MTD sceptics soften their attitude
Intuit QuickBooks has revealed the results of its first Making Tax Digital (MTD) sentiment tracker since the new legislation came into force in April.
With more businesses than ever aware and taking steps to become compliant, there has been a significant increase in positive sentiment, as firms appreciate the benefits digital can bring.
- 89% of businesses are now aware of MTD, up from 82% at the end of March, just before MTD came into force
- 84% of those who have heard of MTD believe they are compliant, an increase from 76%
- 32% uplift in SMB’s attitude, as 49% of SMBs now believe MTD will have a positive impact on their business, up from 37%
- Less than 1 in 10 (9%) SMBs foresee a negative business impact
QuickBooks demonstrated the full extent and functionality of the MTD product suite, including Bridging Software at Accountex 2019.
The first public demo of SmartCheck also happened during the two day show. SmartCheck, helps accounting professionals and small businesses save time by identifying common mistakes when submitting VAT returns.
SmartCheck, currently in beta is one of many new features automatically generating intelligent solutions to common issues faced by customers. Already available for accounting professionals is SmartLook, a virtual customer service solution using video technology to help with tech support, and available soon is Smart Notifications, a system that notifies accounting professionals when their clients need to file for VAT.
Nick Williams, UK sales director at Intuit QuickBooks, says: “The transition to MTD was never going to be without its stumbling blocks for accounting professionals and small businesses, but it is pleasing to see increasing numbers realising the time, efficiency and cost-saving benefits that digitisation can bring.
“QuickBooks is determined to continue innovating and iterating our product, releasing new features that help accountants better serve their clients as they navigate industry and legislative changes like MTD and Open Banking this year. By embracing and using the latest technology, AI and machine learning for their practice, accountants and bookkeepers become the true puppeteers of prosperity for their clients.”
Also demonstrated on the stand will be QuickBooks Online Advanced Payroll, a new solution that solves for accountants and payroll bureaus that manage multiple businesses with complex payroll needs. Available now in QuickBooks Labs, QBO Advanced Payroll provides a route to payroll automation, a streamlined pension experience and a self-service portal for employees, including a mobile app. QBO Advanced Payroll is a different product, but complements the existing QuickBooks Online Standard Payroll, a simpler payroll solution.
For more information on the QuickBooks product suite visit HERE
Accountancy's shifting cultural landscape...
Sage has released its annual Practice of Now research report, revealing a shifting cultural landscape in the accounting sector driven by evolving client demands and the marketplace.
Of the 3,000 accountants surveyed worldwide, 90% believe there has been a cultural shift in accountancy as it enters the next decade. This shift is driving significant changes in hiring practices, business services and attitudes toward emerging technologies across the globe.
“Accountants around the world are embracing change within the profession, bringing in new skill sets and expanding services to better meet client needs,” said Jennifer Warawa, EVP of Partners, Accountants and Alliances, at Sage.
“The future is promising, but there are still challenges ahead and more work to be done in order to build a successful practice for both today, and the decade to come. Accountants need to carefully evaluate changes in the workplace, paying close attention to skills, training, technology adoption, changing client expectations and diversity within firms. Innovation in these key areas will power the next generation of accountancy firms.”
The Practice of Now
The Practice of Now reveals that accountants across the world are still facing challenges as a result of ongoing cultural changes within the industry. Key findings in the UK include:
An Industry Ready for Change
Amidst this cultural shift, there’s no doubt that meeting client expectations begins with employees. In fact, 88% of UK accountants said they are considering recruiting from a non-traditional background. Furthermore, 39% of respondents say that new accountants joining the profession should have industry experience outside accounting. The accountancy profession will need to bring in new skill sets and update business processes to meet customer expectations, or risk losing out to competing firms.
As skill sets such as technological literacy, relationship building and business advisory become increasingly important, 55% of respondents agree that today’s accounting training programs will not be enough to run a successful practice by 2030. Training programs will need updating so that firms can keep pace with innovation and evolving client demands.
