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The Ultimate Tax Preparation Outsourcing Handbook for Accountants

The tax season is one of the busiest and most exhausting periods of the year for accountants. Each year, the HMRC announces certain changes to the UK Self Assessment tax legislation. In addition, tax preparation and filing are slated to take a digital route in the coming years.

Accountants are, thus, constantly on their toes to keep track of the changing tax regulations, connect with clients, assemble the necessary forms and paperwork, and prepare their teams for the Self Assessment tax season.

According to the 2021/22 tax statistics, the UK government raised over £916 billion in revenue from taxes in 2021/22. Of this, a whopping £228 billion was raised merely from income tax, which is a crucial indicator of the massive market and opportunity that lies ahead of accountants.

UK-tax-statistics

As the burgeoning job opportunities in the global market give birth to new individual taxpayers, the number of Self Assessment tax returns generated each year increases steadily. Although many individuals file their own taxes, a considerable percentage of taxpayers seek professional help from accountants.

Accountants, therefore, continue to remain busiest during the fourth quarter of the year. By the time January approaches, accountants are almost on the verge of burnout and gasping for a break. While there are several ways to deal with this effectively, a widely preferred solution is OUTSOURCING.

Tax preparation outsourcing offers several benefits to accountants in practice. But most of all, it is looked upon as a viable way to prevent staff burnout, squeeze in last-minute tax preparation and filing requests, and meet deadlines.

On this page, we will explore the scope of Self Assessment tax return outsourcing for accountants in the UK and understand the service in detail.

Tax Preparation Outsourcing: What You Need to Know

The UK government estimates about 32 million people pay taxes every year. For most of these individuals, the income tax is deducted directly by employers and pension providers via the PAYE system. For self-employed individuals, however, the government does not know the amount of taxes owed. The Self Assessment tax return system is crucial for these individuals.

Millions of individuals in the UK file Self Assessment tax return every year. While some of these individuals manage the tax filing process themselves, several others seek the professional expertise of an accountant or accountancy practice. This is primarily because taxes are complicated and tedious and require accurate knowledge and understanding of the latest tax regulations.

The coronavirus pandemic further added to the complexity of tax preparation. For example, the furlough scheme supported taxable wages and salaries to protect household incomes and aid businesses. These schemes, regulations, and calculations are difficult to comprehend for self-employed individuals and business owners. This is where the expertise of an accountant in practice becomes crucial.

Each year, accountants and accountancy practice owners get hundreds of Self Assessment tax returns to be prepared and filed before the due date. It takes immense time and effort to prepare and file each tax return, often leading accountants to severe burnout. But turning down these requests is not an option as it means loss of potential business and revenue.

In such a scenario, outsourcing tax preparation services can be a fruitful option for accountants.

Outsourcing simply refers to transferring a part or whole of your work to an experienced professional or entity outside your firm. Tax preparation outsourcing is a demonstrated strategy for accountants to sail through the busy tax season and can benefit accounting firms in numerous ways.

The Challenges of the Tax Season

Let’s face it – the tax season is no less than a horror story. Accountants who have dealt with last-minute tax preparation requests from frantic clients will agree with this fact.

The busy tax season commences in November and extends all the way to January. While the world revels in festive celebrations during this time, accountants remain bound to their desks, struggling with the seemingly endless tax returns.

When it comes to tax season challenges, we do not have one issue to battle. Accountants encounter multiple challenges during the tax season. Let’s look at some of them.

Capacity Challenges

Almost every accountancy firm is battling capacity challenges in 2022. The global accounting industry has been gripped by a severe talent shortage, making it difficult for firms to hire and retain talented accountants.

Moreover, since the busy tax season coincides with the holiday season, many accountants face a shortage of workforce due to employee absences.

This automatically reduces the capacity of accountancy practices to take up new work or finish the existing returns within the Self Assessment tax return deadline.

