Tag: Making Tax Digital

Posted on by Vipul Sheth

Chatter about Making Tax Digital is picking up, but this is a situation where allowing compliance to drive change might put you behind the curve, rather than in front, notes Kevin Reed.

The trundling (some may say stumbling) juggernaut that is Making Tax Digital saw some new information come to light in the last few days… but whether the pace (or) direction of its delivery has changed is very questionable.

First-off, the most-publicised titbits came via a new policy document from HMRC. The tax authority set out some more detail about MTD’s introduction for sole traders and landlords in the income bracket of £30k to £50k (from April 2027).

While more of a summary of recent thinking and announcements, what did catch the eye was the whooping £561m transitional cost of moving to MTD for this tranche of micro businesses; with an ongoing annual cost of £196m a year. And between 2027 and 2029, the increased tax take from digitising these businesses’ records will equate to around £1.3bn.

Talking tax

Just a few days’ earlier Intuit held a very interesting webinar with HMRC director general of customer strategy & tax design Jonathan Athow, which hasn’t received the same level of interest. The webinar (or ‘fireside chat’ as it was badged) aimed to discuss HMRC’s modernisation plans; MTD; and ‘putting the customer at the heart of HMC’s agenda’.

Did Athow throw any metaphorical grenades out there? Within a well-managed webinar (‘fireside chat’) that was unlikely. But it was interesting to hear him say the quicker information is received then the more accurate it’s likely to be… that may seem counterintuitive but makes more sense within the context of digital transactions flowing in real-time into accounting/tax records. And digital transactions are more likely to have a level of automation (and less chance of humans getting things wrong).

Athow then said that this change would lead to “more timely payments”. This was a bit of an eyebrow raiser as it could be taken as ‘payments closer to the time of transaction’. That doesn’t have to mean quarterly – though we all suspect that’s a goal for the medium-term. In fairness, paying tax in January that occurred months and months before is a strange one (I whispered that in my head as I wrote it).

Digital communication

Further digitisation is to follow, Athow added. Again, a bit of a no-brainer but you do wonder how this would work in an increasingly complex tax environment. Perhaps AI will be the layer of computational excellence that helps taxpayers get to the answers they want? Of course, this may put tax advisers’ role at risk, which made me think mischievously about an arms race between HMRC’s AI and that of the accountants themselves.

Perhaps, even more surreally, we can have tax disputes communicated between the adviser and tax authority with their respective AIs chuntering to each other? Who knows, they might even fall in love – though one suspects the adviser’s AI will get frustrated at HMRC’s tardiness at replying to (digital) letters.

While Athow (thankfully) didn’t explicitly go down the direction of AI, he did say that MTD was “exciting” because of the potential to use third-party data to help pre-populate tax forms – however, that will need to be managed very carefully. An alternative would be to use that data to help ‘nudge’ someone filling in a form to double-check the answer they’ve given i.e. ‘are you certain that’s right?’

Performance anxiety

Athow also addressed the elephant in the room: HMRC service standards are not being met. While “hotspots” such as VAT registration have been targeted, it’s all in the context of growing tax complexity, and a resource-constrained department.

Digitisation, particularly where it can support people to self-serve, will help – but that requires investment and Athow notes that decades-old legislation can “constrain” modernisation.

He also notes that the stars must align somewhat for this to all work, namely: HMRC; the taxpayers; the software industry; and the accountancy/tax profession. “It’s a challenging delivery but we’re doubling down on efforts to get to April 2026 (for qualifying income over £50,000).”

The upshot

One can’t help thinking we’ve been here before (we have). Admitting that the latest MTD deadlines are “a challenge” and that “we want to work with all partners on this to make sure we’re aligned” doesn’t build a system that can handle millions of quarterly submissions. It hasn’t built one before.

However, the direction of travel is set. It is an inevitability that, at some point down the line, we will end up with a PAYE-style self-assessment system – or even real-time tax. It’s a question of when, not if. MTD is step down that path… albeit a tentative step we’ve been waiting for a while.

Yet the ‘when’ is not to be underplayed. In these circumstances, it could make a huge difference in terms of software companies’ focus, or even the efforts that a practitioner makes in pushing their clients down the route of digitisation.

It is, after all, a sad inevitability that regulation and compliance drive technological and operational change in business, rather than those changes initially made to produce meaningful insight to increase profits, or be more efficient.

