Automation will make 31 January obsolete

Calendar
istock_mizar_21984
Share this content

Human nature means many clients wait until the last possible minute before worrying about their tax return. Data released by HMRC shows 40% of tax returns are filed in January, with around 1.3 million (or 13% of the total) submitted in the final three days of the window.

While the human tendency to procrastinate will never change, can automation help accountants reduce or manage the January stampede? And can it ever reach the point where 31 January becomes just another day in the office?

There are many stages in the preparation of tax returns, and all involve human graft. Accountants send out initial requests for information, chase clients for responses, analyse and troubleshoot data, contact clients with questions or requests, manually enter the figures into the tax return, create various PDFs and send copies to the client. Finally, the accountant clicks a button and submits the tax return, and then sits watching the screen to see if it’s accepted or rejected.

But does it have to be this way? This article looks at how technology, automation and connected systems could, one day, do most of this work for you.

Here’s how the tax return process could work in the not-too-distant future.

Getting the tax data

  • On 6th April your smart tax software automatically sends personalised emails to your clients requesting data for their next tax return. A link in the email takes the client to their own area within a secure web portal, where they can add and manage their financial data.
  • The portal contains information from the previous year, such as bank account numbers, shareholdings and pension fund details. The client is asked to check and update this information.
  • Income and payments figures are imported from third-party systems such as banks, pension fund providers etc.
  • PAYE income and other data are imported from HMRC via its existing API system.
  • The client runs through a wizard process to check whether any other information, such as capital gains or foreign income, needs to be included.
  • Once complete, the client clicks a button to mark the data as final, at which point the accountant is instantly informed.

Accounts data

  • Clients who have self-employment businesses complete their bookkeeping records using either specialised software or an integrated bookkeeping module.
  • Once complete, the client clicks a button to mark the data as final and the accountant is informed.
  • After checking the data and making any necessary adjustments, the accountant clicks a button to create the accounts.

Creating the tax return

  • Reminders and nudges are sent automatically to remind clients to complete their data.
  • Once all figures are finalised, the smart tax software automatically creates a tax return and imports the various figures.
  • The self-employment accounts are imported (possibly from HMRC’s MTD system) into either a long or short supplementary page depending on criteria and preferences set by the accountant.
  • Income or dividends from connected businesses, such as partnerships or limited companies, are automatically imported once available.
  • The smart tax software checks the tax return to check whether the best tax outcome is achieved, calculating or optimising items such as foreign tax credit relief, partnership allocations and claims for capital allowances.
  • Once all imports and checks have taken place, the smart tax software updates the status of the tax return and notifies the accountant.

Approval and submission

  • The accountant checks the tax return for accuracy and completeness.
  • The accountant adds any HMRC data not available via API feeds, such as payments already made, and makes any manual adjustments to future payments on account etc.
  • A button is clicked to mark the return as complete.
  • The smart tax software copies the tax return, plus related documents such as a tax calculation and any accounts, to the client’s tax portal, and sends an email or text to say the documents are ready for inspection.
  • The client views the tax return and clicks a button to give formal approval.
  • The smart tax software notifies the accountant that the return has been approved and automatically submits it to HMRC.
  • The software displays the result of the submission to the accountant and sends notification to the client.

Technically, all the above is possible now. We can already access HMRC APIs providing PAYE and other income, and connectivity with third-party systems (such as banks etc) is likely to increase rapidly over the next two or three years.

What other developments are possible in the future? One area is artificial intelligence, with our smart tax software soon able to have a conversation direct with the client to chase them or ask for more information. I’m sure the AI bot will even make understanding noises as it’s told why the client’s data is so late, and how everything will be different next year.

About Matt Bailey

matt_bailey

Founder of Aegia Cloud Systems (Gbooks), the leading cloud-based tax and accounts system.

Replies

Please login or register to join the discussion.

23rd Nov 2017 16:38

Its all possible if you want to run a returns factory

most clients however dont want to sit clicking about with portals, wizards and all the rest of it, or they would already be just doing it direct with HMRC. Have you looked at HMRC's returns software lately? Its really improved from 10 years ago.

