Outsourcing tax preparation work to India: What UK accounting firms need to know

By: Vishal   |   26 Jul 2018  |  
Tags: Tax preparation Outsourcing
Tax preparation outsourcing to India for UK Accounting firms

More and more UK accounting firms seem to be jumping on the outsourcing bandwagon, according to a survey of IRIS Software customers. Their report suggests that in the next five years “30% plan to delegate work to external providers”, with that figure “set to increase to 50% in ten years”.

These are substantial numbers when you consider how quickly the shift is occurring. By outsourcing tax preparation services to India, you not only get the extra help you need getting through the busy Self-assessment tax season but also make the season more profitable. 

Gains from outsourcing tax preparation to India:

  • Using a good outsourcing company allows accountants to scale their practice up or down according to busy and slow periods. Plus, accountants that successfully manage to outsource their tax preparation work are likely to avoid the hiring of additional staff come January when there is an influx of self-assessment tax returns.
     
  • Another motivator for outsourcing self-assessment tax preparation work to India is the quick 24-48 hour turnaround time for each tax return. Because of the time difference between India and the UK (4.5 hours), a tax return sent late in the evening can be completed in time to be reviewed by the UK firm in the morning.
     
  • Lower labour costs is one of the biggest drivers for outsourcing tax return work. According to Payscale.com a senior accountant in the UK earns £34,032 a year . The cost for the same is £21,600 a year if the work is outsourced.
     
  • Another way outsourcing boosts business capability is by enabling accountants to expand their service offerings. When accountants outsource they are in an advantageous position to take on more work and provide more services to their clients. 
     
  • Perhaps one of the most important gains from outsourcing is that it gives in-house, front-end teams more time and energy to focus on building relationships with clients and providing advice.  

Client data security – Priority # 1

When considering a tax outsourcing solution, you need to ensure that you do it right. This means ensuring your client data is safe and secure. So before you partner with an outsourcing company in India, do your due diligence from a security perspective and make sure that the outsourced accounting and tax preparation vendor:

  • Follows world-class security standards such as ISO 27001.
     
  • Is GDPR-compliant. Preferably via a framework such as BS 10012:2017, as it’s the only available industry code of conduct that currently aligns with GDPR requirements.
     
  • Maintains Non-disclosure agreements. 

Why is GDPR important to UK accounting practices outsourcing tax preparation work to India?

By working with non-compliant outsourcing companies post May 25, 2018, you expose yourself to a risk which has the potential for reputational damage, not to mention significant new fines which are up to €20 million or 4% of a company’s global annual turnover, whichever is higher. We have covered this topic in detail in one of our infographics. You can see it here

How tax outsourcing works:

The process of outsourcing self-assessment tax work is pretty straightforward. There are three ways: 

  1. Working remotely

    Using secure virtual technology like VPN/RDP/Citrix/ GoTomyPC, the outsourcing company in India logs into your system and completes the tax work

  2. Working on a secure FTP server

    All tax documents are scanned into a secure FTP portal, collected and worked on by tax teams in India, and delivered back to the portal.

  3. Working in the cloud

    This requires accountants to provide (their India team) login details to the cloud accoutning software of their choice. Supporting documents and working papers can be sent using a secure portal.

Finding and qualifying your outsourcing provider:

Before you consider outsourcing tax preparation work to India to help meet the demands of the upcoming busy tax season, you’ll want to carefully vet potential partners ahead of time to guarantee trustworthiness and reliability.

Nowadays people rely heavily on peer reviews. The same applies when searching for an outsourcing provider. Ask other accountancy practice peers if they have an offshoring partner or if they know of any good ones.

Once you have a list of suppliers you can then dig further and start talking to them directly. It’s important to establish contact so you get an idea of how they function and their capabilities. Also be sure to ask for some of their clients who have a similar practice to yours. A confident outsourcing supplier should have no problem letting you speak to their clients to get a reference for their work.

If you are having troubling determining if a potential outsourcing partner is worth your time and money, consider the items on this checklist:

  1. Conduct a background check and ask peers and colleagues for references 
  2. Interview several outsourcing providers
  3. Find out their outsourcing process and data security
  4. Confirm the fee structure in writing
  5. Check their infrastructure, staffing and technological capabilities
  6. Establish a review period and a governance process
  7. Prefer someone who is professionally affiliated to industry bodies such as the ICAEW or ACCA  - it indicates that they are commited to continual professional development. 
  8. Select someone you respect and communicate with

To make things easier for you here is our handy outsourcing partner checklist and you can also check out the seven questions to ask before choosing a tax outsourcing partner.

If you are considering Outsourcing to help you get through tax season, click here or call 0845 838 2452.

 



About Vishal

My name is Vishal Kurani, the author of the QXAS blog and I appreciate you stopping by! I help accountants gain Accounts Outsourcing knowledge through my easy to follow blogs and guides. Download my free guide "The Accountants Guide to Making Payroll Profitable" to learn how to make payroll profitable for your accountancy practice.