Making Tax Digital may be taking a slower road to online compliance, but data from this year’s Software and Practice Excellence Awards entries show that the initiative has already had a profound effect on the profession.
Olly Evans at 2017 Small Firm of the Year award winner Evans & Partners saw the writing on the wall in 2015 and has reshaped the entire practice away from low value compliance work to focus more on advisory services.
“MTD is a great catalyst for change in the profession,” Evans said. “The challenge for us is around data collection. If we say to clients that we need them to use cloud tools so we can have the data to advise them on – it’s all good.
“If we get to ‘real-time accounting’ they won’t have to worry about paper so much and they’ll get the relationship they want, where we’re there to help them day to day. It happened in Australia and New Zealand. There may be a lot of naysayers here, but we just need to get on with it.”
Numerous other entries reflected this stance, including AccountingWEB member Glenn Martin, who along with Olly Evans played a leading role in February’s review of new generation practice management tools.
They both agreed that the biggest challenge of MTD is going to be collecting the data for submission to HMRC. Client communications will be crucial and good practice management tools will be essential to manage those processes going forward, said Martin.
The MTD model touches on most of the functions that a good practice management system will cover: a clear overview of client characteristics and disposition; a way to steer appropriate messages to them at the right time, including triggers to get them to provide tax documentation, and mechanisms to streamline and track their work through the practice.
Practice management and customer relationship management systems have risen visibly within the Practice Excellence community since 2015, but our Software Excellence Award survey data confirms that MTD has already seen wholesale adoption of online software systems:
The cloud growth rate was close to 50% over the past year and has nearly doubled since 2015, with the result that more than four out of five AccountingWEB practitioners have accepted cloud tools into their working lives. They may not be support all - or even a majority - of their clients online, but the trend is unmistakable:
Source: Software Excellence and Practice Excellence Awards survey data 2006-17
Even the downward trend seen in the proportion of entrants offering virtual finance director services can be explained by the MTD effect. As the population of second wave cloud adopters exploded, The overall number of practices offering more sophisticated advisory cloud services has risen, but their percentage of the overall Practice Excellence entrants has fallen.
Expense capture apps
The adoption of cloud add-on apps has surged in parallel with wider cloud use over the past two years, but a look at the third line on our graph shows yet another parallel trend – the use of mobile expenses capture apps like Receipt Bank, AutoEntry, Expensify, Concur and datamolino.
AutoEntry CEO Brendan Woods confirmed that the timing of George Osborne’s conversion to the cause of digital tax just as AutoEntry was gearing up for a UK relaunch couldn’t have come at a better time for his company.
Ironically, the market is more uncertain for products specifically designed for MTD. Receipt Bank was first out of the traps in this category with 1Tap – but that only addresses data capture end of the MTD process. BTCSoftware, IRIS, Gbooks, Thomson Reuters and TaxCalc and other specialist developers devoted considerable time and money to extend MTD functionality and application programming interfaces (APIs) into their core products during 2017 – but then the government changed tack in July.
As Rebecca Cave explained in the Practice Excellence Live MTD webcast sponsored by Thomson Reuters, the draft Finance Bill 2017-19 clauses set out the requirements for income tax. No draft legislation, guidance or technical specs have yet been set out for the MTD version of VAT, which is now due to come into effect from April 2019 (original article corrected - see comment below. Ed).
That change of tack will send practitioners and software developers alike back to the drawing board VAT, but we can be assured that the shift to digital taxation systems will continue. How exactly the shift will play out in the profession’s software habits will be something we watch carefully in the next couple of years.
A full summary of the 2017 Software Excellence Awards results will be available for download shortly and the Practice Excellence Live MTD webcast is available to view again on demand.
About John Stokdyk
John Stokdyk is the global editor of AccountingWEB UK and AccountingWEB.com.