A Diverse Workforce for Today—and Tomorrow
With a gulf in the talent required to build a modern, digital firm, what’s needed is a commitment to building a diverse workforce. But this year’s data identifies an underlying issue not yet addressed by many practices. Just 28% of firms say they’re actively seeking to diversify their workforce. Only 31% have a written policy on diversity and inclusion. Even fewer (23%) have offered training or have altered any policies or procedures to promote diversity and inclusion (18%).
Building a Practice Ready for the Next Decade
Accountants can see challenges ahead, and they’re preparing for it. 51% of respondents have formally examined their business practices in the last year, with an additional 26% stating they have formally examined their business practices in the last five years. All signs point to a profession building for the future. Still, accounting and bookkeeping remain the dominant service offering in practices worldwide (78%), however; business advisory services (18%) and outsourced CFO (4%) remain a significant growth opportunity.
As accountants re-evaluate business models, 86% state that the profession needs to pick up the pace of technology adoption to remain competitive internationally. Over half of respondents (56%) cite increases in productivity as the main benefit of technology adoption, with an additional 27% citing time savings as its main value. Meanwhile, more than half of UK respondents (59%) look forward to adopting relevant artificial intelligence (AI) applications as they become available.
The Practice of Now 2019 includes the findings of independent research commissioned by Sage and conducted by Viga, surveying 3,000 accountants from across the globe (US, UK, Canada, Spain, France and Australia) in January 2019.
The Practice of Now is available for download here.
Taxfiler integrates practice management in its accountancy and tax software
Award-winning tax and accountancy cloud-software provider Taxfiler, launched Taxfiler Practice Management at Accountex in London last week.
The integrated application enables micro practices to manage day to day priorities and complete activities ahead of compliance deadlines.
Taxfiler Practice Management provides a consolidated view of all client compliance data, relationships and activities. It is centred on the client record, automatically sending alerts for tax and compliance deadlines by populating task lists. As a result, accountants can efficiently manage day to day priorities by tracking workloads, tasks and jobs.
Following the acquisition by IRIS in 2018, Taxfiler has accelerated investment in its next generation of cloud-based compliance software for micro practices. The business has doubled its product development capacity and increased customer support to service the growing customer base.
Micro accountancy practices
The new cloud-based practice management functionality has been designed for essential everyday work in micro accountancy practices.
Taxfiler founder and director, James Reeves explains, “As the industry moves to a digital accountancy economy, our customers are demanding more integrated functionality. Managing the practice is an ongoing issue many of our customers face. They are providing impeccable compliance services but need to create more efficiencies to grow their business.
“Taxfiler Practice Management sits at the core of the cloud accounting revolution, increasing the flexibility, collaboration and efficiency of accountancy professionals, wherever they are based.”
Fundamental processes
The platform originates from Farnell Clarke, a leading digital accountancy firm that has been a 100% cloud practice for the last decade. Using the fundamental processes built and implemented by Farnell Clarke, Taxfiler customers can enjoy the unsurpassed efficiencies developed by the digital practice.
Will Farnell, founder and director of Farnell Clarke says, “It’s been a great opportunity to use our practice experiences to help fellow accountants build successful digital firms. The industry is embracing the rapid changes taking effect in the market and alongside the experience of Taxfiler, I believe we can help other practices thrive in the digital economy.”
For the first time in its history, Taxfiler has realigned pricing according to the functionality needed for the different size of practice. Practice Management functionality is included, enabling customers to benefit from structured practice management.
The new pricing is effective from 1 May for new subscribers. Taxfiler will contact existing customers to ensure they are aligned to the package best situated to their needs.
The packages are:
Startup. Single User. Up to 10 clients. £10 per month. This new package has been designed for independent practitioners or those who are launching a practice.
Solo. Single user. Up to 30 clients. £20 per month. Solo users will benefit from additional functionality including MTD for VAT, IRIS OpenSpace Link and Practice Management.
Pro. Multiple users. Unlimited clients. £30 per month, per user. Pro users benefit from integrated practice management and can access document management and email management if required.
Team. Unlimited clients. £199 per month for 10 users. Team users benefit from additional discounts for more than six users in the practice.
That's another fine mess for KPMG!
For KPMG, it's another day and another £5m (fine, that is) plus a rap on the knuckles from the accounting watchdog. This time it's for a 'substandard audit' of the Co-op Bank 10 years ago.
