Paperless practice: Automating the tax workloadby
If you’re buried under paper documents and tax returns at this time of year, there is another way, writes John Stokdyk.
Document management specialists often wonder why it has taken so long for paperless techniques to migrate into the tax departments of accountancy firms. So much of the tax workload is predictable - particularly during the busy Self Assessment season in January - and relies on certain recurring types of document that the activity should be a natural for automation.
From evidence gathered in AccountingWEB’s Document management discussion group, the realisation is finally beginning to sink in. Paperless tax processing is no longer the preserve of just the big firms - even sole practitioners are now enjoying the benefits of working on tax documents and returns electronically wherever possible.
At first glance, the “brown paper job” is a challenge for scanning and sorting and documents typically come in dribs and drabs - P60s in April, P11D in the summer, plus bank and dividend statements, pension contribution records and all the other information that arrives at random intervals.
AccountingWEB member Kevin Salter, author of a guide to paperless practices, points out that often tax teams will dump the documents and data they receive into a client file and forget about it - anyone else wanting to access and use the file will waste a lot of time trying to work out what they’ve got and what to do with it.
The documents may be diverse, but the information they contain is surprisingly consistent, and using modern scanning and optical character recognition (OCR) technology is more efficient than relying on humans to carry out the data entry.
Scanned source documents can easily be collated into an electronic version of the concertina files used by many tax departments for organising client record. Once everything has been scanned and organised, the software can let you generate a single electronic PDF 'pack' for archiving. Turning the clients’ tax data into digital information at an earlier stage makes it easier to pull it into the electronic workflow that already exists around tax work.
Paperless tax processing at work
When information relating to clients’ Self Assessment returns arrives at Salter’s firm Glover Stansbury, it is immediately scanned and forwarded to the manager for action, with a link copied to the partner, so that only one version of the document is retained. According to Salter, this avoids the situation where letters end up sitting unopened in partners’ in-trays for several weeks.
Even though the paperwork is digital, the actual tax return process is the same as it always was at the firm, with piecemeal documents scanned as they come in through the year and used to compile tax returns on screen (Salter is a big fan of dual screens).
Once a return is ready to go out for approval, it’s published in the firm’s online portal for the client to view, and simultaneously stored in the in-house document management system. If any changes are required, the form is altered and refilled in both places. The portal application includes an approval tag, so when the client views the online PDF, they can click a button that indicates someone at their internet address approved the document at a specified time and date - fulfilling HMRC’s requirements for electronic authorisation.
“Portals save time, cost, hassle,” says Salter. “It’s a part of our quicker and more efficient tax processing. The biggest advantage is the reduced output. Returns can run to 40 or 50 pages sometimes. With a portal, there are no photocopies any more - just electronic copies.”
While appreciating the advantages of the fully automated approach, Alan Rolfe uses what he calls a “halfway house” approach to tax processing. Small documents to and from the client are scanned immediately, but the larger packages tax return information remains in paper form until the return is submitted, when the whole lot is scanned in as a single multi-page item.
This allows his team work make notes on the original documents (for example to record a shared interest calculation on a photocopied interest certificate.
“It is easier to work with pieces of paper, even though we all have dual screens. Until we find a suitable PDF tool to allow viewing, editing, reordering, etc. in a quick, easy and efficient way we will stick with paper at the processing and reviewing stages,” he says.
Rolfe is more comfortable with a situation where the reviewing manager can physically tick documents to confirm that they have been seen and checked.
While Glover Stansbury is happy to accept the approval record stored in its online portal, some AccountingWEB members have voiced concerns about electronic authorisations. Document management discussion group Charles Verrier responds: “You don't need the signed pages - an email is fine. While there are ways of faking them, the practical reality is that emails are accepted by (Civil) courts every day of the week.
The IR Mark issued by HMRC is based on an algorithm calculated from the data contained in the version of the return that clients approve, he explains. “As the mark changes when any of the return's content changes, you can use this to show that your filing was identical to the copy that the client saw and approved.” Using the the IR Mark number as the identifying reference is good practice, particularly if several versions have gone to and fro.
More paperless office resources on AccountingWEB.co.uk
- Paperless tax processing discussion
- Paperless coverage and Any Answers threads
- IT Zone library: Paperless office
For a more detailed examination of these issues, download Charles Verrier's whitepaper for CCH, 'Realising the next wave of benefits'.
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