Market forces

The irony is that, despite the excruciating wait for MTD, many practices have grasped the nettle and pushed their clients down various technological and digital pathways. The ease with which new practices can set up using a basic app stack has seen many formed in recent years, alongside a plethora of mergers and consolidations in the accountancy market that has seen a steady flow of accountants and tax advisers then leave to control their own destiny.

The likes of AdvanceTrack have supported new and existing practices to improve processes and support resource, particularly as the pandemic drove home to accountants’ clients their need for help beyond compliance.

Perhaps then, after all, it will be the market that drives the digital, automated and intelligent back-office, rather than the government’s desire to close the tax gap. Much better this way around than explaining to clients that their tech costs are to increase and, perhaps, their tax bill too.

Kevin Reed is a freelance journalist and editor of Financial Accountant magazine.

Posted on by Vipul Sheth

While MTD has taken the headlines, a different set of rules could see your clients (and even some practices) hit by an extra-large tax bill.

 

While there’s been much focus on the reporting impact upon the smallest businesses from Making Tax Digital (MTD), there are other impending rule changes that require focus.

Basis Period Reform seeks to ‘remove complication’ by aligning sole trader and LLP tax filings with that of the tax year itself. Taxable profits will need to be reported from April 2024 for the period up to 5 April – even if they have a different accounting year-end.

But, while there has been the threat of MTD being a step towards HMRC collecting tax earlier, the Basis Period Reform could be a cash nightmare for some small businesses. With 2023/24 being a transition year, businesses with a year-end that fails to match the tax year-end will have to ‘catch up’. In other words, those with an end-of-April year-end could be taxed on 23 months of profit.

The communication game

This impending change isn’t ‘a new thing’, but there’s no doubt it’s crept along (and with little debate or publicity) since announced in 2021.

Certainly. Many practitioners have been looking to change accounting periods for some affected already and help them manage their new tax bills. Others will be aware of ‘overlap relief’ and the ability to spread the extra tax due over five tax years – but still, it’s a potentially big negative impact on cash positions.

But I do wonder if practices have done enough to warn their clients – and that practitioners operating within LLPs themselves are aware of the potential difficulties that these accelerated tax payments (and/or shifting their accounting period) may have on any partner payouts. Or… what if the reliefs and mitigations happen during a period that partners are retiring?

A heady mix

Without delving further into the technicalities, it’s a heady mix of potentially revised reporting, alongside ‘fiddly’ tax advice and cash management. And then there’s the fact that it may impact many practices directly.

The reality is, there has already been work for accountants to undertake; and, by definition, for us at AdvanceTrack – with more in the pipeline. But can practices price in, or even keep track of, this ‘extra’ work? And if so, are you prepared to do so?

Vipul Sheth is founder and MD of AdvanceTrack

If you’d like to talk to us about helping you manage your workload, then please get in touch by clicking here

Posted on by Vipul Sheth

If you turn on the news then you can’t help but be presented with small business owners who are incredibly concerned about their future. New research from Iwoca shows that a quarter of SMEs expect turnover to shrink in the next 12 months, while 43% of owners expect to be personally worse off by the end of the year.

The other big news is that of Making Tax Digital project being kicked into the long grass, and likely to impact fewer sole traders, for its tentative 2026 introduction. Some accountants (and perhaps SME owners) have breathed a sigh of relief – particularly those for whom MTD was a distraction to the ‘business of doing business’ during these tough times.

There’s certainly a question to answer as to whom would receive the most benefits – if any – from MTD. I covered that very question in a blog a few months ago.

But the one thing that its enforcement did was make accountants stop and think: how do we systemise and digitise how we work with clients? And can we get to understand better how our clients work in order to drive that systemisation and perhaps even automation?

While tax matters can vary from client to client – and require a personal touch – there’s no doubting that the vast majority of the process is relatively straightforward and ripe for automation. More importantly, creating a flow of critical financial information between the client and accountant opens up the door for true accountants to grasp what many of their clients want: a good understanding of their financial position and some advice to help them grow (or perhaps survive, in this current climate).

Does MTD delay really ‘help’ accountants and clients?

Does stopping digitisation plans really help the accountants’ clientele? When a quarter of them expect revenues to fall?

There’s no reason to not help clients understand and use readily available apps to collect and send information through to you. they can use their mobile phone to undertake most basic back-office tasks: namely invoicing and capturing expenses.

We know that ‘lumpy’ filing of tax return information pushes many accountants to the limit in January – as I write, some of you will be under pressure. That will increase several times over when quarterly filing of some description becomes mandated.

