HMRC is now living the digitalisaiton dream. It’s exciting to witness and makes a clear statement of intent for the future. MTD Income Tax and MTD Corporation Tax loom large.
While MTD will have been a headache on a number of levels, not least integrating technology and getting clients ready, the effort will be nothing in comparison to these new initiatives. Meeting the demands of HMRC’s digitalisation strategy will be all consuming from now on.
If you like, HMRC has eased us in gently with MTD VAT. We were lucky. It knew when it embarked on the strategy that producing quarterly VAT returns wasn’t a new thing, and for lots of practices nor was doing it electronically – in most cases the preferred bookkeeping app did the heavy lifting behind the scenes and now it will do a little bit more each time ‘submit’ is pressed.
The biggest challenge will have been to change client behaviour and get them into digital bookkeeping. However, that effort will seem small compared to what is around the corner.
When the annual income and corporation tax submissions move to regular quarterly submission then we’ll really know life has changed. These events that often happen many months after the year end, often with a wait of up to 21 months to see the impact of transactions hit a return, will be transformed. It will require a huge shift in mindset and practice management. No longer will practitioners be able to ‘mop up’ at year end, instead it will have to be more or less real-time. No question.
This time the burden of weight will predominantly fall on accountants, not clients. HMRC’s vision is clear and I can’t imagine the government will listen to pleas for a stay of execution based on clients not being ready: this is about the profession not being ready, and the electorate won’t have any sympathy for us.
So where do you start? Put simply, you’ll need to reengineer your processes from top to bottom. You need to get ready now to support a constant and regular flow of information from your clients to meet the MTD filing obligations.
It’s also time to say goodbye to that long meeting you have at the end of the year. It’s a goner. Instead, you need to start thinking about a strategy of micro advisory, thinking about shorter, regular check ins throughout the year. It’s about getting things right at source, on time, every time. Above all, you will need to build on your MTD for VAT changes, and make sure your clients are on top of their bookkeeping.
Creating a micro-advisory will also require a change in skill. You’ll need people who are competent at advising at a moment’s notice and helping clients adjust to the new found freedom of information they have. They will have more insight than ever before and helping them realise the way the future will pan out for their business as a consequence will be invaluable.
That might seem like a challenge in itself, but the most taxing part of this strategy will be establishing how you do it without losing your margin. You won’t be able to raise your rates to cover the extra work or investment in people. It won’t wash with clients – it’s not their problem.
It’s evident then that process change can’t be done in this scenario without technology to improve efficiency. So now is the time to invest in a digital strategy and the technology that will make it happen. Those that lead on this, and avoid price hikes, will be the ones that acquire customers and get a return on the technological investment, and all the skills transformation that happens alongside it. Everyone else will be out on a limb.
HMRC is serious about changing our profession and the vision won’t recede if anything it will become more ambitious. We need to prove we are up to the challenge and get started on digitalisation, skill transformation and establishing micro advisory services today with a similar vision of what else could come in the future. If we don’t we simply won’t survive as independents and that would be a crying shame for all the SMEs Britain’s success relies on.