Last-Minute Requests

It is a matter of fact that all your clients will not be the same. While some clients are mindful about sending their documents on time, some don’t bother to get things done until the last minute. So, no matter how hard you try, you cannot avoid last-minute Self Assessment tax return requests.

Stress and Burnout

A 2021 Indeed study found that burnout is common among accountants today, particularly in the post-pandemic world. The research showed that 52% of the survey respondents felt burnt out, which is up from 43% before the coronavirus pandemic.

The tax season being a crucial time marked by piling tasks and last-minute requests, stress and burnout are common among accountants during this period.

There are several other challenges that can hinder an accountant’s productivity and efficiency during the busy season. However, all these challenges can be effectually dealt with when you outsource tax preparation services.

Here’s a complete guide for accountants to maintain sanity during the busy season.

The Process of Tax Preparation Outsourcing

The world of tax is changing. With the advancement in technology and digitalisation of accounting processes, tax operations are slated to take a turn in the years to come.

The HMRC has already given momentum to the Making Tax Digital (MTD) initiative. Additionally, the Self Assessment tax return legislation keeps changing every month, making it difficult for accountants to keep pace with it.

Tax operations are no longer only about preparing and filing income tax returns. According to a Deloitte study, companies and tax leaders expect more from tax professionals beyond the core tasks. Therefore, outsourcing the core tax preparation task to experienced professionals is a viable solution for accountants.

Outsourcing, however, is not a one-step process. A lot of thought and research goes into the personal tax preparation outsourcing process. Let’s understand these in detail.

Step 1: Research & Due Diligence

Like any other crucial business decision, the process of outsourcing begins with research. Research here implies everything from market study and competitor analysis to finding the right outsourcing partner, background checks, and due diligence.

Step 2: Candidate Selection

Once you finalise the right tax preparation service provider for your practice, the outsourcing firm shares the profiles of their best candidates. Accountants can schedule virtual interviews with these candidates and choose the right resource for their firm.

Step 3: Agreement

The next step in the tax preparation outsourcing process is to draft and sign a Service Level Agreement (SLA) laying out the framework for the outsourcing association.

Step 4: Onboarding

After the agreement is signed, you are ready to onboard the outsourced tax experts to your team.

Although onboarding is the last crucial step in outsourcing your tax preparation work, it is equally important to take the steps needed to maintain this association. This can be achieved through regular communication, job tracking, and providing constructive feedback and appreciation.

Benefits of Tax Preparation Outsourcing

Outsourcing is an excellent way for businesses in today’s world to tackle critical issues such as capacity challenges without adding up to overheads. Tax preparation services help accountancy firms, particularly small and medium-sized practices, navigate the tax season effectively without compromising the quality of work and efficiency.

Some of the most significant benefits of outsourcing tax preparation services are listed below.

Get rid of staffing concerns

Staffing is currently a grave issue for the accounting world. With the onset of the Great Resignation, it has become more challenging than ever for accounting firms to retain talented resources and hire new employees.

A survey by accounting giant PwC revealed that one in five participants were likely to switch to a new employer by 2023. Moreover, planned employee absences, unexpected leaves, and unforeseen resignations are rampant during the end of the fourth quarter, which also happens to be the holiday season.

In such a scenario, hiring help from across the globe makes sense for an accountancy practice. Since this is the time most clients submit Self Assessment tax returns, it is a good idea to outsource tax preparation during the peak season.

Build capacity for your firm

Let’s assume your firm is adequately staffed. But do your resources have the capacity to take up additional workload, onboard new clients, or focus on value-based services?

We know clients now expect much more from accountants beyond core tax preparation and accounting functions. These professionals are expected to be advisors and subject matter experts, helping firms scale amidst the growing industry competition.

Tax preparation outsourcing can be fundamental in creating capacity for your firm by delegating the cumbersome tax tasks to outsourced professionals, thus freeing up your internal resources.

Manage tax season rush

Year by year, the number of taxpayers in the UK keeps increasing. While the UK government collected receipts worth £916 billion in 2021/22, the receipts collected in 2020/21 amounted to only £794 billion.