As a profession we need to do one thing: be proactive and truly support clients to run their business. The most successful members in our profession make that effort.

It’s about having a firm that’s fit for the future. If you’re not able to give an answer to clients about how you’ll help them they will say that they’ve met someone who can – or go to someone that does the basics cheaper. And ultimately you erode the value of your practice.

Being able to provide value to clients inevitability adds value to your practice. It would be sad is small businesses and their practices are left to run into the ground. On the flipside, there are great opportunities for those willing to invest and transform.

Vipul Sheth is founder and MD of AdvanceTrack Outsourcing.

Posted on by Vipul Sheth

You may have heard of the term ‘KYC’, which means ‘know your client’. But what about ‘KYP’? And how does that relate to Making Tax Digital ITSA? OK, enough of the cryptic acronyms.

We know that Making Tax Digital for Income Tax Self-Assessment (that’s the MTD ITSA bit) comes into force for the tax year beginning in April 2024. Basically, sole traders and landlords will have to start making multiple filings to HMRC, replacing the singular filing that takes place at the moment.

There is an ever-increasing focus on accountancy and small business software vendors to have ‘solutions’ in place to help accountants and their clients cope with the change.

But, as is always the case, while technology is a vital tool in helping the business world operate there are many steps to be taken on the road to running smoothly and efficiently. And this is where the other acronyms come into play.

KYC is more of a regulatory reference than a business strategy. The terms came into play for financial services organisations – do they really know who they’re working with? Whose funds they are transferring? It broadly covers anti-money laundering policies.

Some accounting practices will be managing such client verification. But… the term ‘KYC’ could easily apply more fundamentally to knowing who your customer is, how they work with you, and how they operate in the normal course of running their business.

And then there’s ‘KYP’… which could well mean ‘know your practice’. Do you understand how your practice operates? For example, do you have unique processes for each client, or just a few? And how efficient are those processes… can they be compared? Have you checked that they’re the best way to work with those client subsets?

You may think to yourself: How does KYC and KYP relate to MTD ITSA? Without understanding how your practice works with its clients, or stress-testing the number of different ways you work with them (and how this can be streamlined or reduced). then you’re missing a fundamental number of steps prior to implementing the right tech to help you manage the huge tranche of extra filings that will follow MTD ITSA’s introduction.

Without knowing how your practice works, your clients work, or how you work together, it will be difficult to leverage technology to support you through this major tax filing change.

Vipul Sheth is MD and founder of AdvanceTrack Outsourcing. If you’d like to speak to Vipul and his team about improving your practice’s processes and workflow, contact him here.

Posted on by Vipul Sheth

A lot of our recent discussions have been about practices’ strategic approach to clients, staff and management. It seems a good time to put the key UK tech providers under the spotlight. What are they focusing on, and where do they see their relationship with accountants impacting on tech development in the future?

 

Wolters Kluwer/CCH

Wendy Rowe, commercial director TAA, Wolters Kluwer UK&I

Q: What is your latest/impending launch?

A: We were proud to launch CCH OneClick in April. CCH OneClick delivers complementary cloud tools to the CCH Central on-premise suite supporting accountants around GDPR, digital data collection, accounting efficiencies and new cloud tools to support new filing regulations being driven through HMRC’s Making Tax Digital (MTD) programme. One of these tools is VAT filing, supporting the mandatory VAT filing for businesses from April 2019.

 

Q:What developments can we expect from you in the next 12/24 months?

A: Our focus for the next 24 months will be around how we support practices becoming digital and in helping accounting practices to embrace and navigate the new digital world.

Areas of interest are:

  • Providing tools that help with digital data collection and aggregation of digital data– helping practices to reduce the volume of manual data entry but also collating useful data that can be leveraged across multiple activities. For example, how transactional bookkeeping data can be used to support quarterly reporting compliance needs but can also be leveraged to create a set of accounts and then for forecasting cashflow projections for business advice.
  • Delivering compliance more effectively– with HMRC bringing in new regulations around MTD, practices will need to review their current processes. It is highly likely that these will change to ensure compliance work remains efficient.
  • Advisory– Wolters Kluwer is exploring solutions and services that help accountants to be more proactive and responsive in their client interactions.

 

Q: How will conversations with practitioners develop over that period – what will you be discussing with them in 12/24 months’ time?

