FreeAgent Review Part 4 – Accountant’s view

FreeAgent have effectively outsourced their relationship with accountants to a company called Iris. Iris are a BIG name in specialist accounting software.

There's not much in the way of extra functionality only for accountants just a brief overview page allowing you to log into client accounts. There is also some preferential pricing depending on the volume of clients signed up.

Much more interesting is the ability to prepare tax calculations within the software.

Tax calculations

As discussed earlier in this review. FreeAgent has functionality to take accounting data and turn that into a tax calculation.

We have two concerns about this:

  1. It's a very simplified approach to tax returns, we promise it's a lot more complicated than this; and
  2. It's bringing closer the day that accountants are totally replaced by computers.

Focusing on the first point. There are lots of cost types that need to be treated a bit weirdly for tax purposes. One tiny example is that company incorporation fees are not tax deductible. We'd be surprised if FreeAgent will identify these costs and treat them differently. Similar 'entertainment' costs are a minefield and we don't think software will be able to apply the necessary judgement to get them right even if the client data has been inputted perfectly.

The real concern is that it's giving users a false sense of security. They may be making big costly mistakes on a tax return without realising it.

Turning the issue around though it does present a great tool for accountants. If the accountant can gain absolute comfort that costs in FreeAgent have been allocated perfectly and understand how this feeds through into the tax calculation then it could save a significant amount of time. So it's not at all something we dissaprove of but just urge users to use it with caution.

The fact is that good accountants really don't like wasting time filling out forms and doing calculations for the benefit of HMRC when they could be advising and adding value to a client. Anything that helps that is good with us.

Accountants' Verdict

FreeAgent has similar bonuses to KashFlow and Xero in that it's far nicer to have a client record all their transactions on it than on a spreadsheet. It makes the year end process quicker and easier whilst also allowing the accountant to maintain a real time view of the client's financial position.

We like the innovation with the ability to prepare tax calculations but are concerned that it will only be suitable in the simplest of cases and may result in some costly mistakes for FreeAgent users.

 

 

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