Making Tax Digital: Q&A with global director of product marketing at Sage

Accountancy Age speaks to Michael Office, global director of product marketing at Sage, about what software providers can do to help businesses comply with MTD

Making Tax Digital was removed from the Finance Bill in April ahead of the debate on the bill in the House of Commons. What does this mean for the digitalisation of tax?

Very simply it is full steam ahead as planned. So what we are hearing is that the reasons for taking these parts out of the Finance Bill was purely about timing, that because there are fiscal pieces in that Finance Bill like rate changes that needed to go through, they needed to get the Bill through but there wasn’t enough time to have the proper scrutiny and debate needed before the purdah kicked in and before parliament was dissolved for the election. So, we don’t believe there’ll be any changes to timelines, that it will be full steam after the election. Of course, there is uncertainty around any election, no matter what the polls might say, so there may be some changes there. However, we believe it will be full steam ahead.

So, here at Sage we are continuing with our plans, we’re working very hard to ensure we are building not only the simplest technology to be 100% compliant, and we will make sure our customers are. We are also accelerating our plans around how we remove admin from business, so we know that Making Tax Digital may cause some increases in the workload on businesses and their advisers, mainly accountants, so we are building stuff to take that pain away, so overall you can be compliant but you can save time. And to be honest, we would do that anyway, even without Making Tax Digital. Quite a lot of our plans remain the same.

Do you believe that the government’s proposed timeframe is realistic?

Because of the election I think it’s safe to say that because there’s not clarity on when the Finance Bill will pass, the timescales feel tight. They feel tight because things may change between now and everything being locked down. So what I’m urging HMRC to do, and the wider government when they get elected, is that we need to lock down the details as soon as possible. It’s not a problem to launch after the timeline that they have today as long as there’s certainty around what’s going to happen. If there’s potential for any additional changes, that can cost not only the software industry, because they need to make investments and if things change, that’s more money, but also accountants who are preparing now. There’s almost a fear that things might change and that’s causing people to stop and wait and see what happens. So, we need to get that clarity on locking down the legislation as soon as we possibly can, so that people can start preparing. So, the timelines are tight because of that uncertainty. Sort that uncertainty out, and I think it’s realistic to do it.

How can software providers help businesses comply with MTD?

So there’s three very simple things actually. Number one, we’re going to make it really simple to make sure you can do what you need to do by law, we’re going to make it really simple to be compliant. What I mean by that is that when you need to record transitions, when you need to correct errors, when you need to review, submit and do your end of year submissions, we’re going to make that as simple as we possibly can. And we know how to do this, whether it was the VAT rate change 10 years ago, all the changes in the pension and payroll world, we’re used to these big large scale compliance changes and legislation changes, and we have always taken the lead and been number one for that, and we will continue to do that with Making Tax Digital.

Number two, we’re also going to invest very heavily in becoming the go to place for help and advice for Making Tax Digital. So we’re going to have all of the information that anybody that is affected needs to be compliant. We’re going to be providing free support, for anyone who’s being affected to get advice. There’s going to be a website, there’s going to be seminars all around the country, virtual seminars held online. We’re going to be having panels and focus groups, all free for people who are going to be affected, whether it’s somebody who’s just a landlord but above the threshold – that’s the second stage of Making Tax Digital – all the way to enterprise businesses, we’re going to be providing lots of help and support. We see that as a really important thing for us to do, because as we’ve learned in automatic enrolment and RTI, HMRC had okay advice but it wasn’t the depth of support that’s needed in different formats of people, so we want to fill a bit of a hole there.

And the third thing we’re going to do, and we’re absolutely committed to doing this and announced this promise last week at Accountex in London, we are promising that Making Tax Digital is not going to increase the admin needed to run your business. So we’re going to be using things like smart bank feeds that connect up to your bank to post transactions, we’re going to be automating data entry, we’re going to be making it a lot simpler to record your transactions using technology like machine learning and artificial intelligence and also character recognition. So basically, when we launch a submission for Making Tax Digital, no matter when you will be affected, our promise is that if you embrace it, it will not be extra time based on what you do today, and it’s actually going to save you time and we believe we can save the average business up to 10 hours a week in terms of less admin. So, they’re the three things Sage is doing to help businesses be compliant with Making Tax Digital.

Have you collaborated with HMRC on MTD software?

Yes, absolutely. There’s a formula to success here around these legislation changes. So the first one is, as soon as things begin we make sure that we are involved in every step of the way. So, there are many different forums and conversations with HMRC that software developers can get involved in. Some times they are very dry, as you can imagine, but actually it’s important that we are there. We attend every single session that’s available around software development, around HMRC partners, we attend every opportunity. We carry out focus groups and we also have dedicated conversations with HMRC to help them understand from our customers, who are also their customers really, how things are going to go down. We’ve been working really hard to drive the agenda with HMRC and lobby the issues that matter to our customers and our accountants.

So, one of the things that we have had some success with lobbying around is the definition of who should get free software provided by the commercial software industry, because it was very specific criteria that was quite complicated to implement, so we’ve managed to get that simplified. And we’ve also had some success alongside other people who were lobbying HMRC around the timelines that certain people were going to be affected. So we moved out one group of people to the second phase of 2019 from 2018, and we will continue to do that. So our focus around influencing them now is getting the details locked down, and having surety about when the Finance Bill is going to happen, what the plan is after the election, how do we get this locked down. Of course they’re in purdah at the moment so they are radio silent. However, we’ve already got seven or eight sessions planned in when we expect purdah to be lifted, with various senior members of HMRC, so we’re very close to them and we will continue to do that because we need to influence as much as we can. And they’re listening, which is great.

Will you be providing clients with any training initiatives on MTD software?