A: I see the following as key themes over the next two years:

  • Efficiency/automation– how technology can make compliance more efficient.
  • Advisory and data– the use of technology to help advisers to become more proactive.
  • Client collaboration– how the advisor changes their traditional collaboration approach in light of the millennial generation and a digital world (mobility and so on).
  • New technologies (eg. machine learning, BI and so on)– how these technologies can assist the practitioner of the future while simultaneously protecting the profession.

QuickBooks

Alex Davis, business development manager, Intuit QuickBooks

Q: What is your latest/impending launch?

A: Making Tax Digital is part of the UK tax authority’s plans to become one of the most digitally advanced tax administrations in the world, and a topic on everyone’s mind as we look to make the process as easy and straightforward as possible for our accountant customers.

QuickBooks Online is already MTD-ready, which means the product is fully compliant with the requirements set by HMRC. Companies will be able to submit VAT filings directly from our software through to the UK tax authority. We’ve already completed successful filings from a number of our accountancy customers through our beta programme.

 

Q: What developments can we expect from you in the next 12/24 months?

A: Our teams are focused on helping our customers earn more money, make better decisions and develop greater confidence about their finances. Bringing together siloed data is one important way we help save customers and their advisors time, and reduce the risk of manual errors. For example, we have direct bank feeds with three major retail banks in the UK, covering 60% of the UK market. Direct bank feeds automate much of the time-consuming data entry associated with bookkeeping. Tax prep is an area in which we continue to add value for accountants who spend an excessive amount of time gathering data for a single client on an annual or quarterly basis. A recent example is our release of the option to import bills and invoices to QuickBooks.

 

Q: How will conversations with practitioners develop over that period?

A:There is little doubt that over the coming months practitioners will be focused on first identifying which of their clients need to be migrated to MTD-compliant software. Then, they will put the plans in place to manage those migrations efficiently. This will involve the transfer of critical financial data, along with educating staff and clients on how to use the software efficiently. Once these building blocks are in place, we expect the conversation to move towards how these insights can be put to use.

IRIS

Nick Gregory, chief product & marketing officer, IRIS Accountancy Solutions

Q: What is your latest/impending launch?

A: IRIS continually develops products to help practices evolve beyond compliance services to deliver more lucrative advisory-based services. This includes Accountant Go, a practice-branded app that enables accountants to engage and communicate with their clients.

We’ve also launched IRIS Analytics, an analytics tool for large accountancy practices to obtain comprehensive insights into business performance. We are due to launch IRIS AI, a new AI tool that enables accountants to address skill shortages and deliver new risk and fraud assurance services.

We are also adding more GDPR enhancements across our product range, and launching IRIS GDPR Advisor, a new service designed to help accountancy practices maintain GDPR compliance.

 

Q: What developments can we expect from you in the next 12/24 months?

A: IRIS is 40 years old this year and our heritage allows us to see the industry in a unique way. IRIS continues to heavily invest in developing its product portfolio to help accountants’ grow their businesses and deliver new services, enabling them to thrive in the new digital economy.

The next strategic announcement will be at IRIS World in October with the launch of ‘Darwin’ which will help liberate desktop IRIS compliance suite data and offer new apps, all available via a cloud platform. We also want to make MTD (VAT and personal tax) as easy and as seamless as possible for customers so will continue to enhance new digital ways of reporting into the existing products and workflows.

 

Q: How will conversations with practitioners develop over that period – what will you be discussing with them in 12/24 months’ time?

A: Without a doubt, MTD – and especially MTD for VAT and personal tax – will continue to be at the forefront of discussions. Traditional assurance and core compliance services are evolving, so our job in the next few years is to ensure practitioners get it right, first time and succeed every time through integrated, efficient and automated processes and workflows.

As the industry transforms, discussions advance beyond compliance services to business advice.

Sage

Michael Office, VP Accountants, Sage

Q: What is your latest/impending launch?

A: We’ve just launched exciting new services for accountants and bookkeepers in practice:

  • Sage Accountant Cloud– the platform to run your practice – brings together all your client information, important dates, documents and interactions to help you keep on top of tasks and jobs. It also gives one-click access to client bookkeeping in Sage Business Cloud Accounting, and an automated workflow to Accounts Production and Compliance/Personal Tax.
  • Sage 50cloud Payroll Online Bureau– we’ve given the 6,000 practices running payroll on behalf of clients the very best benefits of the cloud: automation. With secure online employee details and hours entry, payslips, payroll documents and reports – all with an automated workflow to and from payroll.
  • Accountants and Bookkeepers Hub– this has brought together all the expert advice and support we offer (from help with MTD to growing your practices, from toolkits to webinars) into one place, dedicated for accountants and bookkeepers.

