A South African practitioner gives Richard Sergeant her impression of the UK accounting scene, including tax digitalisation and Brexit.
Given the interesting times we live in, it’s perhaps a good time to take stock and have an opportunity to see how others see us. Inspired by the premise of a recent BBC radio series, we find out if seeing the UK profession through the eyes of a South African peer sheds any light on where we are.
Giving her impression from South Africa is Candice Mullins, who is managing director and owner of The Tax House, a firm of chartered accountants based in Grahamstown and Johannesburg.
In real contrast to some of the views and experiences of UK accountants, HMRC and some of the developments of MTD are seen as aspirational for their South African peers. The argument about the benefits of a more joined up data sharing system seem to be won, and the impatience to get there is clear.
Interestingly, the UK is also seen as the place to seek innovation and a place to go for ‘tried and tested’ solutions primarily to speed up their own developments, both in terms of technology but also new ways of adapting their service models.
Given the long term state of the South African economy perhaps it’s no surprise that Brexit is low down on the agenda for businesses, but for those with personal assets it seems it is the domestic agenda (and it’s ability to hit them in the wallet) which will grab the bigger headlines.
What’s your impression of UK accountants?
I’ve always been looking to get to know UK accountants who can help share and develop ideas with, and I’ve been really lucky so far. I’ve only formed a really good impression, and I’d like to think of them as innovative and forward thinking.
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In particular those dealing with SMEs, you can see that we are very similar: our thinking, the whole value add and not just about the compliance stuff, wanting to evolve into the strategic partner, and helping business grow.
I’ve learned a lot from them, and consultants like Mark Lloydbottom too.
What about technology?
We are a follower country for sure, but we don’t have to be the pioneers, so we often look to the UK for tried and tested formulas. There are a lot of forward focussed tech specialists in South Africa, but my biggest frustration is that HMRC and UK banks are embracing and understanding small business and the need to feed financial information directly into software, while these integrations are being resisted by the big banks here.
Digital tax authorities?
Our revenue services (SARS) are not even close to having any meaningful integration with software, they are so far behind. This restricts some of the things we would like to do to make things easier and better for us and our clients; there is lots of utility even in Xero HQ which we can’t use yet.
We have green eyes looking at what is happening, and what UK firms can use.
SARS are showing no initiative here, and the systems are massively unreliable. A great example was that in January the SARS efiling system broke. We, a group of accountants, engaged a consulting firm to fix it. We fixed it, not SARS. What we would love to see is automatic integration with software and filing for VAT and payroll, and no manual process. At the moment there is no mandation to file electronically, and no sign of it coming our way.
But it does get worse. Systems just don’t talk to each other effectively, so filing data and instructions with different government departments isn’t connected and can lead to all kinds of penalties. There is no real sync between all these systems which means we can’t trust the integrity of their data and information.
So we look to the UK and see where we can be heading, and do our best to get there even with these restrictions.
Attitudes towards change
I think that because we are so slow to evolve, so far behind, it’s given me much comfort to work with UK accountants. Saying that, and thinking about digital tax again, when you look at the likes of Russia who are so far ahead again, you realise that transparency is something that is very hard to absorb and adapt to for SA and UK accountants. We’re really still in the dark ages.
We are slower in embracing technology than in the UK and still taking a while to be so open to change, but it’s coming.
The US are still even further behind, they are so manual and so slow.
How commercial are they?
It has to change for us all. The old school accountants think it’s all about the compliance piece and putting the figures together. They think they know better.
The new thinking is that if you are not commercially minded, thinking of marketing, technology, and new models then you are going to get stuck.
We had a huge cost base,with significant property and people investment, and although it’s taking time we are moving to a new model, we’ve established a matrix of part time people who can work remotely.
We’re moving away from time based billing, providing access to specialist consultants, and moving to commodity pricing. Clients are now expecting us to have more knowledge than just the financials, and we’re figuring how we can do this in a profitable way.
Our view is that if you are out of your depth, then you need a network of specialists around you who can step in and help. When you think about it Xero has the approach of being the base in the middle and all the apps sit around and feed in and out, and we’re increasingly much more like that as a firm. We have to be commercial.
And this is what I definitely see happening in the UK, and that’s why I’m taking a lot of my learning from them. I’m picking out particular people and case studies, exploring what is working and not and seeing if we can rely on something now having been tried and tested with similar clients.
What about charging?
It’s hard to know how long jobs are going to take, but we were making a loss on somethings and not even realising it. We’re now really pedantic on making sure we get the proposals right, and we’re focussing on ensuring we get a minimum profit margin.
We also ensure that we are very clear about what the project is going to achieve, and what the cost will be, whereas in the old days we didn’t even send proposals and just sent out bills. Moving on to retainer based model means more transparency for clients. It means we get cash flow certainty and cover our bases; and the project, structuring work and hard advisory is the cream on top.
What about the political situation?
I was with a British client, and they don’t want to buy any UK stocks at the moment. Everyone will be waiting to see what will happen before making the next move. Clients are scared off by the UK until they get some certainty, which is a big change as the UK is viewed in South Africa as solid and unbreakable.
We don’t think it will have such a big impact actually on South Africa directly, but you do hear people talking about whether or not their kids will be able to get work experience and stuff like that.
What is more relevant to us is the changes to inheritance tax. Expats with properties in the UK could be double taxed! To perhaps put it another way, Brexit is not an issue unless it hits them in the pocket.
About Richard Sergeant
Specialist insight and business development support for accountants and their vendors. Cloud advocate with a pragmatist eye.