Only a Third of Businesses Use Accounting Software
The government’s making tax digital project was designed to bring tax into the 21st century. But most businesses prefer to stick with 20th century software.
Given that we can conduct practically every other aspect of our lives online, the Making Tax Digital initiative is something that many see as long overdue. The digital transformation of tax should make the entire system simpler, quicker and more user-friendly for businesses, accountants and the tax authorities themselves.
Conceptually, that is something that nobody can argue about, but in practice, the digitisation of tax returns has proved more challenging.
Businesses don’t want to think about bookkeeping
When a small business employs the services of a local accountancy firm, it is because they don’t want to be bothering themselves with bookkeeping. That makes all sorts of sense, but the problem is that they are also reluctant to start investing in bookkeeping software. These are businesses that have been using spreadsheets since time immemorial, and they simply don’t have the time or inclination to make changes to what they see as a “necessary evil.”
As a result, a remarkable 78 percent of accountancy practice clients across the UK are still using spreadsheets and have not moved across to accountancy software. Right now, that is not a disaster, but it adds a whole level of complexity to the process of filing tax returns, when the idea of MTD was to make it simpler. Ultimately, for MTD to be a success, businesses will need to drag themselves out of the spreadsheet age, whether they like it or not.
Accountants taking the lead
Small businesses essentially want their local accountant to pick up their tax obligations and make them go away as painlessly as possible. Perhaps the key to increasing adoption lies in this attitude. Some accountancy firms have taken a proactive approach, offering a service whereby they physically collect all their client’s paperwork, take it away, scan it to the cloud and upload in onto appropriate software.
What about bridging software?
There has been plenty of talk on the topic of bridging software as an interim solution that will move data from spreadsheets and into more appropriate software from which it can be directly uploaded to HMRC. Again, what is a problem to one sector is a business opportunity to another, and software development company IRIS has taken the ball and run with it, offering its software to accountant firms free of charge to allow them to guide their clients through the transition to digital tax.
Even this, however, is only a short term sticking plaster. The fact is that MTD is upon us in the here and now. Businesses are relying on their accountants to do whatever is needed, so practices need to ensure they have their own processes and strategies in place to ensure they can deliver.