Last week KPMG was fined £6m and issued with a severe reprimand by the FRC over its audit of insurer Equity Syndicate Management.
In the latest indiscretion, the FRC says KPMG and partner Andrew Walker “both admitted that their conduct fell significantly short of the standards reasonably to be expected of an audit firm and an audit partner”.
Walker was fined £125,000 and reprimanded. Both he and the company admitted misconduct.
Capital black hole
The fines relate to a proverbial "capital black hole" of an incredible £1.5bn after the bank’s 2009 purchase of the Britannia building society.
Here's the official word from the FRC...
"The Financial Reporting Council (FRC) has imposed sanctions against KPMG Audit Plc (KPMG) and its audit partner Andrew Walker, following their admission of misconduct in relation to the audit of the financial statements of The Co-operative Bank plc (Co-op Bank) for the year ended 31 December 2009.
- KPMG has been fined £5 million (discounted for settlement to £4 million) and severely reprimanded. The firm will also pay £500,000 towards the FRC’s costs.
- Mr Walker has been fined £125,000 (discounted for settlement to £100,000) and severely reprimanded.
- In addition, all KPMG’s audit engagements with credit institutions for audits with 2019, 2020 and 2021 year ends will be subjected to an additional review by a separate KPMG Audit Quality team, who will provide reports to the FRC.
The Misconduct occurred shortly after the Co-op Bank’s merger with the Britannia Building Society (Britannia). KPMG and Mr Walker both admitted that their conduct fell significantly short of the standards reasonably to be expected of an audit firm and an audit partner in two areas:
- the audit of Fair Value Adjustments (FVAs) in relation to loans within the commercial loan book acquired from Britannia; and
- the audit of FVAs and liabilities under a series of loan notes, (Leek Notes), which were also acquired from Britannia.
The Misconduct in respect of these two areas included: failures to obtain sufficient appropriate audit evidence; failures to exercise sufficient professional scepticism and a failure to inform Co-op Bank that the disclosure of the expected lives of the Leek Notes in the financial statements was not adequate.
The FRC has also separately considered the conduct of the Chief Financial Officer of the Co-op Bank. He has previously admitted Misconduct and was excluded from membership of the ICAEW for six years.In addition to the penalties, all KPMG’s forthcoming audits for credit institutions for the years 2019, 2020 and 2021 will be subject to FRC scrutiny. Last week KPMG was fined £6m and issued with a severe reprimand by the FRC over its audit of insurer Equity Syndicate Management more than 10 years ago."
HMRC voice data collection falls foul of GDPR
HMRC's voice recognition ID service is illegal and data collected from its use must be deleted says the Information Commissioner's Office
The ICO was asked to probe the tax authority by Big Brother Watch.
Investigators looked at the voice authentication process for customer verification on some of HMRC’s helplines, which were introduced in January 2017.
They concluded that HMRC failed to give customers sufficient information about how their biometric data would be processed.
Withhold consent
HMRC also failed to give them the chance to give or withhold consent, breaching the General Data Protection Regulation.
A notice was issued to HMRC in April compelling HMRC to delete all biometric data held under the system, for which it does not have explicit consent.
Steve Wood, ICO deputy commissioner, says: “Our investigation exposed a significant breach of data protection law – HMRC appears to have given little or no consideration to it with regard to its voice ID service.
“Innovative digital services help make our lives easier but it must not be at the expense of people’s fundamental right to privacy.
"We welcome HMRC’s prompt action to begin deleting personal data that it obtained unlawfully."
One Paper Lane makes UK debut with tech to help accountants build better practices
One Paper Lane, a U.S.-based digital automation and collaboration platform, will launch in the United Kingdom in collaboration with M&A and strategy consultants, Foulger Underwood, at Accountex 2019, stand 490.
The partnership will bring One Paper Lane’s (OPL) acclaimed technology platform to UK-based accountants for the first time, with workflow transformation capabilities that streamline processes, reduce overhead and automates their practice areas and client management work.
“We only look to collaborate with partners we believe will have a tangible impact and address a real need in the marketplace,” said Keith Underwood, Foulger Underwood managing director. “OPL’s scalable, flexible and affordable offering will provide an essential tool to assist UK accounting practices to evolve and improve profitability.”