The skill of the accountant is still to take a pile of disorganised stuff, and by understanding the client, find all the holes and create an accurate tax return.

Tech is just a tool to help that happen.

Thanks (19)
avatar
24th Nov 2017 10:09

Dream on!

Thanks (2)
to david wilks
24th Nov 2017 10:19

david wilks wrote:

Dream on!

This, ten fold!

Thanks (2)
avatar
24th Nov 2017 10:09

Dealing with HMRC will always require checking because they are not credible or reliable and regularly make mistakes.

Example: HMRC advised what tax was deducted from an employment as client had lost P60. We included 0 tax on return as per HMRC advice. We submit return. HMRC then write to us saying tax was in fact £700 but the tax on another employment was zero even though this was processed a few days prior on RTI by ourselves so is definitely correct.

Two most basic errors indeed. HMRC cannot be trusted.

We had another case where HMRC included two PAYE's for prior year for the same company for same amount and tried to tax the client twice. This was resolved 2 years ago yet they amended as an earlier year underpaid tax in the 16/17 calculation.

HMRC is quite simply not fit for purpose and this will not change in my view. Therefore the only way to sort out the January stampede is communication with the clients and not to rely on HMRC in anyway, shape or form.

Thanks (2)
avatar
By tamasv
24th Nov 2017 10:30

It is not that simple and agree with everybody.

I think accountants need to learn how to improve their organisational skills and time management to avoid late submissions. HMRC is getting worse and worse every year. Shocking how many unqualified staff it employs.
No way we can rely on them in the future.

Plus clients pay us to avoid doing anything. And if they require to spend time clicking through wizards, they might as well do the return themselves. Nonsense!

Thanks (1)
24th Nov 2017 10:31

Agree that if it were that simple, taxpayers wouldn't be using us anyway! And if they enter their own data, how are we supposed to actually check whether it's correct? We'd still need documentation (for instance to check they have included the correct year!) Pie in the sky.

Thanks (2)
avatar
By codling
24th Nov 2017 10:39

It won't happen because you are dealing with people and people will always find an excuse to put something off for as long as possible.

Thanks (1)
avatar
By Ammie
24th Nov 2017 13:21

Another example of how out of touch Westminster is.

I believe that "31 January" will more likely become the norm, as has the ever lengthening list of deadlines we already have. The small business that refuses to pay attention to their compliance needs because "that's what the accountant is for" will always exist to fuel that. Consequently, I suspect that those same clients will find it increasingly more difficult to find a competent professional to act for them.

Accountants will need to
- improve the quality of their client base,
- tighten up on their practice policies and
- review up the wording of their engagement letters,

because this accountant won't be bringing in each New Year meeting MTD, whilst the client pops the champagne.

When MTD dawns on the dismissive client the stunned silence will be deafening.

Thanks (2)
avatar
24th Nov 2017 16:31

I see that its mostly accountants dissing this analysis. The one thing you forgot is that AI will mean that all this can be done with a computer hence no need for accountants.
Better retrain boys!!

Thanks (0)
avatar
to richards1
24th Nov 2017 11:09

That is because accountants DO know their clients and HMRC do not

Thanks (5)
By CazzyT
to richards1
24th Nov 2017 12:16

and girls??

Thanks (4)
to richards1
24th Nov 2017 12:59

richards1 wrote:

I see that its mostly accountants dissing this analysis. The one thing you forgot is that AI will mean that all this can be done with a computer hence no need for accountants.
Better retrain boys!!

Because AI is magic that can turn whatever clients throw at it into perfect accounts.

Accountants are dissing this because they know what some clients produce. AI is nowhere near good enough to deal with that yet. A lot of what is being touted as "AI" in this context is actually relying on predictable inputs to appear intelligent. (i.e. it only appears smart as long as you stick to the relatively narrow range programmed into it).

The singularity is not yet upon us.

Thanks (6)
avatar
to richards1
24th Nov 2017 13:30

Might I respectfully suggest that this is because accountants actually have some knowledge and experience of extracting useable and accurate data from chaotic dross.
I presume that you understand the acronym GIGO.