 

Q: What developments can we expect from you in the next 12/24 months?

A: Our mission is to make admin invisible by 2020 for accountants, bookkeepers and their clients. Our roadmap for the next 12 months across both Sage Business Cloud (featuring accounting, payroll and payments) and Sage Accountant Cloud (featuring client/practice management and compliance) is focused around automation, efficiency and AI/machine learning driven proactive capabilities. A great example of this is automatic bank reconciliation and bank rules launching this autumn across Sage Business Cloud Accounting and Sage 50cloud.

 

Q: How will conversations with practitioners develop over that period – what will you be discussing with them in 12/24 months’ time?

A: We talk to more than 1,000 accountants and bookkeepers (face to face) every month through our expert field team and at events. We know that MTD is something that is on the minds of accountants and that together we can unlock the potential that digitisation presents.

Taking 60 days out for tax year-end and Christmas, there are just 90 working days to go until the MTD deadline next April. The average practice has 112 clients, so already that’s more than one client per day that practices need to get ready for MTD now. Our focus is therefore helping, supporting, enabling and driving practices to be ready for MTD.

Xero

Damon Anderson, director, partner & product, Xero UK

Q: What is your latest/impending product launch?

A: Most recently, we launched the all-new Xero Expenses. This has been one of our oldest features in Xero but it was overdue some love, so we’ve worked closely with our accounting partners to reimagine it from the ground up. It now offers businesses a more efficient way to manage expense claims and is smarter, easier to use and designed to benefit both the small business and their employees.

 

Q: What developments can we expect from you in the next 12/24 months?

A: Artificial intelligence has a fundamental part to play in all our product developments over the next two years.

Further proof of our commitment to improving productivity for small businesses is through our recent acquisition of data capture solution Hubdoc, offering our customers another powerful solution for better workflow efficiency.

Machine learning is paving the way to high-integrity accounting. Our Find and Recode software has already saved small businesses and their advisers in excess of 307 hours of time in the first year alone, and the next two years could see the elimination of data entry and coding entirely – a really exciting prospect for business productivity.

 

Q: How will conversations with practitioners develop over that period – what will you be discussing with them in 12/24 months’ time?

A: Making Tax Digital is having a major impact on the accounting profession, and supporting accountants through this change is our priority. And a modernised VAT returns experience will mean a better understanding of business financials as well as enable improved levels of efficiency and productivity.

There are the pacesetter firms that will have no problems in the coming 12/24 months. But many others might be faced with the daunting prospect of getting their clients’ finances online in a short amount of time, and we will be helping them navigate these waters.

It doesn’t stop there. Once MTD has been fully implemented, we then want to support practitioners as they build new service offerings or fuel their growth. We don’t see the conversations dying down any time soon.

Posted on by Vipul Sheth

 

With technology-driven change accelerating, Kevin Reed looks past the acronyms to set out the state of play on key tech topics of interest at the moment – and what you need to know to keep up

Accountants know that getting a handle on the latest tech acronyms is just the start of the learning process. These strangely-titled pieces of legislation or ‘next new thing’ will impact on their clients – or how they serve them. We take a look at four of the key topics.

Making Tax Digital (MTD)

Many of you will be weary of the sight of the acronym ‘MTD’, but it’s worth keeping track of key dates and developments. VAT-registered businesses over the VAT threshold will file quarterly returns from April 2019, while it is likely that those with income over £85,000 will need to file under the regime from April 2020. Effectively, HM Revenue & Customs is looking to digitise the filing system and gain access to information on a more regular basis.

Understanding which clients fall into which ‘box’, as far as MTD is concerned, is a priority for accountants. Setting a plan for moving away from using HMRC’s systems and taking on a commercial solution is another crucial step, as the taxman phases out its own delivery platform. Educating clients to this change, and through the process, must also be carefully considered.

There is concern about whether HMRC’s £2.1bn transformation plan (to become a digital provider of public services, while reducing costs) is feasible, fears that have again been raised following the publication of a report by the Public Accounts Committee.

Brexit is likely to see a 15% increase in projects undertaken by the taxman – on top of 250 outlined as part of its transformation plan. HMRC is now ‘re-prioritising’ its workload and will reveal more by the end of 2017/18 as to the likely impact.

