What startups can learn from the taxman

The tax authorities aren’t usually the most popular bunch amongst small businesses and entrepreneurs. Many will only known the taxman through an endless series of manila envelopes that clutter up their doormat, demanding money and the filling in of lengthy forms. Be it the IRS in America, le Centre des Impôts in France or Canada’s Revenue Agency, you’ll find no love lost for the taxman in startup circles.

The UK tax body, Her Majesty’s Revenue & Customs, is no different. In the last year HMRC has been dealing with accusations of incompetence, inaccuracy, overly aggressive enforcement tactics and just plain shoddy service. However, look past the bumbling public sector exterior and HMRC is doing some interesting and impressive things technologically.

HMRC has been amongst the most proactive tax authority in the world in moving their services online, even ignoring a Government Committee recommendation that offline services be retained for those without Internet access.

Since the start of their push towards web filing, the volume of personal tax returns submitted through HMRC Online Services (the dedicated portal for all things financial) has more than tripled from 23% in 2006 to 77% last year. In the same period the number of VAT Returns filed online has mushroomed from just 5% to 67%, and the percentage of Employer Annual Returns filed online is now a rather staggering 99%.

The raw numbers here are impressive too. During the busiest period for personal tax return filing (which, predictably, falls on the evening of the last day before the deadline) Self Assessments are completed via Online Services at a rate of almost 650 per minute, and in total over 7.1 million pass through HMRC’s website.

Not only is HMRC making huge progress moving its services online, it is also overhauling existing infrastructure and processes to be more cost-effective and efficient.

It was announced recently that HMRC will be the first arm of the UK Government to move all their data to the cloud, which could save them around £1m every year. HMRC is also pushing forward with the rollout of Real Time Information (or RTI), a ground-up rethink of how payroll information is filed. RTI requires tax and salary information to be submitted to HMRC on or before each payday, and the data must be sent to HMRC via the Government Gateway which is, in essence, a huge API.

So here we have one of the largest Government departments, with 67,000 staff and an annual budget of £4 billion, who are successfully using cloud services and APIs (plus some complex technological infrastructure to make sure the whole thing doesn’t fall down) while navigating the mire of public sector procurement and ensuring they adhere to all the relevant rules and regulations.

Despite the negativity surrounding their customer service and ability to collect the correct amount of tax, HMRC is a technological success story on a grand scale, and one startups can learn a lot from.

1. If a tanker can turn this sharply, imagine what your speedboat can do

Never be afraid to completely turn your business around. HMRC has ploughed ahead with huge projects that would make even the most seasoned IT Contractor blush.

If one of the largest tax collecting organisations in the world can reengineer their services from the ground up, it should be a piece of cake for a nimble startup!

2. It’s up to you to lead the way. If you’re right, your customers will follow

HMRC’s introduction of Real Time Information has gone ahead despite howls of anguish from accountants and their software providers (who aren’t generally the most forward-thinking bunch), but once the transition is made it will result in huge savings for HMRC, and more efficient service for accountants.

When the time comes a fundamental rethink – rather than papering over the cracks – means a better business will emerge the other side, even if it means a painful changeover period. It might hurt in the short term, but it’s beneficial for both you and your customers.

3. Don’t listen to advice 

Most of HMRC’s modernisation has been against the advice of Ministers, Committees and public bodies, who said the changes would be too complicated or costly. If HMRC had followed the advice of Ministers or Government committees their move to web filing would have been delayed by years. If they’d listened to the advice of accountants Real Time Information might have never seen the light of day.

HMRC wisely ignored these naysayers and took what they knew to be the best course of action. Now, rather ironically, those same naysayers look likely to be the main beneficiaries of these new schemes.

Photo: Images of Money, Flickr

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About the author

Jon Norris

Jon Norris is a freelance writer and Web Editor at online accountancy firm Crunch

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