Shakeout looms for accounting software houses. By John Stokdyk

I was at the AccountingWeb awards (thank you AccountingWeb) and heard Dennis Keeling speak. At one point he suggested that with all the changes to accounting requirements emanating from HMRC it was likely that accounting software would become like payroll, "requiring" annual updates for the software to remain usable. I am sure I could sense the software developers rubbing their hands together with glee under the tables!

Not that they need an excuse to roll out annual updates to keep their offices furnished with thick carpets and thin china. What version is Sage Line 50 on now? 12/13?

Luca Pacioli wrote the spec some 500 years ago so you would have though it would take less than 12 attempts for an organisation with their resources to get it right.

Anyone in business with any sense should start thinking about signing up for an online/on demand accounting package. (I would say that though, as I am a director of Liberty Accounts)

Support for old versions is not an issue because there are no old versions. Updated features are available to all users as soon as they are implemented centrally.

We are currently awaiting the specs from HMRC for the VAT fraud changes and the online filing. They were due at the end of September and look like being a few weeks late. Once we get them the work will be done and with minimal fuss our users will soon have access to the changes.

We won't be going to the marketplace trying to convice users they "must" upgrade because of the VAT changes because, lets face it, the majority of users aren't going to be affected by the reverse charge requirements since they only affect wholesale trade in a small number of specific goods, and they can always use the HMRC VAT online facility if they don't want to shell out for a software upgrade.

Alan Wright
Director
Liberty Accounts

Changes will not be limited to the UK as this fraud is Europe wide.

I find the concept a difficult one to get my head around and I don't think there is any practical advice on offer from HMRC that will allow existing packages to deal with the changes as a work around. Am I wrong?

Developers will need a clearly defined software design specification from HMRC and European Tax collectors before they commit resources. Again, am I wrong in thinking these are not yet available?

If HMC&R really wanted to shake up the VAT aspects of the business software accounting systems in the UK then the most straightforward way could be to require all companies to pay VAT directly to the HMC&R - by BACS - at the time that settlement is made to the supplier companies of the non-VAT element of th egoods/services supplied.

In can't beyond the scope of accounting sofware developers to create VAT accounting systems - as part of the accounting programme packages - that ensure that all VAT liabilities are transacted directly to HMC&R with all of the intricacies of the VAT returns calculated and worked out centrally.

Whether, given the government's record on commissioning large scale computer systems and - the NHS is one area that springs to mind - means that it could cope is another matter. But it seems crazy that VAT is not accounted for directly as part of the actual, inter-company payment/settlement processes between companies and as it happens. If such a scenario could be created then one major benefit would be that companies would never again be tempted,or able to, use VAT receipts as part of their cash flow solutions.

Feel like I've seen this post and commented before. Anyway as per Jim's point this is quite a big change but as far as I can see will only affect a small number of companies. PS are you the Jim Johnson I know? :o)

Also, regarding the upgrade issue mentioned below; aside from the mechanics of who performs the upgrade what is the difference between continuning to pay a monthly subscription for an online service and paying an annual licence to receive upgrades? In fact, let me argue the case from the other side. If I use a LAN based product such as, say Pegasus Opera II, when I've got past my upfront costs I can stop the licence and use the software for as long as I like with no additional charges. You can carry the risk of new leglislation and needing or not needing to upgrade. Presume thats not the case for an on demand product?

Then it comes down to how much value does the product give me and whats the cost over it's lifetime.

Regards

John Clough
BDO Stoy Hayward LLP

The comment made "I can stop the licence and use the software for as long as I like with no additional charges." may not be correct since some suppliers have set in a time restricted Licence number. Therefore your most central computer program could cease with just enough warning for you to pay for the next 12 months.

Hi Stephen,

That is true, and that is why I picked Opera II because I dont think (or at least until recently) there are no restrictions like this.

Similarly you could do this with Line 50, but not MMS.

All comes back to what I said before though which is you need to understand the contractual terms of using any system, cost it out over it's entire life, then decide whether it offers you the best value for your business.

Regards

John Clough
BDO Stoy Hayward LLP