Yes we will be, so part of what I mentioned before is we will be giving a fantastic level of free help and support who are affected by MTD. We are also providing training, whether that’s virtual training that you can attend online with certification, we’re going to be providing one to one virtual training sessions. We’re even going to be offering on premise training for not only MTD changes, how to comply, but also how to get the best out of our solutions, to make sure it can save you time. So, we’re going to have what we call a service menu – some of it will be free, others will be very competitively priced, for somebody to come to your site you would have to pay for that but the value that you get from that, a business can pay a nominal fee and get it all taken care of.

And then through our accountants, which we are doing right now, we’re partnering with all of our accountants to get Sage and practice led seminars and workshops with their clients to encourage them now to get ready, and that does mean training them on some of the digital record keeping solutions that we have today, so for example people who are using shoeboxes, we are training them on Sage One so that they can start that process now of saving time on their admin, saving time on getting rid of the paper so that they are recording their income and expenditure, it takes an average of 8 seconds to log whether it’s an income or expense and that’s going to be down to 4 seconds when Making Tax Digital comes around, and literally that’s our focus now, getting people prepared and starting to adopt the technology now rather than wait until later on.

Should businesses see MTD as an opportunity to improve efficiency and embrace the digital world?

Yes, absolutely. So we believe that Making Tax Digital is a lever to encourage people to get the most out of technology that either exists today, or is literally just around the corner – and around the corner means 6 – 12 months not 10 years time. So, we know and are absolutely confident that if somebody is using cloud accounting today versus manual record keeping versus spreadsheets versus shoebox of receipts, you not only can run your business more efficiently, you can be a lot closer to your accountant or adviser, so they can give you real time help and support. Those two things alone translate into more turnover, less cost, less worry, less time wasted. That’s been proven and is generally accepted. So we are hammering that message at home.

Our position is that Making Tax Digital is an opportunity, play it as such. Now the key to doing that is not only with us going out there and saying that in the market and investing heavily in marketing for that, actually it’s about accountants. So we are trying to win the hearts and minds of accountants and get them to understand that this is an opportunity. Because, to be blunt, if it happens, which it’s going to, whether it happens in this timeline that HMRC has published or a year out, it’s going to happen because it makes sense with the digital world. Accountants who don’t embrace it will have one of two things happen- either they’re going to have a hard time when we are closer to the deadline, and it’s going to be harder for them to embrace it because they’ll have less time to prepare, or they’re going to become irrelevant.

Now, some of them will say this is an opportunity for them to wind down their presence in the industry, that’s 1-2%. The vast majority of the accountants we speak to, more than 50%, are completely on board with seeing this as an opportunity now. And the ones who are still yet to be boarded are starting to turn. At Accountex there were a lot of sessions on this, lots of conversations about some accountants where they were talking about seeing this as an opportunity. Some people are seeing it as an opportunity just to increase their outsourcing business, so in other words “yeah it’s going to be really hard for you to do that, I’ll do it all for you and you pay me more” – that’s not the right approach because you’re not getting the benefits of the technology that can work for you. However, that is one of the solutions that’s out there, so we see this as an opportunity. Accountants are key at this stage, they hold the key to influencing everybody. And then, towards the summer I think we will start to ramp up going directly to the people that are affected, especially when they’ll start thinking about being compliant.

What can businesses with little digital experience do to adapt to the measures?

The first thing they should do is have a conversation with their accountant or adviser today around what the accountant or adviser’s plan is for being compliant and how they can they take steps now to reduce the burden of change when it gets closer to the deadline.

Now, my advice there would be very simple, which is if you’re not using technology today to run your business, there’s no better time to start than now because you can do it at your own pace, you can run side by side, you can get training, you can make mistakes, you can learn, you can take the time to make that transition from where you are today to that digital world. If you leave it until Christmas, Christmas will be gone, you’ll come back into the office and it’ll be end of January before you do anything and you’ve got two months then to become compliant. And we saw this with automatic enrolment, people let things till the last minute, and it caused a lot of pain and it cost a lot of money. So we’re going to be doubling down on our efforts to share that experience with everybody and saying come on, don’t forget we’ve just been through this with payroll, you need to learn your lesson with regards to accounting.

Now, our accountants are pretty much clued up to that and are driving that message to the point where we are starting to prepare lists of people we know who need to make the biggest jump and are segmenting those guys and having specific conversations with them. So, the answer to your question is start preparing now, there’s no reason why you can’t embrace the technology now, you can start learning it and give yourself a bit of time.

With tax shifting to digital, are there any concerns surrounding cybersecurity that you’re mindful of as a software company?

Yes, absolutely. So there’s a lot of stuff in the news especially recently about the security of the cloud and everything else so it’s really important that when businesses are thinking about going digital they are choosing their software providers who have got a reputation for keeping their data secure.

From Sage’s perspective, we partner with Microsoft and Amazon around the security of data centres, and we invest a significant amount of money in our data security and making sure that things are kept there. And it’s also about reputation, so for the last 35 years we’ve been at the forefront of helping UK businesses being compliant, and businesses around the world, and that reputation has been hard fought. So we will continue to do that, and we take our commitments around that very seriously.

What I would say is that having your data stored in the cloud and in a secure manner is a lot safer than having data in different devices, having some things on your desktop and some things in different places, so there’s a natural security that’s built in with 2 stages of authentication etc in regards to the cloud so it is going to be a concern for some people, especially given the negative media around some of the things that have happened recently. But if you dissect the issues that we’ve had, it’s been businesses that haven’t got a reputation and a track record of security, or it’s been people using old technology. We’re really clear with our proven reputation, we invest heavily, we have got a clear commitment about what we’re going to do. And we think that will make a difference when people are making that choice.

 

Interview by Alia Shoaib, reporter on Accountancy Age.

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