THE THOMSON REUTERS DIGITAL READINESS REPORT. Key insights into accountants preparations for a digital future

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1 THE THOMSON REUTERS DIGITAL READINESS REPORT Key insights into accountants preparations for a digital future

2 THE THOMSON REUTERS DIGITAL READINESS REPORT 2 Table of contents Introduction 3 Recap of Making Tax Digital 4 Reaction to the deferral 5 Preparations continue 6 Determination to change 8 Staff and client education 9 Firms are still taking action 10 Client communication is key 12 MTD for VAT 14 The 2020 crunch 15 Closing thoughts 16 Author and Contributors 17

3 THE THOMSON REUTERS DIGITAL READINESS REPORT 3 Introduction Despite a widely welcomed deferral of the Making Tax Digital (MTD) timetable, many accountants are choosing not to waste the time, money and effort they have put into preparations. Thomson Reuters surveyed over 850 accountants in the days following the deferral of MTD to gauge their opinion and understand how much work they had done to prepare. The responses clearly show that most accountants continue to focus on preparations for the future. This report explores our findings; backed up by the views of leading accountants. It is intended to help accountants benchmark themselves against their peers, and provide practical actions to prepare for a certain digitalisation of the tax profession. MTD is going at a slower pace, but it s definitely not going away. Mark Purdue, Thomson Reuters

4 THE THOMSON REUTERS DIGITAL READINESS REPORT 4 Recap of Making Tax Digital In summary, there are four main strands to HMRC s MTD initiative. In light of the deferral, let s take a look at how these have changed. No change: Digital Tax Accounts (DTA) - These exist for every taxpayer today. Agent access to DTAs - Pilot currently running. HMRC s better use of third party data - To pull some tax return data directly. What has changed: Quarterly reporting - Original timetable amended, as follows: April 2019 VAT reporting mandatory for businesses over VAT registration threshold only. Reporting of VAT and other taxes voluntary for businesses below VAT threshold. April 2020 Earliest date for mandatory quarterly reporting of income tax. Assumed CT deadline, but subject to change. Given the only change to MTD is quarterly reporting, so that HMRC can focus on thoroughly developing and testing the software before the system goes live, it s clear that the path towards digitalisation continues. As we ll go on to show through our survey findings, the delay provides more opportunity to prepare clients and put in place the most efficient systems across your practice.

5 THE THOMSON REUTERS DIGITAL READINESS REPORT 5 Reaction to the deferral Eighty-six percent of accountants said that the government made the right decision to defer MTD, although over two-thirds said that digitalising the tax system is still the right approach. For some practitioners, relief has been balanced with pragmatism: Common sense seems to have prevailed. A shake up of people in the Treasury after the election has helped, with more people there willing to think about the impact on businesses. However, it has made us more resolute in where we are looking to take things forward. Jon Cooper, Cooper Faure 5% 9% 12% Has the government made the right decision to delay MTD? 27% Do you agree digitising the tax system is the right approach? 61% 86% Yes Yes No No Too early to tell Don t know

6 THE THOMSON REUTERS DIGITAL READINESS REPORT 6 Preparations continue Our survey shows that the need to prepare remains even after the announced delays, with 82% of responses indicating they plan to continue with preparations or revisit them next year. We ve spent a lot of time understanding, planning and looking at different software. It has pushed me to digitalise more clients for sure, and we put in a lot of thought around workflows and how we were going to be handling things. Luckily the biggest cost to date is time. Tom Featherstone, Finsbury Robinson Clients are unaware of the changes and would have needed to make significant changes to behaviours quickly. Those changes will still need to be made but can be managed more realistically now. Paula Sparrow, Wise and Company What are your plans for quarterly reporting? Continue with preparations Revisit the requirements next year Revisit when VAT goes live in 2019 Other 47% 35% 12% 6% Assessed software The Top 5 Areas of Preparation for MTD Assessed clients Internal meetings Reviewed service offering Assessed processes 77% 71% 62% 56% 55%