However, as the committee is putting pressure on HMRC to manage the so-called SME ‘tax gap’, it seems unlikely that MTD will disappear off the radar – but it does raise the risk that a shift in focus away from digital transformation onto other projects will adversely affect any technology-focused changes. And a cautionary note: HMRC told the committee that it expects to work with tax advisers to encourage their clients’ compliance.

Accounting app ‘ecosystems’

Perhaps the most intriguing technology development in recent times has been that of the ‘app’, and associated ‘app market’. Think Apple Store or Google Play Store, and the multitude of tools and games that has been borne or reincarnated through these platforms.

Now we have accounting technology providers enabling accessibility and integration in the cloud. Xero, Quickbooks and Sage have followed the ‘app’ approach in the small business space, and extended it out into practice management. Their online app stores offer a multitude of add-ons. For accountants in practice, this development opens up lots of opportunities – and issues to be resolved.

First, is it worth making the leap from your current technology platform? Some practitioners will work with ‘best-of-breed’ software and go through the painful process of extracting data from one tool to another. Others will used integrated suites of products – but some parts of the suite may not be the best tool for that particular practice. Again, this may require extra software purchases and fiddly data transfers.

Carl Reader, director at Bristol accountants d&t, says the ‘platform and apps’ approach is tempting in comparison to the alternatives. “Traditional integrated accounting platforms are quite clunky, particularly as there’s no such thing as the ‘stereotypical accounting practice’ anymore,” he explains.

It is worth noting that the new cloud-based platforms are also expanding their remit, and offering deeper functionality. However, unlike the traditional integrated platforms, you have more flexibility to opt out and instead use another bolt-on app if you prefer – without a painful manual integration. A major concern, in a world where the app market is expanding rapidly, is knowing which of the add-on apps are right for your practice. “The options seem to increase on a daily basis and it is almost impossible to keep on top of what is happening,” according to Blick Rothenberg partner Bobby Lane. The practice has worked with a consultant who helps constantly monitor the latest developments in the accounting and business app space. But, as previously mentioned, the platform providers are developing their service further, which Lane believes will remove much of the need for picking and choosing add-ons.

“There seemed to be an add-on developed for every area and businesses believed that they had to have everything,” he says. “The reality is that when you break down the actual requirements of the business, most of what they need can be carried out with the basic platforms. These will continue to develop and replace the need to add on.”

PSD2 (aka Open Banking)

This is the acronym that has probably had the least traction in the media.

It sounds like a droid from the new Star Wars movie – it actually stands for Second Payment Services Directive. While neither the acronym or the full title will mean that much to anyone, you may have heard reference to its alternative moniker: Open Banking.

Put simply, banks will have to make available, upon your request, direct feeds of account information to third parties. These third parties will provide a range of financial and corporate services based on you allowing them access to your data.

Clearly, some of these products and services won’t just be for the consumer – corporate and business-focused offerings will also become available. Tim Fouracre, founder of Clear Books, has launched Countingup. This app will enable small businesses to open a current account via their smartphone, while undertaking your accounting. It will be able to submit VAT returns, generate a P&L, create invoices and do the bookkeeping. He says it’s no surprise that the banks are “dragging their heels” on being ready for Open Banking (it’s believed five of the nine big banks missed the 13 January kick-off date).

“It’s no surprise HSBC et al are dragging their heels into Open Banking. It’s going to kill them,” he says. “We already know their point of contact with customers is on the decline as the branch network erodes away. But as the banks move to a predominantly online model, Open Banking is about to remove their point of contact with customers in the digital world too.”

Blick Rothenberg partner Bobby Lane urges patience – as far as practitioners are concerned. He believes the new regime “will not make a huge difference” to dealings with clients in the short term. He does predict new services to arise around the lending decision-making process for SMEs, which may influence how practices work with clients in finance-raising. Accountants serving clients in the fintech space must also be aware of the opportunities presented by Open Banking.

“At the current time, the role of the accountant will be more education-based, letting clients know what is happening and what this will mean for them,” says Lane.

GDPR

Like MTD, GDPR is an acronym that – by casting an eye over it – will automatically make you feel weary, anxious, or both.

We broached the thorny topic in our April 2017 issue of InsideOutsourcing – but it’s still well worthy of a reprise.