Thanks (2)
avatar
to leon0001
24th Nov 2017 13:45

I always thought it was CICO.

Thanks (0)
to johnjenkins
27th Nov 2017 09:54

No, it's SISO.

Thanks (0)
avatar
24th Nov 2017 11:01

I repeat - dream on!

Thanks (1)
avatar
24th Nov 2017 11:05

I believe in the tooth fairy as well.

Thanks (2)
24th Nov 2017 11:26

Oh I wish. I assume Matt you've never met a typical (ie not IT savy) self employed person. Someone who is so busy they have neither time nor inclination to do this and have to juggle between urgent demands and desperately urgent demands so non-urgent demands such as accounting has to take a back seat. Some self employed who do try get in such a muddle and end up claiming VAT on drawings, insurance, even their VAT payment to HMRC! Their time is better spent doing their job and running their business and letting us put their records together. I personally embrace IT and would be delighted if all my clients could handle it, but I've tried with several who were willing but ultimately we failed even after giving the client hours and hours of support over the year.

Thanks (3)
avatar
to kevinringer
24th Nov 2017 11:40

Absolutely.
HMRC are bombarding the taxpayer with emails, webinars, instructions and all other manner of nudges with a view to putting the onus firmly on the self-employed to get their tax affairs right. Heaven forbid they get it wrong and HMRC will just say "Well, didn't you join in our webinars? Didn't you read our emails to you offering help?" Then they slap on the penalties.
No self-employed person in the land has either the time or inclination to do anything other than to try to earn a living.
Get real AI proponents and do stop encouraging HMRC to go oh so digital.

Thanks (3)
to kevinringer
24th Nov 2017 12:25

Hi Kevin, without meaning to sound defensive I've met plenty of non-tech savvy clients. I've gone through their carrier bags of receipts, including the random extras ranging from the interesting (e.g. poems written by the client) to the not-so-interesting (e.g. mouldy food that fell into the carrier bag six months earlier).

I don't think automation and smarter software is all about cutting down the time accountants spend helping clients. If I were running a busy B&B (as an example) it would help me if bookkeeping software could pull transactions out of my bank account, work out what they were (based on previous transactions for my own or similar businesses) and bring order to the chaos without any intervention on my part. I would just get an occasional email saying please provide more information on this transaction as we can't find a match for it.

Likewise, instead of going through my tax paperwork to find items such as interest certificates and P60s, it would help me if the software already knew this data from other sources (i.e. banks , HMRC etc). I could log in and click a button to say it all looks good to me.

So it will help a busy (and non-tech savvy) B&B owner and leave them more time to run their business.

Thanks (0)
to MattBailey
26th Nov 2017 06:43

Hi Matt, you've clearly dealt with real-world clients. What success have you had getting non-tech-savvy clients to use software? How much support do you need to give them? I know with the clients I have tried that I've ended up having to provide more time supporting them than it takes me to do the accounts myself and then they expect a fee reduction because they've spent so much time themselves. I fear that our role will change from accounts production to IT support (because they'll also want to know what computer or phone to buy and will want support on anything to do with that device such as how to email their holiday photos). We still won't have any time left for business support and development.
We do have clients using software designed for MTD such as SageOne and it is no more intelligent than the old desktop software eg we have one client who reclaimed VAT on their VAT payment to HMRC because Sage defaults to VAT code T1 on all payments: insurance, drawings etc. MTD is going to be a nightmare until the software is clever enough to not make such fundamental errors. Clients don't understand the significance of T1 (they're not accountants - that's why they employ us) and they've been told this wonderful software will do it all for them and save them a fortune in tax and accountancy fees. Clients do the work and look it is true, they've got loads more input tax (because of T1 on drawings etc). We come along and reverse all those T1s and suddenly clients have to pay more tax and pay us for the privilege. So ditch the accountant and pay less tax. Somehow HMRC seems to think this is better than the status quo.
Currently we correct all these errors and make sure clients only claim what is legitimate. Clients don't see the working papers so don't know what we've posted to private but the MTD software will give them constant reports about their tax so clients will see as soon as we adjust something. We're then going to have to spend extra time justifying to clients why we've done what we've done and having to defend ourselves against the "you work for HMRC" argument. The "easy" cases will be those clients who give us the records and we do the whole job. But I know from trials I have conducted that the time required to input transactions in to MTD-type software is vastly more than into our current spreadsheets so their bills will go up too. Yes I know we are supposed to be able to use spreadsheets linked to MTD software but how will that link work? The link won't be intelligent enough to recongise transactions so we're going to have to spend time telling the link what is what. Currently we don't have to record everything on spreadsheets even: if the client has given us a paper list we can use the total, or maybe I'll just input a pile of stuff into a calculator and use the total, but under MTD I'm required to record each individual transaction. What is the point of spending all this time when the software will default to T1 and reclaim non-existent VAT?

