What plans are practices putting in place to educate clients and prepare them for the new digital tax regime? Find out by reviewing this recent AccountingWEB and Thomson Reuters webinar. NB: Some links in the text point to specific sections of the presentation video.
AccountingWEB’s What would you do differently? tax season survey in association with Thomson Reuters came up with some startling findings this spring:
- Over a third (34%) of respondents found January worse than last year, whilst another third (32%) found it the same as it always was.
- 86% respondents found lazy/late clients to be their biggest niggle.
- The top things firms are planning to do next year are: chase clients earlier (46%); introduce a fee penalty/incentive to get information earlier (39%); or get rid of troublesome clients entirely (33%).
- 32% of firms are planning to implement better organisation for themselves and staff, while 49% have no plans to change their practice systems.
The disparity between the 86% of accountants who are aware of the continuing problem of late clients and the 40% who plan to do something about the issue is a worrying sign of passivity within the profession. The spring survey confirms findings from other sources such as the Bankstream index that suggest any UK accountants are stuck in a self assessment shaped rut.
Clients appear not to be listening to their advisers’ request for vital tax information. As we have heard occasionally on Any Answers, perhaps they view their accountant as just another part of their annual tax hassles. But the response from many firms has been to shrug their collective shoulders and moan, “We’ve tried, but we’re never going to be able to change their habits.”
HMRC’s plan to make tax digital is going to change that situation dramatically.
As a follow up to our survey, AccountingWEB hosted a webinar to address some of the issues uncovered, and see how the remedies could be applied in the emerging digital tax environment.
To present the practitioner’s view, we invited along two cutting edge accountants to share their views on how they use technology to streamline tax processes, and how they are preparing for making tax digital.
The panel participants were:
- Lucy Cohen, Mazuma - Lucy and her partner founded Mazuma in Cardiff in 2006. The firm now boasts a client base of 2,000+, of whom 50% are sole traders. Mazuma has implemented a high volume business model that’s well adapted for the smallest clients who could potentially suffer the most from quarterly reporting. But as she puts it, “We’ve been very keen on getting clued up and getting systems in place.”
- Alex Falcon-Huerta, Soaring Falcon Accountancy - Frustrated with life within a traditional accountancy firm, Alex set up Soaring Falcon last year. She specifically designed her firm’s processes to avoid the January workload bulge and wrapped up all the work for her first SA season by the beginning of December.
- Mark Purdue, Thomson Reuters - As product manager for the Digita tax products Mark is very closely involved in the firm’s preparations for making tax digital. During the webinar he provided some detailed insights into HMRC’s intentions.
The session was hosted by Principle Point managing director Richard Sergeant, who consults to accounting firms and their suppliers about the process and managerial requirements for growing practices. After reviewing the tax season survey findings, he asked the panellists for their advice on how to handle clients who were lagging behind with their tax information.
Cohen was not surprised that this was such a big issue for survey respondents. “We spend a lot of time and energy chasing clients right from the 6th of April… It’s a problem across the industry and is something accountants have to take responsibility for and have to push to communicate and educate clients to get their information in early. No one wants to sit there on 31 January filing tax returns at midnight. That’s not fun.”
When setting up her new firm, Falcon-Huerta implemented procedures and systems from the off to get tax information as early as possible. But touching on what all three panellists saw as the key remedy for late clients, she emphasised the importance of client training and communication.
“At the very, very early stages I spend a lot of my time training them and advising them on what the best way is with the systems. We make sure they understand it fully. I then provide them with guides if they do get stuck. I then follow up with emails, phone calls or a regular meeting,” she said. “We’re always in contact and eventually they go off on their own and become comfortable with that.”
Since the webinar took place, Thomson Reuters introduced its new Onvio Documents system, an online portal combining workflow alerts and electronic authorisation tools that directly addresses some of practical issues that occur during tax season.
Previewing the company’s thinking during the webinar Mark Purdue commented, “We’re getting feedback that improvement to that process of getting information either from client or to the client is really important. Portals, electronic approvals of forms, online storage, apps - that is where you can improve the process and improve the efficiency to speed up that turnaround.”
The process of getting from the client information to the tax return is quite rigid, he continued. “The quicker you can automate those steps and get from A to B the better. Our role is very much to get that process as smooth as possible and help you manage the clients,” Purdue said.
Making tax digital
The tax return process may be very rigid as we currently know it, but that certainty will no longer apply when personal tax does go digital. The details of what data HMRC wants and how it’s going to get the information is still unresolved, along with numerous other compliance and technical issues that will be put out for consultation after the EU referendum. But one simple fact is certain, Purdue warned: “That paper form is not going to exist. The agent is going to be asking the client to review and agree some kind of statement of income that will update their tax account.”
Firms that currently print out paper tax return forms and post them to clients will struggle under the new regime, he warned. Even without the specific details to hand, the next two years are going to be all about educating the clients about how you are going to be working and getting clients on board, “so they are a client you still want to act for”, Purdue said.
While Falcon-Huerta and Cohen both endorsed this view, accountants at the Thomson Reuters Synergy Conference earlier this month worried about the risks MTD would pose to their role - for example if HMRC’s direct relationship cuts accountants out of the loop with clients.
That risk is real. As the tax system becomes increasingly automated, practitioners will need to adapt to the changing circumstances to ensure that they remain relevant to clients - and that they have a relationship built on mutual co-operation and trust.
“It’s a really interesting time in accountancy,” said Cohen. “We’re at a sort of crossroads. You can’t just stamp your feet and go, ‘I don’t like this. I’m not going to do it. Tough. And the same applies to clients. They can’t insist on signing paper forms when everything is going electronic.”
“We’ve seen it happen with VAT returns being submitted digitally, staggered dates for filing self assessment returns and RTI. It’s just the next step. It’s an opportunity for accountants to decide what sort of clients they want - and use this as an opportunity to keep clients that are willing to change and fall in line with those systems and ditch those that won’t.”
Follow the links or see the full video session below to get more detail on all these points. A follow-up summary document with more practical advice will also be sent shortly to webinar participants and those who request a copy. Also see Mark Purdue's guide, The effect of digital tax accounts on your clients.
About John Stokdyk
AccountingWEB’s Head of Insight has been with the site since 1999 and likes to spend his time studying accountants’ technology habits. When not nerding out, you can find him exploring obscure indie music and searching for the perfect organic sourdough loaf from his base in Brighton, UK.