as well as by the selection of respondents and the calibre of the interviewers.

With only 40 in-depth interviews it could all be dismissed as potentially unrepresentative. In fact it largely confirms much of what the professional bodies and other surveys have been saying for years. There is no news in the report itself that could lead to HMRC amending its plans going forwards. So what was the point?

Perhaps the research was intended to generate specific feedback re the development of further digital services from HMRC. This was a key part of the interview but the reported responses here simply repeat what has been long known and requested by accountants.

Maybe I’m being cynical but I wonder whether part of the research findings have been excluded from the report itself.  I’m referring to the information gathered during the final part of the interviews in response to questions about each firms’ “strategic business plans”.

What do you think?

Mark Lee FCA is consultant practice editor of AccountingWEB and chairman of The Tax Advice Network through which accountants can source vetted independent tax expertise. His personal website is: www.BookMarkLee.co.uk

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Replies (5)

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By raybackler
29th Oct 2015 11:49

Good Analysis

I always laugh at those surveys during TV ads in the cosmetic market that say 80% said their wrinkles improved and in the small print at the bottom of the TV screen it says sample size about 100.  Anyway, whatever the number it is incredibly small and arguably statistically irrelevant.  This survey is highly skewed towards large firms and a sample size of 40 again steers the results towards statistical irrelevance.

There is further research in the pipeline.  I received a letter from HMRC warning me that a market research company was going to contact me and asking me to participate.  About a week later, I took part in a very professional market research call from one of the industry leaders.  I look forward to this report with greater interest.

Thanks Mark for your comprehensive analysis.  You clearly understand the requirements of good quality market research and I hope you will be able to analyse further HMRC research findings.

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By johnjenkins
29th Oct 2015 15:23

Great article, Mark

You completley "nailed" it. (no ifs or buts)

The money would have been better spent on Agent strategy (if we ever get it).

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By allenlunn
05th Nov 2015 11:06

HMRC

They're obviously benchmarking the rest of us against the big boys and therefore assuming [incorrectly I think] all accounting practices are like them; who presumably have all the toys and know-how in one place.

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By AndrewV12
06th Nov 2015 11:55

Good article.

Us small Companies need all the help and assistance we can get, preferably for free :).

Extract above

Looking to the future, smaller firms feel they may require more training to help/support them offering more specific advice, more investment and improvements to their IT systems and more access to tax specialists whether in-house or on a consultancy basis.

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By johnjenkins
09th Nov 2015 09:39

So the upshot

is that HMRC will eventually get rid of all small entities.

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