The move towards digitisation is being pushed by both regulatory and client-focused requirements, which means that accountants need to clearly identify their relationship with the client.
Making Tax Digital is a clear example of a regulatory imperative – with its subtle but important difference in the way information is submitted to the taxman, setting a path towards linking the practice with its technology platform of choice to submitted data.
From the client perspective, some will embrace the idea of a digital relationship with their accountant; others will wish to continue the same contact and personal service. However, the regulatory push means that maintaining the status quo is not an option.
From a compliance perspective, the accountant will need to consider carefully the processes and workflows of their practice and those of their clients. Fortunately, technological advances mean that information can be shared over the cloud seamlessly and in a timely fashion – if both parties take the data capture/sharing project seriously.
At this point, there are two things to consider. Firstly, how can I take advantage of closer and more frequent contact with my clients to provide a more valuable service, if I evolve my offering? And secondly, if I carry on focusing on tax compliance, what impact will that have on my practice as HMRC continues to drive digital record-keeping and filing?
The first point has been covered by Foulger Underwood here. The second point is worth considering from a ‘tax return revenue stream’ point of view.
We developed an analysis model to categorise personal tax returns into five categories:
Simple forms that will all be pre-populated;
Entries where there will be some input required from non-HMRC captured information;
Those with input from SME dividends or other non-earned income;
Multiple sources of income from non-captured sources including overseas dividends etc; and
Non-resident or high net worth individuals.
From this analysis it became clear that the simple tax returns 1 and 2 might be at risk from HMRC’s ongoing personal tax return digital initiative and possibly the workload in preparing tax returns for category 2 would also be reduced.
For practices, this means a focus on continuing to ‘do as you’ve always done’ will erode your practice’s value.
This is an interesting example of one of the negotiation issues in selling and buying practices, but whereas in the past there has been a reasonable consistency in approach and methodology we have seen: increased audit thresholds; the MTD effect on VAT; and the further digitisation of self-assessment tax. The values of these services, in terms of sustainable returns, need to be considered and re-evaluated.
If practice transformation is an issue for you and your practice to resolve, then please email Julia Whistler at firstname.lastname@example.org.
Foulger Underwood is a team of M&A and strategy consultants focused on the accounting, legal, trust and corporate service and wealth management sectors. Find out more about our value-adding and practical service offerings here.