Tax is Going Digital - Mr Accountant, What Does This Mean for Your Business?

In 2018, whether we like it or not, and for most accountants it’s not; tax is going digital.

Why should I be bothered you ask, its 18 months away. In simple terms because it will fundamentally change the way you do business with your clients. Post 2018 HMRC want small businesses (10 people or less), that’s by the way 95% of all businesses in the UK, to report their tax quarterly. That means as an accountant you need to be in a position to submit a full P and L every quarter. Plus there may well be a requirement to submit a full and adjusted set of accounts for the year end. So potentially you’ll need to submit 5 sets of accounts for every current customer you have from sole proprietors up. Put another way if you currently have 200 customers now, as of April 2018 you’ll have the equivalent of 1000.

Its pretty obvious that you and indeed the whole accounting industry won’t be able to cope with such change without a substantial change to the way you process accounts and manage customer relations.

The caricature of the archetypal accountant small accountant is someone who’s great at detail but not good at dealing with customers, and who pump out compliance work with minimal customer contact. Not anymore. You are going to have to CHANGE.

At our recent Kent Accountants Club we discussed the ramifications of Tax Going Digital, and it soon became apparent that most have not even considered the potential ramifications of this train coming down the tracks. This might be of course because many are still looking at the final phase of Auto Enrolment but most likely it just seems so far away. Our Group has nevertheless agreed to look into the ramifications in more detail over the next 6 months or so to help our members find the best solution for their particular business. (We still have a couple place available in our group for any interested accountants. If you want to know more contact me laurence@exigent-uk.com for more details.)

So what are you going to do about it?

From a customer perspective, I have 3 questions.

When and how will it affect me?

What if anything do you want me to do differently?

What’s it going to cost?

To answer these questions you need a clear strategy and approach.

It could be a radical we can’t support all our clients we simply won’t have the resources so let's pick our best 50%, work with them because they’ll be more prepared to pay our increased fees and we’ll ditch the rest.

or alternatively, we need to change the way we process to support all our clients and they’ll just have to pay what it costs.

The key question is: What IS IT going to cost? And when will you be able to tell me your customer?

The trouble is you won’t be able to answer that question until you’ve understood what your strategy and what that means for your business. What makes it worse, if indeed anything can is that customers aren’t going to be falling over themselves to help you sort this out. Their response is going to be as it is for auto-enrolment, which is: can I ignore it, I don’t want to do it, can't I leave it all up to you as my accountant?

This is why 18 months isn’t long. You’ll need a good 3 months of research and discussion to figure out how best to cope with this change, your strategy. At that point you’ll need to get into detail and in particular what you’re going to need your clients to do differently you help you. The most obvious being that receipts in a bag just won’t work. Information is going to have to be supplied digitally. So everyone, and I mean everyone, is going to have to use an accounts/bookkeeping package like Xero or Quickbooks.  

The next question is how does that get implemented?

What about those who want to use something odd or quirky. Given the time constraints of posting 5 weeks after quarter end can you afford to support these other systems?

Who’s going to answer customer queries as it sure isn’t going to be the supplier?

How are you going to get customers up to speed?

How are you going to move from a free system like say VT to a paid system?

How are you going to support your customers if large tranches of your customer base convert over to digital reporting at the same time?

What is your effort and timescale needs to convert each customer to Digital reporting?

How much reviewing are you going to put into each set of accounts?

How much time will this take? As a customer, I want to be paying as little tax as possible for each quarter. I don’t want to overpay tax and get a rebate sometime after my notional year end.

How will you give clients an assessment of the cash-flow implications of reporting and paying tax quarterly?

What’s your sanction if a client won’t conform?

Will you fire awkward clients or will you keep them but double your price?

As you can see there is an awful lot to consider and you only have 18 months and we’ve hardly scratched the surface on process issues or indeed pricing. You can’t rely on others to help you because mostly they’re waiting to see what you do.

In all of this, there is a huge opportunity to gain market share, profitability and peace of mind, but only if you start considering the implications now.

Exigent Consulting provides specialist services for Managing High Growth, and Coaching and Mentoring to the Small and Medium Business. We help business owners improve the profit performance of their business.