There has always been a fear that accountants too focused on compliance work lose out because of a failure to provide added value to their clients. If someone undertakes the work more cheaply, clients leave.

A glance at the latest self-assessment online filing figures suggests some taxpayers might be doing just that. More online filers are now choosing HMRC’s own software over any one third-party provider.

Although the market share of self-assessment filers is still dominated by independent software companies such as Iris and Sage, due to its use by accountants, advisers should be wary that HMRC’s technology has matured – on the self-assessment filing front anyway.

Dennis Keeling, the former chief of the Business Application Software Developers Association, believes the change in direction could be due to the downturn, with many people making cost-cutting drives.

They have realised that the system is relatively simple to use and although most would still use their accountants to arrange the numbers for them, they are able to save money by doing the technology work themselves.

“A lot of people can now file their own returns and not use their accountants,” said Keeling. He added that the taxman has “invested a lot of money into their online system” to help simplify the site.

Last year HMRC’s slice of all online filing was 29% (1.68m) however for 2008/2009 filings that slice increased to 31.8% (2.1m). More than six million self-assessment submissions were received online – compared with 5.7m the previous year – out of a total of around 9.5m total filers, including paper submissions.

Although Phill Robinson, managing director of Iris’s accountancy division, believes there was “some truth” in the notion that HMRC’s growth has come from the downturn, the bigger picture is that there is another wave of adopters coming into the online filing system.

The first wave was driven by the accountancy firms using third-party software. The second, which we are now seeing, comes largely from the “unrepresented” filers who were previously submitting paper returns.
Robinson added that the fast growth in recent years has come from firms who took the switch to online very seriously.

“The growth didn’t really affect accountancy firms – they are all pretty much online now,” he said.

This year Iris saw its total of around 45% of all third-party filing remain untouched. The company was used for more than two million submissions this year, and 1.7m last year.

Sage’s third-party market share remained relatively untouched too. This year more than 488,000 filed using its technology, with last year’s figures coming in around 474,000.

A spokesman for HMRC said there were initially “some concerns around our IT” but those worries were now diminishing.

He added the taxman had “invested heavily” in the online offering. “It’s not by chance that the system is being used more because we’ve spent money on the system and listened to customers needs and responded to them,” the spokesman said.

For those firms still making up their minds about filing returns online, Sage said that the move was a positive one that would benefit them. “Firstly, filing online is a much quicker and cleaner process, with less paperwork and faster confirmations from HMRC – so clients can rapidly be reassured that the process is complete,” said Gareth Howe, senior product development manager at Sage’s Accountants Division.

“It is also encouraging accountants to review and streamline internal processes. Many now store their returns electronically rather than in traditional filing cabinets – not only providing cost savings but also making it easier to archive and retrieve documents.”

Digita was unable to supply its filing figures at the time of going to press.

IN OUR VIEW

HMRC has confirmed for the foreseeable future there are no plans to rid the world of paper filing. However, the software vendors may find they have a very serious competitor on their hands. Once word gets out that
the tax is worked out for you, the software is free and it works, the UK could see a shift from accountants taking up the responsibility of
filing self-assessments.

Further reading:

HMRC breaks online filing record