At the recent Accountex North summit, Adam Owens – our technical director and all-round tax geek – had the opportunity to grab a few words with Andrew Hubbard on the future of tax.
As a former CIOT President, with a long and varied career, Andrew has seen it all when it comes to the many changes the profession has faced over the years, and remains at the cutting edge of the profession. They naturally found themselves discussing these changes – both historic and future.
So Andrew, for the few readers that may not be aware of you, tell us a little about your background and career.
After studying music at university, I joined the Inland Revenue as an Inspector of Taxes in Nottingham in the mid 1980s. I knew nothing about tax then – indeed I don’t think I had ever paid tax up to that point! – but the training I had in the Revenue was superb and it gave me a strong grounding in the fundamentals of the tax system which has been invaluable throughout my career.
I left the revenue to join what was then a big 8 firm and stayed with them for about 12 years through various mergers. I then moved to one of the firms which ultimately became part of Tenon, where I had various national roles in policy and technical areas. When Tenon collapsed I went across with most of the business to Baker Tilly which subsequently became RSM. I stepped down as a partner last year but still do some consultancy work for the firm.
Writing about tax has always been an interest of mine – I won the tax writer of the year award in 2006 and three years ago I became editor in chief of taxation magazine. I have more recently increased my involvement with Lexis Nexis (who publish the magazine) and now work 4 days a week across a variety of editorial and writing roles.
In the midst of all of this I somehow, not quite sure how, managed to be President first of the ATT and then the CIOT.
You’ve certainly had a long and diverse career. In that time, you’ll have seen a lot of changes within the profession…
How would you say technology has impacted the nature of the role of the tax professional, from when you first started to the present day?
Technology has had a profound impact. When I started there was still a typing pool and everything was done by letter. The daily rhythm of the office was dominated by the time that post was delivered and collected. I remember how distrustful we all were about the “new” fax technology and were sceptical of whether it would ever work(!). I even remember sending a telex.
Computations were all done by hand and then typed up – our secretaries had huge skills in setting out accounts and computation on a typewriter. The first tax computation software was a huge step forward although again people took a long time to accept it. I had one senior manager who would insist on adding up all of the figures in columns because he didn’t trust the computer to get it right.
Technology has speeded everything up – both in terms of access to information and the ability to communicate. If you were working on a sale and purchase agreement for example, amendments would be put through on a typewriter and sent off to the other side by post. This meant two things. The first is that people did spend more time trying to get things right first time. The second is that there was a bit of space to consider any changes. Now with email there is an expectation that everything will get turned round in a matter of minutes. I’m not sure that in the end the process is that much more efficient than it used to be.
It’s interesting to hear how information technologies, whilst beneficial, have also increased the pace of work. But that’s not to downplay the advantages of course….
What would you say are the most positive developments that technology has brought to our profession?
Probably the availability of information, exactly when you need it.
Back when I first started in the profession the only way we could access information on budget day was to send a couple of students to Somerset House to pick up a copy of the pack and then wait for them to get back to Nottingham on the train.
When we finally got a copy in the late afternoon, me and my team would make copies and pore over it, way into the evening, to make sure we were fully briefed on all the new rules.
It’s a lot simpler now. Anyone can access new legislation immediately when it’s published. Fewer late nights, though of course as there is far more published on budget day than there used to be, so even with an earlier start time, digesting all of the information still seems to take most of the night!! The truth is, the change didn’t happen overnight. Even when fax technology was available we still sent graduates on the train the first couple of times just in case!
And it’s not just Finance Bills – we can access any legislation, HMRC Guidance notes, and other materials instantly at the click of a button.
When you think of it, these are some huge changes…
Yes, and even simply looking around us today, these changes are immediately apparent.
Here at Accountex North we’re surrounded by booths from hundreds of different software providers. Much of it is entirely new technology. The pace of change is really quite staggering. The possibility of real time exchange of information between clients and their agents opens up all sorts of new ways of working and should lead to greater process efficiencies. But it won’t happen overnight and clients who won’t or can’t use modern technology will still need to be serviced. But I suspect that they will become fewer and fewer in number. Eventually we will have an entirely digital profession.
So that brings us to the present day. Despite all these changes, you’re still right at the cutting edge of the profession…
I’ve just watched your presentation on Making Tax Digital – which was very interesting I might add. I’ve even since integrated some of the points raised into our Diagnostic software!…
Tell us more about your views on HMRC’s digitalisation.
I’ve always been a strong supporter of HMRC’s digital ambition and I still am. It would be extraordinary if HMRC were not to want to enter the same digital world as accountants and their clients.
But a change of this nature has to be done in a controlled manner and with the support of the profession. I am afraid that HMRC’s original timetable was completely unrealistic – had it been carried through then we would all be doing the first quarterly updates for income tax, which is a scary thought. I was very pleased when the new minister announced a slowdown in the time table, because it does allow time to build a consensus and get the systems right. This is not just an IT issue – I am still concerned that the scale of the change which will be required to the taxes management act has still not been grasped.
MTD for VAT, which comes in this year, is now the guinea pig. That itself creates many issues, not least because the software industry has not generally been involved with specific VAT products, though we can see around us today that suppliers are now beginning to offer solutions. I hope that everything will be ready in time.
The main issue for MTD (and this will also apply to income tax when it eventually comes in) is record keeping. For the first time businesses will be legally required to keep an electronic record of every transaction. People are only just beginning to understand the implications of this. There were certainly some worried expressions in the audience earlier today when I started to talk about what would be required.