Thanks (2)
to kevinringer
27th Nov 2017 10:06

Hi Kevin, I don't believe we'll see a situation where all clients are using high-tech, automated systems in two or three years time. But we'll probably see firms offering cheaper tech-based services, and clients will have the choice of continuing to use their existing accountants or moving to one of the "tax return factory" type providers.

In terms of seeing a fully automated service, where AI is used to handle some or all communications with the client, that's probably five or ten years away. And many clients will still want a human on the other end of the phone even when (or if) those services become available.

But I also think automation can help the traditional accountant to become more efficient, handle more clients and increase fee income. In the article above the accountant is still involved in the process, and is doing the more interesting, higher value-added parts while technology handles the more mundane admin or data entry stages of the process.

I also believe non-tech savvy clients can be persuaded to use new technology as long as it's very easy to use.

Thanks (1)
avatar
By DMBAcc
24th Nov 2017 11:51

Anyone out there interested in helping micro businesses who are one step away from unemployment? Try finding a decent job in Cornwall. There are so few which is why there are so many micro businesses. The last thing they need is a ton of bureacracy. Is that what HMRC want, to have everyone on the new single benefit so we can all be easily controlled? Sheer madness

Thanks (2)
avatar
By DMBAcc
24th Nov 2017 11:42

Where do these dreamers come from and who allows them to spout their fantasies? The title looks so good doesn't it? Great, I will get a decent Christmas holiday. BUT there is always a catch. Yep I get NO LIFE. All I will be doing is chasing clients who wouldn't know a debit or credit entry in a software system if it jumped up and bit them. And I only have 60 clients. Instead of 10 months to submit their annual returns I get 22 working days each quarter to submit their quarterly returns. Well Matt you may think that's progress but from where I am sitting that is a recipe for increasing the black economy ten fold!! If you really do want to spout this stuff then come and work with my clients for the next couple of months and explain to them just how things are going to be so marvelous for them. Oh yes and by the way don't bother turning up on their doorstep from April to October when they are working flat out running their B&Bs etc. They don't have time to breathe leave alone trying to do any form of accounting. They watch their cashflow and chuck all their invoices into monthly files so we can sort the lot in November with a nice drop of Single Malt - JOB DONE and no huge fees to the software friends of the HMRC. I do wonder how much underhand dealings have been going on in secret. We'll find out when those in London resign and suddenly appear as directors on company boards. That I am watching with GREAT interest. The whole of MTD stinks from top to bottom and NO ONE, NO, NOT ANYONE is interested in small businesses who will be hit hardest. MTD will affect the economy far greater than Brexit, though I suspect someone will try to blame Brexit for the failings of poor MTD implementation. BTW has there been any further information issued as to what my one VAT registered sole trader has to do from April next year. He has been sent nothing and as his agent I likewise have received nothing - just 4 months to go - you couldn't make this stuff up could you.

Thanks (7)
avatar
24th Nov 2017 11:44

Best laugh I have had in ages.

Clients don't want to do that stuff, which is why they employ us in the first place.