Foulger Underwood, an experienced team of M&A and strategy consultants, is working exclusively with OPL on the launch. OPL’s cloud-based process automation and collaboration platform has been tried and tested in the U.S. and other global markets across business segments.
“What we offer accountants is simple. Our tools allow you to streamline, automate and improve processes thereby increasing productivity and improving both the client and team member experiences,” said Gaurav Mirchandani, CEO of One Paper Lane. “We’re very excited to be working with Foulger Underwood to replicate the success we’ve seen with our clients in other parts of the world.”
Visit stand 490 at Accountex London on 1-2 May 2019, and attend Keith Underwood’s roundtable discussion on Wednesday 1 May at 2.00pm, ‘How to enhance your clients’ experience and improve profitability using digitalisation tools and workflow analytics’, and Gaurav Mirchandani’s Presentation on Thursday 2 May at 10.15am, ‘How Digital Transformation and Cloud Collaboration Can Deliver the Best Client Experience’.
To learn more about One Paper Lane, to read case studies and request a demo, visit www.onepaperlane.com.
To learn more about Foulger Underwood, please visit www.FoulgerUnderwood.com.
Accountancy bridges the digital divide
Data released today has highlighted the move to digital communications and integration as the industry progresses towards a digital accountancy economy.
IRIS Software says it has seen an unprecedented increase in e-approvals between accountancy practices and their clients, with 215,750 documents approved in January 2019.
That's a 328% increase from the 150,000 e-approvals in January 2018. IRIS OpenSpace is used by over 3,300 practices and 500,000 SMEs. As expected, Companies House electronic submissions have also seen a marked increase, jumping by 17% in 2017 and 21% in 2018[1].
Commenting on the propensity towards digital communications, Nick Gregory, chief marketing officer forthe group, says: “Accountancy professionals are bridging the digital divide. Of course, the push from HMRC and MTD legislation has driven the need, but as a result, there is increased appetite for greater efficiency and time saving on the digital journey.”
Total electronic tax return submissions across all IRIS products have seen a significant increase. With the final two months of the financial year yet to be released, 3,448,108 submissions have been made to HMRC using IRIS solutions to January 2019. This already surpasses 2017/18, with a total number of submissions of 3,269,694.
From April 2018 to March 2019, 3,341,273 documents were submitted via third party software to Companies House. 38% (1,283,707) of these submissions were made using IRIS Software Group solutions.
“This matters as firms need to interact with clients more frequently and in return, clients are demanding more digital interaction with their accountant. Practices are responding by improving communications and workflows to ensure they can deliver what they’ve promised on time and within budget.”
Integrated functionality has become critical in the battle for efficiency and productivity. Over ten per cent of IRIS customers (2,700 practices) are using IRIS Connector to import data from QuickBooks, KashFlow, Xero, FreeAgent and CSV files.
“We see a significant change in the landscape over the coming years,” continues Nick Gregory. “Integration will be at the helm of the accountancy ship as professionals select best of breed technology and expect it to talk to other applications. Just in the same way household names such as Sky and Netflix have partnered, industry vendors will need to work closely together to create greater efficiencies for customers. There’s been lots of work to date, but we must forge deeper relationships to make this work for everyone.”
The IRIS vision is to enable accountants to increase the productivity and effectiveness of their practice while unlocking client and practice data to deliver new and more valuable advisory services.
[1] Companies House submission figures show a move from paper submissions to electronic:
| Calendar year | Total submissions | Paper submissions | Electronic submission |
| 2015 | 9.04 million | 13.5% | 86.5% |
| 2016 | 9.76 million | 11.8% | 88.2% |
| 2017 | 10.95 million | 11.4% | 88.6% |
| 2018 | 11.40 million | 9.3% | 90.7% |
A tailored approach to helping clients on the digital journey
There is no doubt that the shift toward digitisation is being felt widely everywhere, including in the accountancy sector. As part of that shift we’ve seen legislative changes being introduced, like GDPR and more recently Making Tax Digital (MTD), which have firmly pushed businesses towards a new way of working. There is plenty of compelling evidence, though, that this new way of working is a better way of working.