7 Find trusted answers on Making Tax Digital at tax.thomsonreuters.co.uk/mtd

8 THE THOMSON REUTERS DIGITAL READINESS REPORT 8 Determination to change Taking action now is still essential to meet deferred deadlines Given that 63% of accountants surveyed thought that quarterly reporting is inevitable for all businesses, it s no surprise that almost half (48%) have already taken practical action. We have already adopted new software and appointed a member of staff to coordinate our approach. The next stage was to start bringing clients into the process, with assessment of how they were going to deal with digitalisation. Lisa Western, Coleman Webb We planned to get things going a year early so we could be well organised. We primed clients, brought in new staff, got software sorted and lined up: both cloud and desktop. It s still going to take a while, so starting now is important. Swaran Sohal, Sandwell Accountancy Services 15% 7% 22% Do you think quarterly reporting is inevitable for all businesses in the future? 63% 45% Has your firm taken steps to prepare for MTD? 48% Yes No Unsure Yes - steps have been taken No - but planned to No - had no plans to

9 THE THOMSON REUTERS DIGITAL READINESS REPORT 9 Staff and client education When it comes to communicating with clients, it s important that staff are aware of the implications of MTD and the firm s plans. Although 51% of respondents have communicated formally with clients, others acknowledged that staff were fielding questions during day-to-day interactions, so having clarity on key details provided important reassurance. Sharing knowledge is an important part of having knowledge I never want a situation where clients are getting the information from other practices. Getting in early, and keeping staff well informed, helps you understand and deal with issues and questions as they arise. Nick Forsyth, Lambert Chapman YES 51% Have you communicated formally with clients about MTD? NO 49% Client communication and staff education go hand-in-hand

10 THE THOMSON REUTERS DIGITAL READINESS REPORT 10 Firms are still taking action Moving to digital recordkeeping is likely to be a requirement for all businesses over time, but making this a reality could take a while. At the heart of a successful practice strategy, you need efficient processes for managing client data and regular filing. Sixty-seven percent of accountants promote cloud-based bookkeeping software to their clients, so, it s clear that many firms are already well underway in moving clients onto cloud tools. There are many advantages in a digitalised tax world. Not least, you gain a real time view of data and can improve the quality of that data more regularly. A move towards a digital tax future will give us the regular figures we need for the more valued forecasting and advisory role. Encouraging businesses to keep their books up-to-date right now allows us to offer more immediate value. Jon Cooper, Cooper Faure We have been attempting to get all clients onto the Cloud with a proper accounting system. The implementation of MTD made the argument easier for us it was no longer us pushing it, but an HMRC requirement. Philip Caplan, Caplan Associates 14% 67% Do you plan to introduce cloud bookkeeping software in the next 12 months? 19% Already have Plan to implement No plan Action Point: Segment your clients, understand which are yet to move to digital record keeping and devise a plan for each.

11 How can you transform your workflow into a seamless cycle of productivity? Making Tax Digital has prompted three-quarters of accountants to review their current technology. The more integrated your processes, the easier it is to manage your clients. The Digita Professional Suite offers a two-way sync with Xero to provide you with a fully integrated tax and accounting software package. Learn more at tax.thomsonreuters.co.uk/xero-integration

12 THE THOMSON REUTERS DIGITAL READINESS REPORT 12 Client communication is key Clients will always look to you to provide answers as to how and when they will be impacted, and to have solutions to the compliance challenges they may face. Communicating what information they will need, what your offering will be and how you will guide them through this transition starts now. Forty percent of accountants already send communication to clients through a secure online portal. What s more, 25% of accountants not yet using client portals plan to implement them. The use of portals and digital e-signatures will dramatically streamline the customer experience, as well as being more secure than traditional methods, such as post or . By pre-empting with communications, we feel a couple of steps ahead. Clients can trust that we have this under control and will guide them through it. Nick Forsyth Thomson Reuters Onvio is a natural step, so we can stop sending things out by post; making our processes smoother and quicker. Accounts shared through the portal and e-signatures will make us much more streamlined, as well as secure. Tom Featherstone Action Point: Grow your reputation as a digital accountant through regular client updates on MTD.

