As I prepare this article, my office is also preparing for the PHTM exhibition, and I am reminded about the changes that I have seen as an exhibitor, over the last twenty years. From being surrounded in the early days by chammy leathers and circuit radio sellers to being flanked by tech companies. In the last decade as an industry we have been through life altering and, in some cases, career ending changes, but all in all we as a trade have been attempting to future proof ourselves.
So, it is with the accounting profession, artificial intelligence reviewing and machine learning mean that the skill base for the accountants in the future is changing. The future looks bright for the strategists and thinkers, but the number crunchers had better beware, software does and will be doing their job better, quicker and cheaper. So here are the big changes in my profession coming up that will impact on our trade in the near future.
A quiet little deadline passed in Jan with the introduction of open banking. It is a series of new rules meaning that banks must let you share your financial info with other authorised providers. It was originally called for by financial industry watchdogs as part of an initiative by the CMA (Competition and Markets Authority) to look at how to increase competition in the finance industry, thus breaking the perceived monopoly-like behaviour of the large institutions. However, the EU beat them to it and introduced PSD2.
Its proper name is ‘The Second Payment Services Directive’. Banks were told to create application programming interfaces (APIs) to open up their data and infrastructure to third-party companies. All UK-regulated banks will have to let you share your financial data, like regular payments, companies you use and stuff like your spending habits. (bank and credit card statements). Authorised providers are people like apps, or other banks or accountants and bookkeeping software for that matter.
The idea behind these changes is that they’ll bring more competition and innovation to financial services which, in turn, it’s hoped will lead to more and better products to help manage your money. Up until now, you’ve been able to let third-party providers like finance apps have access to your bank account details and numbers. However, since Jan 2018, you are properly protected when you do. The platform will allow us as the consumer to compare prices of all products both retail and internal within the broad range of banking services. This will force the industry to transform how it looks at itself, because there will be a level of transparency that will force competitive organisations to compare, like any normal marketplace, in full view of us, the consumer.
It should also standardise compliance which means that it will be easier to share financial information that we can benefit from such as bookkeeping software and cashflow tools. Here is a funny thing though, the best example of an existing API (Application programming Interface its definition being a set of functions and procedures that allow the creation of applications which access the features or data of an operating system, application, or other service.) which in short is reason for the sudden rush of Private Hire (and other) Tech moving forward at such a great pace, is actually Uber, which uses Google Maps Android API on its Android version.
Great news for accountants and our Making Tax digital apps and systems that we are struggling to introduce to clients. If you have a bank account with any of the big banks, you’ve probably received a letter or email in recent weeks sharing this and asking you to read your new terms and conditions. We the accountant, will now have a more straightforward access to your data. We can focus on being your trusted advisor again.
So, like it or not open banking is here. It is a way to increase competition, going beyond just banks and helping all of us tap into the useful stuff, let’s face it the use of apps has transformed our industry and strangely enough the accounting profession is still running to keep up. Note here to my fellow exhibitors at PHTM in the Tech industry, it’s also time that these whizzy dispatch systems recognised the need to populate bookkeeping systems with the real time data you provide. Talk to me.
In a good way it will hand control of this data from the bank over to the consumer, allowing a personal customer or small business to share their data securely, at last. The aim is genuinely to simplify the system, but will it, as everyone is saying lead to a rush of innovation in the finance and banking sector that will free up accountants to concentrate on review and strategy rather than the burden of compliance that we have now?
Some industry insiders are starting to question. The current idea of open banking is open ended and left to the FinTech industry to take the lead, however will the big financial institutions really want to share with smaller third parties? Accounting software has always produced information that only the accountant sees and the “end result” goes to the client and even less to the HMRC. Also, the credit scoring companies and banks will not take kindly to everyone being able to make credit decisions on suppliers, or themselves for that matter. The pros and cons of sharing information will go both ways. Watch this space.
MTD (Making Tax Digital)
You didn’t think I was going to let you get away without the Making Tax Digital plug. So once again here are the ground rules, and remember, we are the test practice rolling out the MTD pilot, so you are getting it from the “horse’s mouth”.
Your books and records will be reported to the HMRC on a quarterly basis. There will be five reporting points, four quarterly and one final return. This means that you need to speak to your accountant to see if they are bringing in new software to deal with this or to make sure they tell you how they will be rolling it out to you the client.
For example, anyone that looks at the new Drivertax website will see that we now have a mobile books and records recorder for your phone, downloadable sheets and a simple pre-set spreadsheet so that people can get used to simple bookkeeping. Our expense photo app will be rolled out in the next few months. I am sure that most accountants are dealing with this as well as helping and training clients to deal with this. Most of these processes are simple but people need to get to know them. Be prepared.
In reality your requirement and costs will very much be based on your own feelings about technology, and everyone is different, but once again remember how people went from radios to XDA’s or mobiles, iPad and apps, not fun but in the ground transport industry we all got there in the end!
If you absolutely cannot cope in any way, for most people their accountant will take it all over from start to finish but there will of course be an increased cost. We do not have unlimited resources.
The Personal Tax account
Did you know that you can already find out loads about yourself online because the HMRC are centralising your information and updating for you? Good news for most of us, bad news for anyone who wants to be under the financial radar. Anyway, according to the taxman;
“HMRC will automatically use the information it holds, along with new data from third parties, to populate the digital accounts,”
This means that even if you use an accountant, all taxpayers will have their own online account, which will show in detail all your taxes; national insurance, income tax, PAYE and pension related info. It does mean that you can keep up to date with the NI position, make sure that your state pension is in order and supply the right income details to your accountant as well as checking what they have done and when. That allows us to manage your account whilst you can still see it yourself. It’ll also be possible to link the new types of bookkeeping software the new digital account.
Finally changes to the industry will also be affected by the oncoming rush of tribunals based on driver status, all of which will have a long term effect on both drivers and operators, for good and bad. It seems that potentially the wishes of the few will impact on the good of the many if these don’t go right. I will be looking at the results of this in the coming months.