As the taxpayers keep rising, so does the busy season rush for accountants. No matter how well your firm is staffed, last-minute tax preparation requests can disrupt your holiday season bliss.

Hiring help from experienced tax professionals can offer a much-needed break during these times. Outsourced tax experts are well-equipped with the UK tax legislation and can process last-minute requests efficiently, keeping up with the Self Assessment tax return dates.

Creating a Self Assessment Tax Return Outsourcing Strategy

Outsourcing can immensely benefit accountancy practices during the busy tax season if done correctly. However, you need a solid outsourcing strategy in place to get it right.

This can be challenging if you are an accountant or accountancy practice owner who has never outsourced before. Let’s understand a Self Assessment tax return outsourcing strategy and learn how to devise one for your firm.

What Is a Tax Preparation Outsourcing Strategy?

A tax preparation outsourcing strategy is the framework that lays down the objectives, guidelines, and procedure of outsourcing. Before you look for an outsourcing provider to partner with, consider creating a robust strategy that will guide you through every step of your outsourcing journey.

A good outsourcing strategy details the goals you wish to achieve from outsourcing your tax preparation services. It also includes your business’s specific requirements, its strengths and weaknesses, the detailed process of outsourcing, and the metrics you will use to measure the performance.

How to Devise Your Firm’s Self Assessment Tax Outsourcing Strategy?

As mentioned earlier, creating a foolproof Self Assessment tax outsourcing strategy can be confusing if you have never outsourced before. Let’s break down the process into steps.

Step 1: Research

Whether it is about creating an outsourcing strategy for your firm or finding the right partner to outsource to, research is a step you cannot skip. It is, in fact, the most important step that largely defines and affects your outsourcing association.

Research the latest outsourcing trends in the market and closely watch what your competitors are doing. Determine your firm’s standing and the amount of work that needs to be outsourced. Look at your past profits and estimate your outsourcing budget.

Step 2: Objective Setting

Once you have all the information you need, make a note of it. This will help you set clear objectives for your tax preparation outsourcing strategy. Formulate SMART goals for your firm and list the metrics you would use to measure them.

Step 3: Outsourcing Process

The third step in the process of strategising involves laying out the plan for the outsourcing process. Although the execution of the outsourcing process will involve your service provider, you must have a rough plan in place to define it.

For instance, try to answer questions like – when should you outsource, how would you like your outsourced team to function, are you looking for offshore resources or onshore support, would you want them to work on your existing software or incorporate technological changes, etc.

Step 4: Analysis

Much like research, analysis is a crucial aspect of your outsourcing strategy. Assess your firm’s goals for the last year and how you have progressed in the current year. Determine your firm’s capacity against the previous years and compare it with your goals.

Lastly, analyse what is working out for your firm and what’s not. This will help you make the decision about when and how to outsource tax preparation.

Questions to Ask While Shortlisting Tax Outsourcing Specialists

Self Assessment tax preparation requires a great deal of knowledge, technical expertise, and understanding of the changing tax legislation. Therefore, accountants must be mindful of resources’ skills and experience while shortlisting them for the tax preparation job.

Philip Fisher, columnist at AccountingWeb, once quoted, “For any firm of accountants, with the exception of losing a major client, the most costly mistakes are going to relate to employees. Indeed, if you hire the wrong employee or employees, that might lead directly to the loss of a key client.”

This philosophy is true for your internal teams, but it also applies to your outsourced tax specialists. This is why you must be vigilant while choosing outsourced resources for your Self Assessment tax return needs.

Here are a few questions you must ask while interviewing and shortlisting candidates for tax preparation outsourcing.

What is your level of expertise?

One of the most significant reasons accountants outsource tax preparation services is to get it done by experts. Therefore, it is essential to assess the level of expertise of your outsourced staff. Ask them about their industry experience and the kind of clients they have worked with to understand their capability.

What are your technical skills?

