How to fall in love with tax season
Had your reminder to complete a tax return for 2023 yet?
If you are a tax practice, I wonder how much you look forward to the coming tax season. Having left that behind due to a change of business, I certainly didn’t miss the end of the 2022 tax season, just around 10 weeks ago. Certainly some of my former colleagues had a very busy January.
A few years ago an article on LinkedIn/Accounting web, can’t recall the writer, argued we shouldn’t accept the last minute rush to meet the HMRC deadlines. I certainly agreed, but how do we change well ingrained habits.
What is the process for the 2023 Tax season
Anyone required to submit a return has to file it with HMRC by 31st January 2024. At the same time they have to pay the balance of any tax due, plus a payment on account towards the next years liability.
If you owe less than £3,000 and pay tax through PAYE the deadline to have it coded (and collected) the following tax year is 30 December.
So a gap of 10-11 months to receive the data from clients, process it, prepare returns for approval and then submit them.
So what are the factors leading to a delay in processing?
Getting to the start
A tax return summarises all the income and gains of a taxpayer. To complete the return the client must provide all the data. Some can be obtained direct from HMRC but not all. Ideally you need everything before starting the job
You need confirmation of earnings, P11d statements, possible, share option details, pension amounts etc
If the tax payer is self employed, will need to prepare accounts, often by a different department. This will add to the time budget. If members of a partnership, notifications of profit shares will need to be provided from others.
Many company directors will have dividends. If not a client company, will need these details. If the company does not have a March year end, more care is required to pick up dividends in line with the tax year. Third party dividends will need to be advised or summaries from Investment managers obtained.
For clients with rental income, income statements may have to be prepared or share of jointly owned properties advised.
Sometimes you will know a client has sold a property (under the reporting 60 day requirement), often sale proceeds from disposal of non property items are advised when data is requested and gains on these or other assets will need capital gains calculations to be prepared
There are plenty of other bits and pieces which will be needed to get the job done.
There is no standard return. So with all of these ingredients how do we get it all together?
Types of clients
There are the super organised that will send virtually all that’s needed without any prompting. Then there are the super unorganised that will leave everything to the last minute, and when they do finally send in that missing P60 or dividend voucher, its for the year before! Between, there is a mix who provide most if not all and require various levels of prompting.
So how do we speed up the process? Why should we bother? Are there are any advantages?
At my previous practice we tried various things to get the data in early. The overall objective was to take pressure away from December and January by starting more of the preparation work over the summer months.
Clear advantages are:
if a repayment is due, client gets it back earlier.
Avoids having to tell a client in January that they need to pay a large tax bill in just a few days.
Smaller liabilities can be coded if the return is complete before December 30th.
If return is ready by July, the second payment on account can be modified if overall liability is going to be less.
For the practice a reduction in overtime in January and
reduced possibility of errors due to pressure of work.
Client satisfaction ratings should increase
Less clear advantages are
the accounts only clients, don’t have to suffer a possible degradation of service levels during November to January.
tax staff may feel under less pressure
more time for tax planning opportunities
But it starts with the client, they all have to cooperate but we also have to plan the work around other work such as the accounts prep.
So what can you do?
You and your team hopefully will know who the easier clients are and who the laggards tend to be.
Some level of stratification would be needed. For the sake of discussion lets use ‘SAW’
S is for summer, clients who can be prepared by end of August, A is for Autumn, clients who can be processed by end of November, W are the winter clients, December and January last gaspers.
Over time the objective would be to push the Winter clients into Autumn and so on.
Each group will need slightly different treatment, the Autumn ones are more likely to be more complex and need accounts preparing but not exclusively. The Winter clients may need some intensive nagging!
At my previous firm we sent out a basic reminder to all registered clients inviting them to send in their data. We also offered to send them a detailed summary of last years entries, access to a basic online portal to upload data and made some basic spreadsheets available to be used to summarise data for rental statements. This was done in April.
The ’S’clients responded well to this.
We also offered an incentive, a voucher (for £10) for all clients who sent in all their data by July 31st. Previously we tried a bottle of wine but somehow a voucher became for more attractive.
Anyone who sent in their data after November was charged an extra £100, but that didn’t seem to be a big incentive!
To get someone to do something they fundamentally don’t want to do (something I’m sometimes guilty of) takes a change of approach. The vouchers worked, we also saw some of the ‘Winter’ group convert to ‘Summer’. Fear of missing out was probably a factor for them.
If the voucher idea is not to your liking maybe a donation to a charity for all data received by a set date (fixed or within a month of the date requested) might appeal to your client base.
Just try a bit of creative thinking.
These letters were good but not as effective as they could have been. Data gathering is often a major time element in the tax return process so fine tuning is needed.
Most accounting and tax teams have great technical skills but not always as good on the client communication side.
This could be a great opportunity to look at customer care courses, there are many out there. One I looked at briefly is provided by thinkhuman.org their Human Centred Writing course, has in one of its key aims to “get people to do what you ask” now that has to be a useful approach. This course costs £120 per person. Something like this if never done before could really make a difference, not just in tax preparation but other aspects of practice activity.
The January rush has persisted for too long, is it not a good idea to get them completed earlier, a real win win for the client and the preparers?