Digitisation offers businesses a huge opportunity to boost efficiencies and productivity by automating administrative tasks. Our own insights, carried out by an independent research firm, revealed UK businesses spend 120 days a year working on administrative tasks. To put that into context, that equates to £30.8bn that small and medium-sized businesses have lost collectively due to a lack of productivity associated with unnecessary administration.
From an accounting industry perspective, digital technologies are enabling practices to receive, process and communicate data far more efficiently than before, while enabling them to engage with clients more often, helping to build deeper relations and add more value. MTD in many ways has paved the way for accountants to help clients who have not already done so take the first step towards digitisation and a more productive future.
First step
Getting clients to take that first step though, even among those now required to do so under the new legislation, isn’t always straight forward.
The simple fact is not all clients are the same, and many will have their own views on the digital transformation that’s taking place. There will be some who just don’t want to, whether through a fear of change or a lack of understanding around the benefits of doing so, and some who may have the will but don’t have the skill. What we know works well in overcoming some of those hurdles is a tailored approach, one that is shaped by putting yourself in their shoes. Here are a few tips that might help with that:
Start by segmenting clients out by identifying where they are on the digital journey. That may include looking at current bookkeeping processes, what their capabilities and resources are to make the switch, and their appetite to do so. It will entail drilling down into any pain points and putting those in the context of their business plans.
VAT threshold
Then, if they do fall within the VAT threshold and are now required to submit their returns digitally, making sure you communicate clearly what the process will entail, how you can support that and the digital tools that might be right for them. It’s important you share plenty of digestible information on why making this change is a good thing for their business, and their teams. Once they have got a better understanding of the bigger picture, only then should you start to knuckle down to the practicalities and the onboarding process.
We know introducing change can often feel a bit overwhelming for busy business owners, so making sure they feel they have the support of a trusted advisor is key to easing any concerns. Make sure there is a tailored service plan in place, with the promise of plenty of ongoing advice and training if needed. And as part of that hand-holding, sit down with them and plan out a roadmap that includes a few test-runs before they need to submit their first VAT return digitally ‘for real’.
MTD marks a great opportunity for businesses to reap the productivity benefits of digitising tax and taking an important step to streamlining the way they run their business. It offers-up richer insights to make more informed business decisions and reduce time wasted on unnecessary admin tasks. From an accountants’ perspective, MTD will undoubtedly have an impact on client relationships, but one that comes with new opportunities. At the very least, it’s a chance to get in touch with clients and enhance your trusted advisor status by helping them make the switch to a digital way of working – which is happening, whether they like it or not.
I will be with hosting a ‘Making Tax Digital: Fast Track Clinic’ on the Sage Stand (stand 720) at Accountex on both days between 12pm and 1.45pm. I will be joined by Verna Gellvear from the Customer Stakeholder Readiness Team from HMRC and Chris Downing, Product Director, Accountants, Sage, and we will be sharing further advice on how we can help you with the agent and business sign up journey.
Changing how we work: why accountants must help clients master digitisation
No profession is immune from the seismic changes being wrought by digitisation. This revolution has been particularly keenly felt in the accountancy sector, where long-established ways of working have been swept away by new reforms and regulations such as Making Tax Digital (MTD) and GDPR.
But practitioners don’t just have a duty to adopt new digital skills and processes; they must also help their clients to master them too. They will struggle to do this if they haven’t already made significant progress in their own digitisation journey.
The good news is that Sage’s Practice of Now 2019 report, which we will be sharing at Accountex, paints a picture of a profession that has already made great strides towards building the practice of the future. Half have formally examined their business practices in the last year, with a further quarter having done so in the past five years.
Increasing digitisation
The increasing digitisation of tax – especially when mandated by governments or regulators worldwide – is among the chief reasons for accountancy practices to evaluate their business practices. And while there might have been some pain involved in adopting new digital-first practices and acquiring the necessary skills, the move to digitisation has brought transformational benefits to accountants who have mastered them.
And master them they certainly have – for the most part. Sage’s research shows that the majority of respondents who took part in our research have achieved greater productivity through adopting new technologies, while for more than a quarter the biggest benefits have been time savings that enable them to focus more on their customers.