There seems to be a lot of responsibility on the tax professional to become more tech savvy. And, to be honest, I think this scares some in the industry.
Do you believe that technological affinity will need to become a skillset for all tax professionals, or do you foresee a separation of responsibility in firms?
There will always be a need, particularly in the larger firms, for technology specialists but I believe that young people coming into the profession will have never known a world without IT and will naturally use IT skills as a natural part of their work as tax advisers.
The world has certainly changed from the early days of computing – I recall one manager (who was not that old) simply refusing to touch a computer keyboard saying that “I didn’t train as a Chartered Accountant so that I could be a typist!”
Well, I can certainly attest to the idea that the “new generation” of advisers can barely imagine life without technology… As someone who started in this profession when email was already ubiquitous, hearing your details of professional life before the internet sound almost mythical!
We’ve often heard it said that, due to new technology, compliance work – which is currently a huge area of tax – will become less resource intensive.
I think that this is part of an inevitable process of technology being used to take out more and more of the basic processing work. I remember going out on an early audit to find a comptometer had been hired. This was a specialist adding machine which came with its own operator (indeed I think that the operator herself was also called a comptometer just as early typists were sometimes called typewriters!).
Artificial Intelligence has some interesting applications in taxation. One is bulk analysis of data – whether it is for automatically examining thousands of invoices for determining what expenditure qualifies for capital allowances or in fraud detection. I’m not sure ultimately what absolute time savings some of these developments will bring but I think that they will mean that time is used more effectively. If you take the capital allowances example. Say you have 1000 invoices. In the past somebody would have had to go though each of those. Now even the very best people get tired and distracted, so the accuracy rate could be quite low. If instead a machine has done the pre-selection and has found 450 which don’t qualify and 450 which do, then it can leave only 100 marginal cases which an individual can then go through, with a much greater chance of each one being considered properly.
But there is a much wider role for artificial intelligence in the tax system. In our own world as information providers we at Lexis Nexis are looking at how AI can help users get to exactly the right piece of information which they need from the vast data sets which are available.
And AI can also play a part in diagnostics – in helping an adviser to give the right advice to a client where there are many different options available. Some people are scared by this or think that it will never happen. But it is happening in all sorts of areas. I went to see my doctor recently on a routine matter and he used a piece of diagnostic software to see which of three possible medications would be the best for me. I didn’t see this as a problem at all and nor did I think that it showed that he was not up to the job. Far from it – he was using technology to help him in his professional role. I didn’t think that he had been replaced by a robot!
I am absolutely certain that the next generation of tax advisers will being using tax diagnostic tools as a matter of course. But that will not detract from their professionalism as advisers: they will still need all of their skills to understand their clients’ issues and give them the right advice.
In fact I would go as far as to say that one of the most important skills of the tax practitioner is knowing what the right question to ask is. Once you have got the right question the answer will usually follow. Technology can help with that.
Advisory work is often suggested as becoming more important. Do you agree with this sentiment and if so, how do you think this transition can work?
At one time we did think that MTD was going to have an immediate effect on the compliance/advisory balance in the profession but it is clear that if there is to be such a change it will be much more gradual and over a long time. But I am always reluctant to draw a distinction between advisory and compliance work simply because without the proper compliance the best advisory work counts for nothing.
I’ve seen a case (not my own I hasten to add) where somebody was entitled to tax relief but simply forgot to put the claim on their tax return, or where they treated something as taxable which should have been tax free. So there must always be a very strong link between compliance and advisory.
I think that the nature of compliance work is changing. There is less of the pure processing that there once was, but issues around disclosure and reporting are more important than they once were. The tax regime is unforgiving these days, and poor compliance is much more likely to lead to penalties (for the adviser as well as the client) than it once was. What and how you tell HMRC is critically important and that is all part of compliance.
And finally, as someone who has experienced and thrived on change throughout his professional career, what one piece of advice would you give to those that are relatively early on in their professional life?
Enjoy what you do! More seriously I would say that the best practitioners develop what I think of as a tax nose – i.e. the ability to sniff out what the real issue is. That is quite different to pure knowledge.
I recall years ago talking through an issue with a young clearly very bright student. The situation was one which was an ideal candidate for rollover relief. If I asked her to set out the conditions for rollover relief she was able to list off the categories of qualifying assets very quickly – hovercraft, space stations and suckler cow premiums and all – but she couldn’t relate that abstract knowledge to the facts in front of her. Fortunately, a lot of people do develop this nose and go on to be first rate advisers. Some of my best experiences in tax have been coaching people through this and seeing their eyes light up when they get what being an adviser is all about.
So become a tax detective and never be afraid to ask the simple questions – don’t get bogged down in the detail until you have seen the big picture.
That’s great advice. I couldn’t agree more. Being a tax adviser is not just about knowing the rules, or even applying them “after the fact”. It’s about being able to have that open dialogue with clients, to understand their objectives, so they can be guided by this knowledge. That’s where tax advisers can add real value.
It’s clear that technology is having a huge impact on the profession. And from our discussions, it seems it always has! But even as enabling technology augments the role of the tax professional, with the introduction of tax diagnostics and AI developments, that important skillset – the ability to understand clients and their motives and use this to guide them – will remain as essential as ever.
Thanks for your time and your insight Andrew!
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