Thanks (9)
avatar
By DMBAcc
24th Nov 2017 11:57

The one thing that cracks me up on the HMRC webinars is the way tax payers are called "customers"!!!! Customers have a choice as to where they purchase their goods and services, tax payers don't. Indeed what service exactly to HMRC provide? MTD is all about the tax payer finding the correct commercial software to speak to HMRC. If it doesn't work it is the tax payer's problem. HMRC will provide no service to make it work. All HMRC are waiting to do is to issue penalties to increase the Treasury coffers because they are too lazy to chase the multinationals for all the billions of lost tax. That smacks too much like work.
Much easier to screw the small businesses. Customers indeed !!!!!

Thanks (8)
avatar
24th Nov 2017 12:11

Look! A flying pig.

Thanks (9)
24th Nov 2017 12:29

Sound money will stop boom and bust cycles and unfettered free trade will eradicate world poverty, nuclear power will provide endless free energy and wars will stop because politicians will finally grow up.

And then I'm gonna flap my arms and fly to the moon.

To sleep - perchance to dream...

Thanks (3)
avatar
24th Nov 2017 12:36

In my tiny mind there is no difference in submitting 6/4, 30/9 or 31/1. There is a window to submit between 6/4 to 31/1. It's up to the relationship between the Accountant and client to decide when to submit.
As for the article, Matt, you've missed an l out of (Gbooks).

Thanks (1)
to johnjenkins
24th Nov 2017 13:24

Ouch

Really?

Thanks (0)
avatar
to rsergeant
24th Nov 2017 13:39

Yes, between the oos.

Thanks (0)
avatar
By Ammie
24th Nov 2017 13:35

The IT boys are loving it.

When the market is flooded with products most cannot compete against their short term honeymoon will be over.

They all have "leading" "cutting edge" software, until the next product hits the market, which is just that little bit better and cheaper.

I expect that after the dust has settled quite a few "leading products" will be shelved, giving them plenty of time to keep their minimal records in order. I don't suppose then software will matter, it will be quicker to use paper and pen!

Thanks (2)
avatar
24th Nov 2017 15:01

Hi Matt,

What AI and all this automation ignore is the Human condition. I'm old enough to remember a plethora of programmes in the late 70's and 80's discussing how we were going to cope with all this free time we would have because of automation ( really no kidding). Since then computer power has increased by a factor of 18,000, yet here we all are bemoaning the absence of growth in productivity over the last 10 years.

What simply happens is we change the way we work and in many cases, this makes us less productive than more. You only have to see the under 35's preoccupation with social media and how that disrupts work patterns or those unintended consequences of automation. Emails being a classic example of how its disruptive influence make people less productive despite its prime intention of making people more productive. Or indeed this website which has encouraged at least 30 people to stop what they're doing ( productive work) to respond to your post, (unproductive work), something not possible 15 years ago because the technology wasn't up to it.

So I'm sure AI will bring in many benefits, but lets remember we are talking about changes in peoples attitudes and that is a very slow and difficult process.

Thanks (4)
avatar
to laurenceexigent
24th Nov 2017 16:23

I think it's a well known fact that not much work gets done (in offices) on a Friday, especially, PM.
Reading other peoples points of views is always productive. It either enhances yours or you learn something.

Thanks (0)
24th Nov 2017 22:46

More pie in the sky.

Thanks (0)
avatar
25th Nov 2017 08:50

Coming late to this one but my first thought upon getting to the end of the article was...

"And they all lived happily ever after.

The End."

Ah, bless, a fairy tale for the end of the working week.

In reality, the future may well look something like that but, as with other e-zealots, the article's author conveniently omits the mess which will arise in trying to get there, especially trying to get there too quickly as HMRC would undoubtedly want everyone to do.

Maybe the teenagers of today will be happy with that approach. I don't know but I do know that my two early 20-somethings won't be and I'm pretty certain that, out of every 100 people who are currently self employed in the age range say 25 to 75, maybe only 5, probably less, would be interested in going this way. That is therefore a long time to wait if we are going to do this properly and fairly and allow people to grow into the new tech rather than have it forced upon them.