Even more encouragingly, it seems that the profession isn’t content to rest on its laurels, with over half looking forward to adopting artificial intelligence applications in the next three years, helping them to cut down some of the drudgery involved in data entry and routine communications by automating many of these processes.
On the horizon
Digital technologies – both those already in use and those on the horizon – are enabling practices to receive, process and communicate data far more efficiently than before, while enabling them to engage with clients more often (and more accurately).
There is certainly more work for accountants to do, and not just within their own businesses. The opportunities presented by new technologies are not limited to delivering efficiencies and better compliance, important as these are, but in strengthening the relationship between accountants and their clients.
To outsiders, accountants are sometimes seen as number-crunching functionaries. We know, of course, that they can play a crucial consultancy role, partnering with clients to improve their own internal practices, strengthen compliance, and reduce the cost and complexity of financial administration.
Look to the future
As accountants look to the future, they need to give careful thought to how they can share the lessons and best practices that they have acquired over the last few years. They must help clients as they digitise their own finances and learn how to integrate data streams from across the business.
Accountancy practices need to become their clients’ coaches, taking time to understand their particular pain points and recommending technical solutions to these problems. This will be impossible unless accountants have mastered the same technologies themselves and can act as an exemplar for best practice.
The benefits of the great digital leap forward are too important to remain locked up within accountancy firms. If clients are the biggest influence on their practice’s culture – as our research has shown – then accountants need to concentrate their efforts on helping their clients extract the same value out of digital technology that they have enjoyed.
That’s why accountants should work with their software partners to ensure that they achieve full mastery of technology, before sharing this knowledge with their clients for to achieve deeper, more fruitful future relationships.
To find out more about the latest innovations in accounting technology and the findings from our industry research, visit Sage at stand 720 at Accountex London.
Residential property portfolios: three ways to help with income tax planning
Since April 2017, when legislation changes were made to tax breaks on buy-to-let property, the yield is no longer as attractive as it once was.
As a result, some landlords with just one buy-to-let have – or are – deciding to sell, avoiding the strategy altogether.
Historically, finance costs were fully tax deductible for the owner. However, this is in the process of being restricted to basic rate income tax only. With the nature of the property sector being ‘illiquid’, selling a property isn’t straightforward. Therefore, retaining the asset – and implementing a strategy to ensure the income generated is tax-efficient – is high on the agenda for many.
1) Transfer of income/ownership
For husband and wife cases, it is worth reviewing the income tax position of both. If the buy-to-let property is in the name of the higher earner, it may be a good idea to transfer ownership to the other as to utilise their personal allowance, or pay tax at their marginal rate (if a basic rate tax payer).
For example, say the wife is a higher rate taxpayer (subject to tax at 40%) while the husband is paying 20% (basic rate). If the buy-to-let is in the wife’s name, transferring it to the husband would ensure the income is taxed at 20% rather than 40%, providing this falls within his basic rate tax band. The transfer would be exempt for both inheritance tax (IHT) and capital gains tax (CGT), as this would be classed as an inter-spouse transfer.
2) Venture capital trusts
Investments into VCTs provide 30% income tax relief (to a maximum of the income tax paid) of the initial investment amount, so can be a useful tool to reduce any income tax liability generated through the property rental income.
Other advantages include tax-free dividends, tax-free gains upon disposal, and the ability to invest up to £200,000 per tax year. The points to consider with VCTs, are that the investment must be held for five (illiquid) years to retain tax relief. They’re also deemed higher-risk investments.
3) Enterprise investment schemes
Enterprise investment schemes (EIS) have been helping smaller companies raise finance by offering generous tax relief to investors. Similar to VCTs (and again higher risk), the income tax relief available upon investment – 30% – can be advantageous, and this time, it only needs to be held for three (albeit illiquid) years to be retained; gains are also exempt from CGT after this period of time.
Clients can invest up to £1m per tax year, with the facility to invest another £1m providing this is made into knowledge intensive companies. Also, the investment qualifies for business relief once held for two years, meaning no IHT is payable on the amount.
These scenarios won’t be applicable to all individuals, yet, they provide some options for those affected by the changes in legislation. Come speak to Mattioli Woods at Accountex on Stand 221 to discuss further!