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ALLISON PLAGER takes a look at the latest software issues.
Key points
- Advisers using SA Online should look at proprietary software.
- Time-saving advantages of proprietary packages.
- Table of providers and costs.
IF THERE IS anything that tax advisers could learn about the failure of HMRC's SA Online system on 31 January 2008, it is that it would probably be a good idea to look at paying for proprietary software. What was very clear on 31 January was that returns submitted online using third party software suffered no problems and went through easily. Unrepresented taxpayers also have the choice of paying for software to do their return (if they prefer not to complete it by hand and submit it by 31 October), but as they usually have only one return to complete, it is not unreasonable that many would rather use HMRC's free software. It is quite adequate for most taxpayers with straightforward tax affairs.
It's free!
So why do tax advisers use HMRC's software? There are a number of very reasonably priced self assessment return packages available, e.g. Forbes, PTP etc., and the cost can be written off in the adviser's accounts, so at least he does get some tax relief on the outlay. However, as Nigel Powell of Digita points out, there are many advisers who have to do tax returns for only 50 or 60 clients. They are on a tight budget and do not want to spend money on commercial software.
It is down to cost, agrees PTP's Paul Onions. He says he knows of some advisers who use, for example, PTP's self assessment tax return software to prepare the form, then use HMRC's SA Online to file online because it is free. Some advisers send the computer generated return to the client to submit online using HMRC's SA Online. This is quite an ingenious use of HMRC's system, but it would surely be more efficient to file online using the proprietary software.
David Forbes of Forbes Computer Systems reckons that it is a 'false economy' to use HMRC's free software and sees no reason why taxpayers' money should be used by HMRC to develop software. A possible solution to the not unreasonable cry of 'why should I buy software for a one-off task not of my own making' could be to allow individual taxpayers to offset the cost of a package, say up to £30, against their tax bills. David has set up an e-petition on the 10 Downing Street website saying that the provision of software should be left to the industry, see http://petitions.pm.gov.uk/HMRCsoftware.
Some software suppliers charge for the online facility as, historically PTP has done. However, from April this changes and the facility will be included in PTP's tax return software. This move seemed particularly appropriate, says Paul, given that online filing will be mandatory for advisers after 31 October.
The problem, says Nigel Powell, is that no Government system is ever going to be able to cope with everybody filing at the same time, which is almost inevitable with the UK 31 January deadline for all taxpayers. He thinks that the answer could be phased submission.
The Australian Tax Office, for example, uses a phased approach and has also had great success with online filing. The geographical spread of the country makes online filing ideal, but Nigel says that to some extent it is a matter of expectation. Virtually everyone in Australia has to complete a tax return, it is not a self-assessment system, and agents and the ATO work together in getting them in. Agents are required by the ATO to file a certain number of returns each month.
Try something else?
So if, as an adviser, you have been using HMRC's SA Online, what do you think of it? For many unrepresented individual taxpayers, it is simple to use and mostly reliable. But it has its shortcomings. For example, it does not bring information forward from previous years, and has only limited capability, e.g. few of the supplementary pages are included, although the capital gains tax and foreign income pages will be available from April 2008. HMRC have also mentioned the possibility of pre-populating the form where it can from information it holds. Inevitably, therefore, this would be very limited and they suggest that the relevant areas would be:
- date of birth;
- state pension information;
- student loan indication;
- authority where registered blind;
- underpayment data.
From November 2006, it has been possible to attach pdf files to the return when using SA Online, but only 20 pdfs can be attached to any one return, and the total file size must not exceed 5mb. This may seem adequate, but it is HMRC's old-fashioned underlying systems that dictate these restrictions. Nigel says that HMRC seem to have 'no understanding of the commercial world' and they really should update their systems if they are serious about online filing and meeting the Carter requirements about systems being fit for purpose.
Third party software, on the other hand, offers users much more help and functionality. Several packages are available, see the Box below, and they vary considerably in what they do, taking into account their cost. See also Taxation's annual technology supplement which provides information about a selection of products and will give potential purchasers an idea of what each product does. The latest supplement was published in September 2007, so it is likely that some of the packages will have had extra facilities added. For example, from April 2008 Digita Personal Taxation will be able to deal with:
- excluded income - for a non resident in the UK;
- automated double taxation relief claims;
- extended reporting for tax clients on client schedules;
- extensive hierarchical management control over the tax return process and related letter writing facilities.
Not all users will want to take advantage of these facilities, but Digita's software remains suitable for sole practitioners right up to the large firms. This is perhaps an indication of the flexibility of the package, i.e. that it works at all levels.
Time saving
In terms of functionality, even the simplest tax return package carries information forward from one year to the next. This means that client data does not have to be re-entered each year, and areas which the adviser would expect to have complete are shown on the form each year. Even these relatively simple measures save a lot of time.
Furthermore, as TaxCalc's Andy Hardy says, a relatively inexpensive package has facilities of which users may not always be aware. He mentions the data-mining facility that many packages offer, including TaxCalc, which enables users to group clients, such as the self-employed. This can be helpful for marketing or other services aimed at providing added value for the client.
Good results
It is virtually impossible for any supplier to guarantee that all returns filed online will be successful. However, most suppliers, including HMRC, have a percentage success rate of close to 100%. All suppliers carry out stringent testing to ensure that returns filed using their system will be successful, and some will not allow the system to send the return until it has been completed perfectly and all errors corrected.
Up to you
Online filing takes on a whole new look for 2007-08 tax returns as facsimile returns are subject to new restrictions, and after 31 October 2008, self-assessment returns will have to be filed online with HMRC, except in a very few special cases.
Andy Hardy says that 'it is difficult to imagine advisers not using tax return software', but it will effectively be mandatory from April 2008, unless advisers plan to have their clients so efficiently managed that they submit all returns by the end of October - hand written!
On that basis, it seems even more difficult to imagine that many accountants and tax advisers will find HMRC's self-assessment tax return offering suitable. Taking all of these factors and comments into consideration, perhaps now is the time, in the period of relative calm after the tax return January madness, to look at what third party providers have to offer.
