Tax compliance work need not be boring and repetitive, says NIGEL POWELL of Digita.
Do you feel that the yearly cycle of compliance activity is more about doing the same things every year with no sign of improvement and that every year the burden gets heavier and more repetitive and for no great thanks from the client!
Each year competition for the work grows ever stronger, putting more pressure on you to retain tight profit margins and hold fee levels for tax work. Is that what you joined the profession to do! Everyone accepts that there is not much choice but to handle compliance as the mainstay of client work, but it is not always the most enjoyable aspect of work.
Consider the basics of tax return compliance. Few standard taxpayers will seek professional advice and they must continue to respond to HMRC directly. HMRC accept that despite their best efforts by way of television advertisements and the like, not everyone is going to go online.
For the unrepresented the war is over, because HMRC have accepted that this group is not the best to ask to compute its own tax (they make too many mistakes which brings down HMRC efficiency). So they will send these taxpayers the new main tax return in 2008, get them to fill in pre-defined boxes which means the forms can then be optically read by a computer which obviates the danger of introducing even more error by re-keying data.
Then offer to compute the liability for the taxpayer and, bingo, you substantially automate the burden on the whole service.
In theory this should free up more HMRC resource which can then be applied to the remainder of taxpayers - your clients. This group is growing in number and becoming increasingly wealthy and looking all the time for a better life style. Having more disposable income, they will consider ways of keeping more of that income and generating even greater wealth. At this point you have to ask do they really care about a tax return other then in complying with their legal filing obligations? If they are not that interested, is it any wonder they leave the preparation until late on?
Mad rush!
Each year I read the comments of practitioners who complain they spend from October through to 31 January in an ever increasing state of urgency, working late hours and weekends just to meet the rush. People from all disciplines are pressed into temporary service just to meet the rush period. How do I know this? Well, each year we sell an ever greater number of temporary tax software licences for the peak times. Everyone knows the issue: it is that clients, for a number of reasons cannot or will not provide the information early enough in the period from 6 April resulting in a compression of activity in the last few months of the season. In some cases it simply is not possible for them to provide this information, as many clients rely upon third parties who also fail to provide information early enough.
It is unlikely that we can change some clients' attitudes, because we provide a service and ask for payment of fees for something that, frankly, the average client feels is meeting a legal duty rather than providing any real benefit. He therefore pays with reluctance. In this relationship we are the servant not the master. So what can be done?
If you had the time, you would want to have a proper review meeting with your best clients just to identify what they would like to do in life: what drives them and what their aspirations are. You might find that they are looking for advice on planning their retirement, finding a buyer for the business or even establishing the true value of their estate for family reasons. Maybe they want to buy a lifestyle property abroad and have no idea about the various tax implications and financing options, or simply could do with advice on tax efficient savings. Every practitioner says this is what they would like to offer, but most complain they never have the time.
Make time!
It is essential to examine all your working practices, because modern tax software is as much about servicing the overall needs of a tax practitioner as it is about producing a tax return and electronic filing.
Do you ask clients electronically for information and then automatically remind them for any balance awaited, or are you still producing questionnaires using clerical staff? Do you still manually record work progress in a spreadsheet somewhere, when a system could do this for you? How do you establish, remind and finally resolve queries with your clients and keep a trail? If this is still by way of yellow sticky notes dotted around your desk, is that the most efficient way? Do you still manually assemble payment advice letters to keep your clients posted rather than pressing a button? Instead of using a system, do you still conduct a largely paper based review of a tax return case? (Worse still, do you not perform any real review and simply increase your risk?) How much time do you spend on making sure you manage risks in your practice, when your software should point out the most obvious risks for you based on known data conditions? Who is the back-stop to prevent an accidental mistake becoming an albatross around your professional neck?
In all honesty, we all do things a certain way because that is the way we have always done them, but that meets head on the expression I have heard attributed to Tony Robbins, the business guru 'if you always do what you have always done you will always get what you have always gotten'.
Basic maths shows that if you can save just ten minutes per year per case for 500 clients that equates to two whole working weeks. In the smallest of practices it is even more important to be conscious of time wasted on process, as there is no one else to blame and equally no one else to share the workload.
I know of one practice that, by taking efficiency seriously, has managed to handle 9,000 high net worth clients and still complete all SA 100 filing by 3 I October last year. It leaves them with real time to plan with their clients and time to expand their business.
New regime
With the advent in 2008 of the new main tax return form goes a new premise that as an agent you will do the data capture for HMRC and they do not want the data transcribed back onto paper based forms but instead provided to them electronically. Agents will not be allowed to use tax software to produce a facsimile return for paper based filing except in very few exceptional cases, but using the original main tax return will generally require hand completion and filing by 3 I October 2008.
The following pointers might help a little:
Think about sending your client a tax folder once a year containing a checklist of the documents you need most, like P60, P II d, certificate of tax deduction from bank interest, dividend counter-foils etc. The sooner he gets into the habit of storing them as he receives them the better able to respond timely and completely in one go (plus he has your name in front of him each time he reaches for the folder).
Try to persuade your client to let you send him his tax return for approval as a PDF attachment (encrypted of course) to an email. The form can be seen in colour, it involves you in no collation and postage, it saves you costs on printing, reducing wear and tear on the printer and as it is 'green' it can be promoted as ecologically sound. At the same time you are involving your client in less work because we all know it is easier to respond to email than it is to prepare a letter.
More savings, less paper
Many myths surround the rule about e-filing your clients' returns. The truth is that if necessary you have to be able to demonstrate an audit trail to prove that your client has approved the self same return data that you are filing online. In most cases, all the proof needed is the email in which he confirms his agreement for you to file, the client should keep the return which he has printed and signed. You may have a working practice built around the need to see a signature on a piece of paper, but HMRC do not stipulate this.
The point is to consider your working practices because the fact that you have always done something one way does not make it the most efficient way. Is it still the case that you believe clients value your work by the number of client schedules attached to the tax return 1 If I were your client I wouldn't, because I can add up a list of my own dividends and I have copies of my P60 and PIID and bank interest tax certificates. On the other hand, if my accountant gave me a summary of the effect of shifting my savings to more tax efficient plans, that would be welcome!
