Do you tell clients when to pay tax?

Do you tell clients when to pay tax?

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I have noticed a recent trend for accountants not to advise clients when tax is payable. In some cases, this policy is clearly stated in the letter of engagement. In one case which I saw recently, it was buried on page 13 of a 16-page engagement letter. The client was used to being told when and how much to pay by his previous accountant and didn't realise that the new accountant adopted this practice. As a result, he paid late and lost his gross payment status under the CIS. Does the accountant have any liability in this kind of situation? Presumably the client cannot validly claim ignorance of the accountant's policy in this situation, but would it be different if the letter of engagement was silent on the point?

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By User deleted
06th Feb 2012 08:13

Shirking responsibility?

At best, it is in my view very poor practice not to advise clients in good time of their tax liabilities - providing of course that the client plays ball and provides information in good time. For those that want to shelter behind the terms of an engagement letter, by all means remove the clause that says that notification of tax liabilities will be given - but continue to do so nevertheless. As noted above, the consequences of late payment can be far more severe than a few quid in interest - so those that don't advise their clients, are they afraid of the consequences of their own failure?

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By ShirleyM
06th Feb 2012 09:15

It depends what you mean ....

If you mean, do we inform them of the tax liability and the latest date for payment? Then, yes, if we have calculated the liability.

We don't keep issuing reminders when it gets close to payment date, and if they calculate their own CIS, VAT, etc. then we don't remind them at all.

If you are asking if we keep on reminding them until the date has passed, or they inform us it is paid, then no.

EDIT: are you absolutely sure the client wasn't informed? I always take clients criticism of other accountants with a pinch of salt, unless I know that particular accountant and their methods.

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By Steve Holloway
06th Feb 2012 09:37

I tell them when I complete the return ...

but after that I expect them to be able to remember two dates a year i.e. 31.01 & 31.07. Mind you I don't remind them of valentines or Christmas either!

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By lesley.barnes
06th Feb 2012 09:51

I'm with ShirleyM on this one

If I calculated the liability I'll tell them the amount and the latest date for payment but I don't keep checking if they have paid and remind them accordingly. Surely the client has to take some responsibility? To fail a review and lose gross status your client must have paid late on at least one of the items below in the last 12 months. Do you know what your client failed on?

 

HMRC have received:

your CIS/PAYE deductions late on four or more occasionsone of your payments of PAYE/CIS deductions more than 14 days lateone payment of your Self Assessment tax more than 28 days lateone payment of your Corporation Tax more than 28 days late

Or, at the date of the Review, you have still outstanding an overdue:

Payment of £100 or more

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By User deleted
06th Feb 2012 10:44

We don't keep reminding, but ...

... with companies, we always drop the client a reminder of the CT due one month before the due date.

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By User deleted
06th Feb 2012 10:57

Some reminders

CT - I'll tell them when I issue the return & again about a month before it's due for payment.

SA - When I issue the return and at the start of July & January

PAYE - if I prepare the payroll then I'll tell them when I issue the payroll info, otherwise nope

VAT - if they do the returns themselves, nope, if I do the returns it's direct debit so I'll tell them when it will go out.

If they don't pay after I've reminded them then it's their problem.

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By thisistibi
06th Feb 2012 11:04

Perhaps

It's more efficient to have a "blanket" approach and treat all clients the same, but I like the idea of asking clients from the outset whether they want reminders or not.  Some clients are very good at keeping payment dates and don't want reminders.

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By taxhound
06th Feb 2012 11:22

with the tax return

When I send the tax return, I tell clients what is due and when.

I have a spreadsheet detailing all payments due, so today I have flicked through my clients on HMRC website to see that all of them paid what was due on 31/1/12.  Those that have not have had a reminder that if they don't pay by 28/2 5% will be added to the 2010/11 liability.

As so many clients were due refunds, or we applied to have tax collected via coding, there were not actually too many with amounts to pay on 31/1 so it did not take too long....

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By Mark Lee
06th Feb 2012 21:10

How odd

I'm astonished by the reference to a 16 page engagement letter that includes a note saying that accountant does not advise when tax is payable. Who would choose an accountant like that?

In terms of the ABC of what clients typically want from accountants, D = Dates on which tax is payable.

Mark

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Replying to pauljohnston:
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By noradh
07th Feb 2012 06:20

Tucked away!

In my experience, the typical client does not plough through the engagement letter. These letters sometimes also contain penal provisions about what happens if the client sacks the accountant, eg a fee of £100 per hour for time spent collating and passing info to the new accountant: I doubt whether the client notices this when signing the letter, as it is tucked away and hard to spot.

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By ShirleyM
07th Feb 2012 09:24

@noradh

I wouldn't worry too much about other accountants engagement terms. If they do something wrong and their terms are considered unfair then they won't be worth the paper they are written on!

The client didn't pay his tax, for whatever reason, and is looking for a scapegoat. At the end of the day, it is his responsibility and he should have asked, rather than waiting to be told. I can't imagine any client not knowing whether they owe tax, or not, even if they subsequently forget, and if that happens they can always refer to the copy tax return, or call and ask to be reminded!

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By Euan MacLennan
07th Feb 2012 11:04

I'm also with ShirleyM

IT - we tell them the amounts and dates to pay in a covering letter when we send them their personal SA tax returns for approval.  HMRC sends them a statement a month before the due date with instructions on how to pay.

CT - we tell them the amount and date when we send them their accounts for approval.  HMRC issues an acknowledgement to the client with instructions on how to pay.

VAT - we tell them when we complete the VAT return and we arrange payment for most of our clients by Direct Debit.

PAYE - we tell them when we run the payroll and again, we arrange payment for most of our clients by Direct Debit.

If the clients still do not pay after being told by us and receiving statements from HMRC for IT and CT, that is their problem.  We have done enough.  We do not go trawling through the HMRC website to see if the little diddums have bothered to pay or not.

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