Editor in Chief (interim) AccountingWEB
Brought to you by
Share this content

Say goodbye to busy season: New approaches to tax

4th Apr 2016
Editor in Chief (interim) AccountingWEB
Brought to you by
Share this content
istock_gerenme

Be careful what you wish for. Those who’d like to see the end of busy season will soon be dealing with something a little more persistent.

In the aftermath of January’s self assessment deadline, many practitioners look back at the preceding weeks of stress and overwork and vow that the annual ritual has to change.

To adapt a well-worn phrase, accountants won’t have tax season to kick them around much longer, but if the government follows through on its promise to introduce quarterly income tax updates and payments, the yearly self assessment slog will very shortly give way to a more fluid, persistent state of preparation work - and all that entails in liaising with clients to ensure their records are up to date.

These issues came to a head in AccountingWEB’s spring survey with Thomson Reuters to examine how busy season affects accounting practices, and what measures they were planning to rationalise their tax work.

Survey results

The survey mood was downbeat. After nearly 20 years, self assessment work remains a growing burden for many practices.

This January, over a third (34%) of respondents found busy season worse than last year. This figure has more than doubled since AccountingWEB conducted similar surveys in 2013 and 2014.

Another third (32%) said the 2016 tax season was the same as it always was, but this figure has also deteriorated since 2014.

Lazy or late clients are the main culprits for the heavier January workload, cited by 85% of survey respondents.

This measure has worsened noticeably in recent years, in spite of considerable efforts to chase, discipline, manage and bribe clients to deliver their information earlier.

Compared to last year 2016 2014 14-16
Worse than last year 34% 13% +161%
Same as ever 32% 51%   -37%
System improvements helped 13% 15%   -13%
Client management made a difference 12% 13%     -8%
SA workload dropped   6%   8%   -25%
Similar results emerged in an Any Answers thread documenting the AccountingWEB members’ monthly spread of tax return work throughout the year. In one case, an accountant filed more than two-thirds (68%) of their tax returns in January.

The theme of the spring survey was “What would you do differently?” and the most popular measures to counter slow clients and workload bulges from this and previous years are set out here (multiple answers allowed):

Change 2016 2014 2013 14-16
Chase clients early 46% 42% 11%  +10%
Premium fees 39% 38% 44%   +3%
Organise staff better 32% 27%   5% +19%
Sack clients 32% 23%   1% +22%
Introduce cloud portal 12% 13%   - +39%
Ran smoothly 14% 11%   3%   +8%

The persistence of the slow client problem is evident from the increasing numbers looking to chase clients earlier (46% in 2016). Over the long term, however, increasing fees is a less popular strategy now than in 2013.

Three years ago sacking clients was almost unheard of; now nearly a third of practices are planning to do this. This is a major culture change for the profession - suggesting that many accountants are losing patience with deadbeat clients.

Among respondents planning to implement new practice systems in the next year, electronic authorisations (24%), automated client chasing (20%) and self-service client portals (14%) emerged as the favourite options for smoothing the workload next year.  In the words of one participant in the conversation on AccountingWEB this February, e-signatures and portals can be a “godsend” during deadline season.

The 14% claiming that things ran smoothly this January closely matches previous AccountingWEB findings about the proportion of our members managing to get on top of compliance so that they can focus more on providing the advisory services that clients want.

One of the purposes of the webinar is to share some of the ideas that help these pathfinder firms stay on top of their tax work.

Look to the future

The What Would You Do Differently? survey is a useful reminder of the practical challenges and tax season and some practical responses. But HMRC has called time on this episode in its online strategy. The new idea of quarterly reporting is based on the assumption that taxpayers and their advisers will no longer gather up a collection of paper records every year, but will instead switch to online, electronic record-keeping systems that will communicate directly with HMRC every three months.

The idea is still very much a gleam in the Chancellor’s eye, but HMRC is beginning to flesh out its approach, which will be based around smartphone apps and online accounting systems.

With some justification, tax advisers are concerned about how the new regime will affect their client relationships; whether the mooted tools will be robust enough to ensure that taxpayers file accurate numbers; and the extent to which the new digital tax regime will impose more administrative burdens on both clients and practitioners.

