The Chancellor’s announcement of the new digital tax reporting that will require businesses, self-employed people and landlords to report to HMRC on a quarterly basis was met with widespread concern. Within a matter of weeks, an online petition started by a small business owner against the changes had attracted over 105,000 signatures.
HMRC has since issued a response and this year’s Budget saw George Osborne announce a number of measures that will support HMRC in the implementation of this new system, including £71 million in additional funding and the recruitment of 800 call centre staff to improve its current telephone service and reduce call waiting times.
While this has helped to address much of the uncertainty around the technicalities of the new system, people are still unsure of the impact this will have on the accounting industry as a whole.
One of the key concerns is that a digital tax system by implication is computer-based, yet there are a number of accountants who are resistant to the idea of having to support clients with such a system. The industry as a whole has not yet embraced new technologies, with many preferring to stick to more traditional methods, but this new digitised system marks a significant move towards a technologically enabled accounting industry – whether it likes it or not.
Another issue is that the new system could remove tax return business from accountancy firms. The new quarterly system proposes to make it easier for people to self-assess online, making it possible that they simply won’t require the assistance of an accountancy practice any longer. However, in reality this is likely to have a relatively small impact on firms and it would be an oversimplification to say that just because clients can do the returns themselves they will.
The new system also offers potential opportunities to firms. Quarterly reporting means that tax planning becomes more important. Tax payers will be given a clearer picture of what they owe and will therefore need to think ahead more as to how they plan their tax affairs so that they are in a position to pay the tax and do not miss out on any tax planning opportunities, such as offsetting tax liabilities through pension payments. Accountancy firms can therefore capitalise on this, offering more services to help clients with this planning.
It could also give firms the chance to build deeper relationships with their clients. Currently, accountancy support is required once a year when the tax return is due, whereas quarterly reporting means firms will be in touch with their clients far more regularly. As a result, firms have the opportunity to engage more closely with their clients, something the industry as a whole has been crying out for. This in turn gives firms more opportunities to upsell and adds value to their service offering where they are supporting clients with tax planning.
Ultimately, while the quarterly tax update and new digitised system could take away tax return business from firms, it could also provide them with new opportunities for tax planning support and client engagement. In any case, it is important for firms to come to terms with the fact that technology needs to become a part of what they do if they are to remain competitive and support their clients effectively. Any legislation is on hold until the EU Referendum is concluded, so now is the perfect opportunity for accountants to turn their attention to how they can embrace technology in their firms.