Practitioner's Diary - Honest pricing policy wins every time

Our West Country general practitioner advocates honest, straight talking when negotiating fee levels.

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26 June - A salutory lesson in pricing policy: I am negotiating prices for the next 12 months online reference subscriptions with the different suppliers (are their sales perople former insurance salesmen? How come the subscription renewals arrive about 10 days before they are due for renewal, leaving you almost no time to get comparative quotes! - just like my house insurance renewal, which has just come with about a week's notice). Our main supplier came up with a ridiculous price. We cut out about a dozen titles that no-one was using and the renewal price still went up by 25 per cent, but when I pointed this out he came back to me with a revised, lower price - from which I infer that he was just trying it on. If we had accepted the first price he would have been laughing all the way to the bank.

Now, of course, he's on the back foot as he has reduced the price with very little persuasion, leaving me the suspicion that if I have the time and inclination I can probably get the price down even further. As it is, this technique of pricing high just on the off-chance that the customer will accept, and then immediately dropping the price when challenged, really annoys me, it's basically barefaced deception so I'm not going to renew with them at all.

I wonder how many of us have done this to our clients - priced high just to see what happens? The success or failure of this approach rests on what you do when the client challenges the price. If you give in without attempting to defend your original price you're just as bad as my salesman, and deserve to lose the business. If you want to negotiate, make sure your initial price is a fair, honest price for the services you are offering. If the client wants to pay less there needs to be some give from their side - perhaps they would be happy with a lower level of service, can you remove a component from the quote? For example, if your services include regular meetings, can you reduce the number, or hold the meetings at your office instead of theirs? Or you could offer a lower price provided they pay up front, or agree to re-schedule the work for a quiter time of year. There are all sorts of ways of packaging your services in different ways which will have an impact on the overall price, but never give the impression that the fee is an arbitrary figure you just plucked out of the air.

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22 June – The student finance form fiasco is another good example of the government’s inability to get its departments to talk to each other. If the student finance form is coded with the same box numbers as the SA tax return, why not just give them your UTR and ask them to help themselves from the HMRC database? At least they would have a verified source of financial data. The same argument ought to apply to tax credits – anyone who submits a tax return ought to be automatically assessed for tax credits and receive their entitlement without having to submit a separate claim. It’s based on virtually the same data – a few additional questions on the tax return and you could do both at the same time. But then I suppose the Treasury would have to pay tax credits to everyone who’s entitled to them, which is much more expensive than just paying them to the minority who actually claim them!

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19 June – I thought I had persuaded him, but Mr Knowall Client is like a dog with a rabbit on this one, he just won’t give up. Despite explaining to him that I thought the form was wrong and that he had to declare his 2008/09 figures where the form specifically asks for 2007/08 he has now spoken at great length to the student finance people and been told that the form is in fact CORRECT! They do indeed want you to declare your 2007/08 income on the 2009/10 GSA1 form, apparently because they want to “help parents during these difficult economic times.” A good way to do that, of course, would be to allow them to provide an estimate of their current income, since unemployment and economic difficulties have really started to bite this year – but no, the most helpful thing they can think of is to base student financial support on 2007/08 income levels. The world seems to have gone mad!

The student finance people did add that parents can alternatively declare their 2008/09 income if it is less than the year before, but I can’t find this mentioned in any of the supporting notes.

Of course, Mr Knowall Client is over the moon, having got one over on us. The last laugh is on him though as his income fell by some 50 per cent in 2008/09 so we still need to declare the later year’s income!

I am surprised he missed the logical comment when they told him to declare his 2007/08 income again – why submit a form this year if they want you to repeat the same information as you put on last year’s form? – just use the information we sent you last year!

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15 June - What is it with the Student Finance GSA1 forms? Some years ago the form designer thought it would be awfully clever to include the SA Tax Return box references against the relevant boxes on the student finance application form - which was fine in the first year, but ever since of course the box numbers have all been wrong because the Return has changed!

This year the box numbers have gone on the 2009-10 forms - to be replaced with requests for information for the 2007/08 tax year! I have had a big bust up with Mr Knowall Client today who insists that I should fill in the form with last year's data and send it in immediately - and I suppose I could, but I know it's not right.