13 Store. Share. Sign. It s our mission to help you offer unparalleled client service by simplifying your processes. With Onvio Documents and Client Centre, collaboration has never been easier. Conveniently share, edit and sign documents on the go, from anywhere. Offer your staff and clients a secure way to manage documents online. Discover Onvio today at tax.thomsonreuters.co.uk/onvio

14 THE THOMSON REUTERS DIGITAL READINESS REPORT 14 MTD for VAT Encouraging applicable VAT clients to voluntarily participate will put them ahead in terms of meeting mandatory deadlines, and provide you with key insights into how your processes may need to adapt. I expect 50 or so of my clients will start voluntarily. Some are already compliant and ready to go and others will follow. Swaran Sohal I have been taking the approach of advising all clients to consider MTD, regardless of size. I feel it is an important process that is beneficial to Small to Medium-Sized Enterprises to maintain their accounts efficiently right from the start. Theresa Parker, AIMS Accountants for Business FCA Action Point: Get ahead of the game and learn what you can through early participation.

15 THE THOMSON REUTERS DIGITAL READINESS REPORT 15 The 2020 crunch 2020 has now become the proposed pinch point for accountants, when the majority of self assessment and corporation tax customers come under quarterly reporting. This date is still subject to change, but as HMRC will have had three more years to develop and test the required technology, so further deferrals are unlikely. If so, the impact to clients and practices would be considerable, with a significant short-term increase in workload and a potentially confusing crossover of filing deadlines for those unprepared. We will still be faced with the prospect of the current year and the MTD year. If they both happen at the same time then it could be extremely testing 12 months or so. Jon Cooper, Cooper Faure Some clients commented that with RTI for wages, submitting auto enrolment data, VAT, quarterly accounts, annual accounts, self assessment etc., they wouldn t have any time available for holidays as there would always be something falling due. This will remain a big issue. John Owen, John D Owen FCA

16 THE THOMSON REUTERS DIGITAL READINESS REPORT 16 Closing thoughts I firmly believe that being able to access near to real-time financial information will enable accountants to grow their practice and offer a more proactive and advisory service to their clients. MTD has encouraged and is still encouraging many firms to make changes getting clients to send in their books early, moving clients to digital records, taking steps to streamline processes, reviewing their fee structures and improving client education. Now it s time to turn the compliance avalanche into an opportunity to take stock of your processes and technology; to ensure that both you and your clients benefit from the inevitable changes to come. Digital tax is already happening make it happen for you. Mark Purdue Take Action Now Client segmentation Understand which clients will be impacted and when. Digital record keeping What are the options for all your clients desktop, cloud or will they outsource to you? What is the plan and timeline to get them there? Streamline processes Look at your internal software and workflow to incorporate integrated systems, client portals, and digital e-signatures. Staff training and client communication Keep everyone informed and on track.

17 About the Author Mark Purdue has spent over 25 years working in tax, beginning his career as a Revenue Officer at HMRC, and then becoming Tax Senior for a UK stockbroker. Mark joined Thomson Reuters in 2006 and now holds the position of Tax Product Manager. Mark was named AccountingWEB s 2017 Software Excellence Pioneer for his commitment to the accounting profession and client satisfaction. He and the team are currently working closely with HMRC to develop a software solution for Making Tax Digital. Connect with Mark: LinkedIn: Mark Purdue #MakingTaxDigital Contributors Thomson Reuters would like to thank our clients for their invaluable comments. This guide could not have been completed without them. Jon Cooper Swaran Sohal Nick Forsyth Lisa Western Tom Featherstone Director, Cooper Faure Owner, Sandwell Accountancy Services Partner, Lambert Chapman Partner, Coleman Webb Accountant, Finsbury Robinson Philip Caplan Theresa Parker John Owen Paula Sparrow Partner, Caplan Associates Principle, AIMS Accountants for Business Owner, John D Owen FCA Manager, Wise and Company Sources The statistics cited in this report are the findings from Thomson Reuters surveys conducted in 2017: The Thomson Reuters Making Tax Digital Deferral Opinion Survey of 867 UK accountants conducted from 23 July to 1 August. The 2017 Thomson Reuters Technology Survey of 590 UK accountants conducted from 7 to 28 February 2017.

18 How can you spend less time on compliance and more time with your clients? Put simply, our software helps you complete simple compliance tasks, so you can focus your valuable time on the work that matters most. We work in partnership with thousands of UK practices to help them reach their highest potential, both today and tomorrow. Contact us today to plan, prepare and execute your digital future. Request details or call to speak with a consultant.