Making tax digital will challenge current practice and taxpayer behaviour. Individual quarterly tax deadlines, possibly tied to VAT registration and return filing dates, will demand even more persistent and nuanced deadline monitoring. But advisers will also need to ensure that non-standard reliefs and expenses are captured by the rudimentary record-keeping tools being touted as the vehicle for quarterly reporting.

Quarterly reporting may well impose an extra burden on clients and create friction for the accountant, but practitioners are going to have to get used to the idea within the next couple of years. And proponents of the new regime argue there are benefits from adopting the new approach. Instead of the intense tax bubble that builds towards the end of January, quarterly submissions will spread the workload throughout the year and encourage clients to stay on top of their income and expenses.

The Prepare your firm for the digital tax future webinar on 13 April will explore all these aspects in more detail. Join us at 11am to find out more about how you can apply the lessons of self assessment season to your preparations for quarterly reporting.

Replies (7)

Please login or register to join the discussion.

avatar
By johnjenkins
04th Apr 2016 11:54

Can you imagine

Accountants with 200-300 clients doing quarterly accounts. It's just not practical and I cannot see how it can work. This is another GO ................... The quicker he goes the better.

Thanks (3)
avatar
By justsotax
04th Apr 2016 14:25

spread the workload....

yes there will effectively be 3 'januarys' per year...and one 'mop up' January which is worse than the others....

 

I await the magic software that will appropriately allocate expense/income work out what is capital or not, and use the new 'intel' chip called 'crystal ball' to populate the records with any cash payments or receipts and appropriate private use/use of home etc.

 

 

Thanks (2)
Chris Caspell CTA TEP
By ccaspell
05th Apr 2016 10:55

Why not adopt the US model?

In the USA a tax payer files his/her annual tax return, and at the same time estimates the tax due for the next year which is paid quarterly. This estimate is based upon the expected tax payable for the coming year and not the last year's bill (as is the case in the UK). If the estimated amount is lower than what should be paid, subject to some exceptions, there is a penalty plus interest charged on the amount under paid.

Adopting the US methodology would mean that we stick with one tax return (it is daft to try and do more) but the exchequer gets its tax earlier.

 

Thanks (0)
avatar
By johnjenkins
05th Apr 2016 11:36

@ccaspell

We already have that facility. Although the figures are based on the previous year profit we have the facility to alter that figure. When you pay your tax is up to you as long as it's paid by the 31st Jan. It would appear that HMRC are replacing that flexibility with compliantly fixed payments.

Thanks (0)
Chris Caspell CTA TEP
By ccaspell
05th Apr 2016 14:31

@JohnJenkins

I think the UK system is fundamentally different as here it is based upon what happened last year as opposed to what is going to happen next year. The PoA system allows for a reduction to the tax payable (via a claim to reduce) but I have never heard it being used to increase the tax payable.

It seems to me that HMRC are looking to get the tax paid closer to the date the income/profit is earned (in a similar way to PAYE) which is understandable for a cash strapped exchequer. Using something similar to the system used in the US would mean the amount of tax paid in January should be smaller as four payments of estimated tax, with an allowed margin of error (such as 90% of the tax needs to be paid to mitigate the possibility of penalties, as they have in the US) would bring the tax into HMRC's coffers much quicker.

I am not saying this is necessarily the way we want to go, but it is surely better than requiring a business to 'file' four tax returns in the year which, I think, would be quite unmanageable for many small businesses.

 

Thanks (1)
avatar
By johnjenkins
05th Apr 2016 15:02

Although I also have

never heard of a taxpayer paying more, the facility to do so is there. So is the facility to pay quarterly or monthly.

I cannot see how quarterly accounts can form the basis of a tax payment. Why should a taxpayer have to pay tax when saving for an Asset? The whole thing just doesn't make sense.

Thanks (0)
Chris Caspell CTA TEP
By ccaspell
06th Apr 2016 12:25

What are the legislators trying to achieve?

I think that ascertaining what the point of this suggested quarterly tax return is going to be is key to this question.

I can't imagine that HMRC really want all this information early without, in the future, them also wanting to receive the tax earlier. It makes no sense to roll out this additional level of reporting without gaining a benefit from having the information. HMRC don't have the resources to deal with the information that they have at their disposal already, let alone adding to it.

If bringing tax receipts forward is the reasoning behind implementing quarterly returns then I feel the same result might be achieved through a change to the PoA system and it wouldn't involve the expense and complexity of huge updates to the HMRC IT system.

 

Thanks (1)