Thanks (2)
avatar
25th Nov 2017 21:05

I wish I could post images on here. I'd use the clip from The Simpsons where Homer is dancing through a world made of candy

Thanks (3)
avatar
27th Nov 2017 09:37

As I recall when I started up as a junior (and as Ian has suggested)...when SA commenced there were all sorts of software to enable individuals to enter their info....even the Revenue provided this...suggestion was (I think from the 2020 group) that compliance would essentially be gone by 2010....

Its not about denial....but the reality is that a significant number of businesses and individuals want someone else to do this stuff.

Perhaps when Gbooks, Xero and alike start providing specific accounting/tax support when using their products we should get a little more worried...but then I guess they will end up having to subbie this work out to ...erm us...to provide that advice at the end of the phone...? who knows...

Thanks (0)
to justsotax
27th Nov 2017 09:57

Sure computers and software can help. But not without some sort of oversight.

Computers can't even read joined-up writing at the moment.

Thanks (0)
avatar
27th Nov 2017 09:55

You know what? Throughout all of this discussion on MTD and how AI is the way to go, apart from standing for Artificial Intelligence the more it is being pushed on us by the techies I have come to the conclusion that the letters stand for Algothrythically Inept. In my view nothing can replace the human mind. Not a dinosaur, just realistic.

Thanks (1)
to david wilks
27th Nov 2017 10:06

We are centuries away from a real, thinking machine.

Re-training is something no-one on here needs to worry about.

Thanks (0)
avatar
27th Nov 2017 11:30

Ah yes, AI, it's working so well already isn't it?

Take automatic bank feeds. Yes, they can pick up and identify Amazon payments, but what if the client is buying different stuff from Amazon which needs to go to different account headings? It's useless as we still have to go through and identify/correct all the exceptions to repost them properly to the right place. As more and more suppliers broaden the range of goods/services they sell, this problem will just get worse.

Take automatic reading/entry of receipts via OCR. The system can't identify duplications, i.e. where the idiot client has scanned/posted both the petrol VAT receipt or the restaurant bill, and the credit card slip for the same thing. Or where there's an invoice for a Travelodge room for the payment in advance, and then another invoice provided upon checkout - again, duplications. Or how about when the system can't read hand-written receipts/invoices?

Some credit card companies make a big song and dance about how they provide an "analysis" of spending on each months' statement, which they market as time saving re book-keeping and improved reporting. Utter drivel, they're useless as some of the suppliers are "allocated" to strange account headings, often one as useless as "other", and the same issue as above applies were a firm sells lots of different types of things.

Some of these new "tech" ideas are actually causing more work rather than less!

Thanks (4)
to Ken Howard
27th Nov 2017 11:34

The great danger is that people will believe the software companies' "Emperor's New Clothes" sales pitches.

HMRC have already been suckered.

Thanks (4)
avatar
to Ken Howard
27th Nov 2017 17:08

"Hmm, I am not sure if I have already scanned these. Better scan them again to make sure."

Thanks (2)
avatar
to Ken Howard
27th Nov 2017 17:08

"Hmm, I am not sure if I have already scanned these. Better scan them again to make sure."

Thanks (0)
to leon0001
27th Nov 2017 17:18

"Hmm, I'm not sure I posted that. Better post again to make sure."

Thanks (5)
avatar
to lionofludesch
28th Nov 2017 09:33

Instead of AI we seem to have AI (Alzheimers Intelligence).

Thanks (0)
avatar
to Ken Howard
28th Nov 2017 15:15

Aha! Could automatic bank feeds be the explanation for the country's sluggish productivity growth since 2010? Are the self employed taking an age to do their own accounting using cloud accounting software rather than passing on the work to their book-keeper/accountant.

Thanks (1)
avatar
By TGG
01st Dec 2017 18:08

I have at least 30 clients who don’t have an email address. Fell at the first hurdle. My clients want to come in and see us, they also want us to do the work, hence the use of an accountant. I don’t paint my own house and then get the painter and decorator to come round and see if it is ok??!!!

Thanks (1)
to TGG
01st Dec 2017 18:12

TGG wrote:
I don’t paint my own house and then get the painter and decorator to come round and see if it is ok??!!!

Of course not. You take a photo and then upload it to his website, using the free smart phone app.

Thanks (0)