The tax function is accelerating towards a digital and sustainable transformation. With MTD supposedly being the future of tax preparation and filing in the UK, your outsourced team’s technical knowledge and software skills matter more now than ever.

What is your turnaround time?

The Self Assessment tax season is a busy period. With a bunch of tax returns pouring into your office every day, you want to hire experienced staff with a quick turnaround time. So, the next time you decide to outsource, do not forget to ask your tax preparation outsourcing partner this question.

Do you have a tracking and performance monitoring system in place?

Although you are outsourcing your tax preparation requirements to experts, you would want to track and monitor the progress of tasks regularly. Ask your outsourcing partner about their tracking and monitoring tools and check if they have a robust system in place to facilitate it.

Ask them about their additional services if you are looking for a long-term association with your outsourcing provider beyond just tax services. Get a good understanding of the solutions they offer and how they can benefit your firm.

Should Accountants Outsource Tax Preparation Services to India?

When it comes to outsourcing, India is among the top service destinations. Over the years, several companies from diverse industries worldwide have outsourced numerous business functions to India.

A comprehensive study on accounting outsourcing by ResearchGate revealed that accountancy firms in the UK prefer outsourcing their functions to India for their cost benefit. The firms participating in the research reported over 40% to 50% cost savings by outsourcing their accounting and bookkeeping functions to India.

Outsourcing tax preparation services to India offers a range of benefits to accountants and accountancy practices. Some of them are listed below.

Advantages of outsourcing tax services to India:

  • Cost-effective services
  • Greater productivity and accuracy
  • Updated knowledge of the UK tax legislation
  • Unmatched technical expertise
  • Faster turnaround times
  • End-to-end data protection and security
  • Enhanced profits

Summing Up

The finance and accounting industries are growing at a rapid rate in 2022. A recent Finance & Accounting Outsourcing (FAO) Market report confirmed this fact through in-depth research and analysis of the industries.

Outsourcing is thus the next big thing in the accounting world and a necessary means for growth-focused accountancy practices to survive in the competitive market.

The tax season being a tough time for accountants, it becomes necessary to seek external help to manage the rapidly incoming work and meet the Self Assessment tax return deadline. However, before outsourcing, ensure you are thorough with your research and have assessed your firm’s requirements.

Customised Self Assessment Tax Outsourcing Solutions with QXAS

QXAS is a global accounting outsourcing firm providing customised tax preparation outsourcing solutions to accountants and accountancy practices. Established in 2003, we have a rich 18+ years of experience in serving multiple clients across the globe.

Our expertise lies in understanding our clients’ requirements and providing tailored staffing solutions that aid their growth and improve their capacity to scale.

QXAS is the accounting outsourcing division of QX Global Group, an industry leader in accounting outsourcing solutions. We have a massive team of 1500+ experienced accountants and tax professionals that seamlessly adapt to your processes and work as an extension of your team.

The Self Assessment tax season witnesses numerous changes in terms of legislation and technology every year. With taxes set to go digital in the coming years, we ensure our resources are always industry-ready by training them extensively at the QX Academy.

We comprehend the stress of the busy tax season and the dire need to finish last-minute returns before the Self Assessment tax return deadline. With QXAS, your search for the right tax outsourcing partner comes to an end.

Why Choose QXAS?

  • Dedicated team of 1500+ skilled and highly trained tax experts
  • Customised pricing and engagement models
  • Unique ‘People First’ approach in every undertaken project
  • Free trial for risk-free service evaluation
  • First GDPR and ISO 27701 compliant accounting outsourcing company in India
  • Professionally affiliated with prestigious organisations like ICAEW and ACCA
  • Fully compliant with ISO 27001 for information security and ISO 9001 for quality
  • Proud winner of 100% score in all BSI audits

To learn more about our services or avail a free trial, call us at +44 208-146-0808, drop an email at [email protected], or log on to Outsourced Accounting, Bookkeeping, and Payroll Services | QXAS UK.