It might be hard to believe it - but one of the most accurate summations of UK accountancy’s digital, post-Making Tax Digital (MTD) future comes in the form of a Twitter bio.
Amy Taylor, the owner of Taylor Accountancy, lays it out clearly on her profile: “Consultant first, accountant second”.
That maxim might make some traditionalist accountants wince but Taylor’s honest diagnosis of her professional offering is a reflection of how the profession has changed in other countries.
And in a digital tax system - which is what MTD is - Taylor’s description takes on a new, deeper meaning.
Making Tax Digital will incorporate a whole slew of changes - but perhaps most crucially it will herald the ‘end of the tax return’. Basically, tax will become real time and taxpayers will send in summaries of their income and expenditure at least four times a year.
Compliance, as we understand it, will end. It’s a very intimidating change to contemplate and fears have often boiled over into frustration. But amid all the tumult and political intrigue of MTD, it’s easy to forget that the UK isn’t the first country to transition its tax system into the digital realm. Not by a long shot.
So the question becomes:
What can other countries tell us about the promise of MTD?
There’s no point in lying here: it will take you a little while to get the hang of reporting under MTD. But once we move beyond the initial awkwardness that always accompanies change, accountants will see new opportunities for connected accounting emerge.
How do we know this? Well, the UK is actually some way behind other economies when it comes to digital tax. Just take a look at what happened in a similar, English speaking economy.
As Panalitix’s Rob Nixon explained, accountants Down Under have worked under their equivalent of MTD for over a decade (New Zealand, even longer). The key result in those countries? A dramatic increase in lucrative business advisory work because accountants could “offer numbers based advisory services with more accurate data in front of them”.
“The real opportunity is not to do more compliance work but to add value to the numbers on those two or three screens on your desk. If the numbers are up to date and more accurate the accountant can add a tremendous amount of value” Nixon writes.
This opportunity is increased under MTD because, under quarterly reporting, businesses will report their accounts through their software. In effect, MTD will mandate the use of accounting software. That’s good news for you: All the data you could need to offer advisory will be streamed to you in abundance.
But there’s another thing to consider:
The pricing debate will go nuclear in a digital tax system.
The pricing debate (fixed pricing vs. value pricing) is an old one in UK accountancy. In a digital tax system, the question will become more relevant than ever.
A digital tax system is nothing less than automation. It’s veiled in a variety of policy talk and ideals by government, of course, but this is the real essence. Automation, as the practice consultant Mark Wickersham has been saying for years, will necessitate a change in accountants’ pricing models.
It’s a point Wickersham stressed again at the recent Accountex exhibition in London. Pricing on time (or even fixed, upfront pricing) will be redundant in a digital tax system where filing is done with a click of a button. The time that will be spent on these tasks simply cannot justify the fees.
Take a look at Denmark, arguably the world’s leading digital tax system. Tax filing is an almost automatic process. Even for businesses, as the Danish economist Rasmus Corlin Christensen explained, “the largely digital and automatic tax system means there is no great need for special treatment for SMEs in terms of the tax administration itself”.
Do accountants still exist in Denmark? Absolutely! Is compliance their main service offering? No.
Under MTD, like in Denmark, there will be very little space left in compliance process for accountants - and the value you offer, over and above this automation, is what you need to charge for.
Accountants will need to stop thinking like accountants, as James Ashford, founder of GoProposal and author of Selling To Serve, noted recently. Instead, accountants will need to start thinking like business owners. That mental shift, not the technology, will be MTD’s greatest challenge. But for those that grasp this new, emerging definition of accounting, the rewards could be huge.