The UK’s Data Protection Act 1998 will be superseded by the EU-driven legislation. The new law intends to bring up to date provisions to deal with the explosion of personal and business data – along with how it is used, stored and deleted (or not). GDPR is enforceable from 25 May.

Personal data will require stronger consent from the individual for that information’s use and storage, the ‘right to be forgotten’. Some organisations will have to appoint a ‘data protection officer’ in certain circumstances. Encryption of personal data is expected to be undertaken. Accounting practices hold much sensitive personal and corporate data. The misuse, or lack of robust measures to protect that data will see much larger fines issued by the Information Commissioner’s Office than previously.

Posted on by Vipul Sheth

With accounting technology developing apace, it is only a matter of time before robots are employed to take care of the more process-led tasks. It’s vital rms protect themselves by evolving their service.

“We’ll need fewer people to do the mundane work,” PwC’s far-sighted head of regulatory affairs, Gilly Lord, told readers of ICAS’ CA magazine last month. This isn’t some huge downturn in the global audit market. Traditional number crunching is going out of fashion… well, at least with humans undertaking the work, anyway.

Lord was referring to the development of digitisation, automation and artificial intelligence to take on audit’s grunt work. These tools are interrogating the data; interpreting is still a job for humans.

But what does this mean for the vast of swathes of practices that sit below the rarefied atmosphere of the Big Four? Will this service revolution impact you?

The short answer is yes. And it’s already happening.

“If we talk about the practice of 2025, it doesn’t seem that far away. But if you look back the same distance to 2009, you can see how quickly the power of technology develops,” says Richard Anning, head of the ICAEW’s IT Faculty.

While the inevitable trimming back and delay of Making Tax Digital has bought practices some breathing space to consider how they will operate with clients in the new reporting regime, many have begun transitioning to a different way of working – one that digitises and automates ‘low maintenance’ clients or straightforward services.

“MTD will be up and running in 2025, and government will be more digital,” says Anning. “That means many more people using accounting software.”

There is nervousness in the market, concerns that the online software houses will replace the practices altogether. However, Anning believes digital government means “more clients will be looking for assistance, in terms of using the software and with tax advice”.

Firms that don’t see the change coming “could struggle” as automation provides opportunities for other practices, and some new ones, to take a more digital and process-led approach, Anning suggests.

“Lifestyle firms will just carry on, but MTD might be an opportunity to think about what they do,” he says.

There appears a consensus that automation of basic accounts and tax production will lead to commoditisation – although what that means for your practice will come down to your imagination, or optimism.

For example, Carl Reader, a director at Swindon-based practice d&t, believes that sooner than we think, the whole process of accounting will be automated – with communication undertaken by ‘chat-bots’. Intelligent systems will be able to gauge behavioural change in the affairs of a corporate or individual with real-time information. The upshot of the decisions the system makes will be relayed to the client.

“Machines can follow a present formula of how to answer questions. When it becomes scary is when that really kicks in… we will programme a chat-bot to answer questions, it will then pick up our language, and pick up trends before humans will,” suggests Reader.

“Self-driving cars will be the tipping point. Once a ‘robot’ can handle all those complex options, then that’s the point where every single job is open for review.”

Vipul’s view

“I agree that automation is going to play a big part in revolutionising the way practices and their people provides services and operate.

For our team members, I see them moving up the food chain in terms of the work they do – it will be higher level and earlier in their career than it is now. This will also be the case in our client rms.

There is a sea-change among the most progressive firms, of how their people work – whether internally-focused or facing clients. We see firms viewing businesses like AdvanceTrack® as strategic partners helping deliver compliance work.

I think there will be fewer local staff, but delivering more per head, and, as Paul Barnes says, providing a range of services.

Firms will no longer be historic-looking – they will play a part in clients’ financial and operational performance from start to finish with the aid of cloud technology.”

But by 2025? Paul Barnes, managing director of Manchester practice My Accountancy Place, isn’t seemingly concerned about self-driving cars, and thinks you should take note of the bigger practices – who are using cloud-based technology to access client data in real-time. More worryingly, for the high street accountant, he sees them scaling the systems to provide services to smaller clients.

“If you don’t step up now, clients will look at bigger firms,” he warns. “But it’s exciting as well. Clients are expecting you to influence their business. They’re challenging whether we’re helping them grow.”

Clients want to see that ‘dashboard’, he believes: “They want to know how to grow profit. Is it through increasing prices? Can we be more efficient? Can we reduce overhead?”

The more we’re made ‘redundant’ from process-led tasks, the more we can operate at the level accountants have been trained and educated, says Barnes. Clients will still need compliance in 2025, but you will need to provide more to keep them. “Become their core finance function, deliver an ‘FD service’,” he adds.

He concurs with Reader in that systems will be “intelligent and highly automated”, but he still sees a place for that human interaction – over the next eight years at least.

“As great as automation is, you need that relationship or person to provide client care,” says Barnes. “Even automated systems require attention – things like bookkeeping – and I’m sure it still will in eight years. Clients will always – and should always – value a professional to oversee and on strategy. If it’s all under one roof, that’s where you’ll win.

“The more automation, the more the client will get value from their spend on an accountant.”

For Phil Shohet, a long-serving adviser in the practice arena and a senior consultant with Foulger Underwood, there are implications for the number of practices and staffing levels due to automation and digital services.

“There will be fewer firms, and they will have fewer staff,” he says. A move in the market towards specialisation of either service or sector will be driven by clients who will – as Barnes says – expect a better and more valuable service. This will lead to consolidation in the accountancy marketplace.

Automation will also lead to a different staffing mix – where fewer people will be needed to head up the processing and account handling, while partners develop business and provide higher-value consultancy.

The danger with this is, as has been seen in corporate finance functions, that removing layers of teams makes it difficult to build skills and loyalty. “You might remove the breeding ground for succession,” Shohet warns.

Despite the concerns of robots using algorithms and computational skills to provide a better service than accountants, and the potential to damage succession planning, you are certainly needed now.

“Micro-businesses don’t need advice,” concludes Reader. “But for the 1.1 million businesses that have employees, the accountants’ role will become more valuable over the next ten years. But there will be a tipping point where the machines will be good enough on their own.”

Posted on by Vipul Sheth

AdvanceTrack client Wood and Disney is a two- director practice based in Colchester, Essex. The practice badges itself as ‘real-time accountants’, using cloud accounting technology to access client data in real-time – so it can provide proactive and timely advice. We spoke to operations director Brendon Howlett about how AdvanceTrack® has helped his practice develop.

Brendon, tell us about your practice

Peter Disney and I set the practice up in July 2013, and we head up a team of eight. We’ve been paperless for years – we love innovation – and won Most Innovative Practice (2-4 partner firm) in 2020’s Innovation Awards two years ago. We took the decision six months ago to focus solely on the cloud.

We use various cloud accounting packages, having taken the view that clients with paper bags of receipts, spreadsheets, hybrids are not the sort of clients we want. This is especially the case particularly when you consider Making Tax Digital, with four times a year reporting. Any client we take on, we say: “You have to be in the cloud.” We facilitate – all staff are Xero and QuickBooks certified advisers. There are training sessions for clients if needed, or we take on the bookkeeping as well, which is where AdvanceTrack® fits in.

When did you start using AdvanceTrack®, and why?

We’d seen [AdvanceTrack® founder] Vipul, had a good chat, then decided to use it as resource that will free up capacity. We commenced in June 2016. At the time, we couldn’t afford to give the client a competitive service to do the bookkeeping – we’d found a couple of bookkeepers locally, but they also reached capacity.

Our practice first outsourced accounts prep to AdvanceTrack®. It was a flexible arrangement at the start, but we loved it. We took it a step further with the bookkeeping.

What impact has AdvanceTrack® had on the running of your practice?

We had one client in London who was always last-minute on VAT returns, accounts ling, tax. We said: “This can’t go on.” They wanted to find someone to do the bookkeeping – we said that approach would cost them a lot and be an unknown quantity. They became our first client through AdvanceTrack®. We now have a weekly fee with the client, and we’re all happy.

That job, for example, runs itself. It frees up so much of our time from mundane historical data and getting it right – we’re now on top of it on a weekly basis.

Another example: a bank we speak to had a client that wanted a loan, but their accountant hadn’t sorted out their previous year-end data. We showed the bank examples of how we can keep up-to-date records, and now they’re our best friends.

What is the future for your practice? What are you looking to achieve, and how?

When the noise got louder on MTD, we took the view to write to all clients and say: “This is going to happen, how will you cope?” Part of the solution is to use cloud accounting and if we can get the data right at the basic level – we’re working with AdvanceTrack® to get that right – numbers can then be analysed. From good analysis, the client and us can make better decisions. This should lead to better results, giving our clients better businesses and all of us a better life.

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