I notice the GSA1 still has nowhere to enter a share of partnership profits. sole traders and employees have boxes to enter their earnings, but partners still only have a box to enter their share of taxed investment income. I always scribble on the form and write in the profit share in the margin, but maybe I'm being over-helpful. Perhaps I should simply fill in what's asked for and just send it back!

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12 June - Of course that's all very well, but what happens when your client has lost all their HMRC login details? I was sat out at a client's premises this morning trying to log on so we could file his February (!) quarter VAT Return. He had two ID numbers that appeared to be 12 digit government IDs, and a whole load of suggestions as to what his password might have been - none were accepted to even enable me to request a new password! In the end I had to phone the online services helpdesk, who amazed me by answering almost immediately. A few security questions later and we had arranged for new login ID and password to be mailed to the client. From the speed of response I got the impression that this is not an unusual request!

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11 June - Many thanks to Stephen Quay back in April for explaining in simple terms how to get clients to appoint us to do their VAT online. For those still struggling, here’s my guide:

1. The client needs a Government Gateway account, so get them to register as part of your new client induction if they are not already registered, and they need to register themselves for VAT online with HMR&C. This all takes time, you can’t take a VAT-registered client and immediately go online to do their VAT, unlike PAYE (why???).
2. The client (or, in practice, you on their behalf) needs to log on to the Government Gateway itself – not the HMR&C website – select “Manage Services” on the left hand side and this will bring up a list of the services they are registered for. Against each one there are links on the right to assign and manage agents.
3. Select the VAT option and enter your firm’s Government Gateway ID – which is NOT the same as your HMR&C online login, as I discovered, so make sure you keep all these ID names and passwords handy!
4. The GOOD news in all of this is that the agent appointment is instant. I eventually worked through this the other day, logged out of the client’s account and immediately into the firm’s HMR&C VAT online account and the client was already there. I notice that they are simply listed under their VAT number rather than business name, so as this list grows it’s going to be a right pain working out which client is which!

I am also experimenting with a client who claims to have registered for online VAT but can’t or won’t provide me with their login details. According to HMR&C a paper 64-8 with the VAT section filled in should be sufficient to authorise us, but it will be interesting to see how long it takes. I’m not holding my breath!

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5 June - I don’t remember reading about Hazel Blears’ CGT anywhere in the professional press over the last month, which seems a bit strange to me. Has anyone involved in CGT advice worked out what she did wrong? There doesn’t seem to be any suggestion that she did anything illegal. As far as I can see she “flipped” (is that the new term for PPR elections now?) her second home a couple of times and, having two or more ‘residences’, discovered that she could make a principal private residence election to avoid CGT. No problem with that, many of us frequently advise clients to do this. I have even had a few clients with serial PPR elections and a succession of legitimate tax-free gains, all under legislation that has been with us for years.

So what did poor Hazel do which the PM (and, let’s remember, former Chancellor of the Exchequer) described as “totally unacceptable”? She simply appears to have claimed a tax exemption that has been around for years and which we all thought was completely legit – after all, HMRC have always found it totally acceptable even if their former boss doesn’t!

So was it an off the cuff reaction to try to appease the public’s anger over the whole MPs’ expenses charade? Or is it an indication of changes to come in some of our longstanding tax reliefs. Let’s remember that this is the former Chancellor who introduced a 0% CT rate and then abolished it when he discovered that – shock, horror - small companies were abusing the provision by having the audacity to claim it! Goodness knows what will happen if he ever discovers that a large proportion of the populace is avoiding tax altogether on the first chunk of their income by claiming personal allowances! I fear for the survival of the AIA if Alistair Brown gets another chance at a Budget, so I’m advising business clients to get their capital expenditure in sooner rather than later.

The other strange aspect of this case is that Ms Blears has apparently “repaid” the CGT in question. Again, I’m not exactly sure what this means – did she repair her tax return and disclaim the relief she had previously claimed (quite legitimately)? Could HMRC in those circumstances reject the repair on the grounds that the previous return was correct? Or has she just made a voluntary payment to the Treasury quite separate from her personal tax affairs? What sort of precedent does that set – your tax liability is x under the law, but you are required by the Government to pay a higher figure because…well, because they don’t like the tax legislation they have created themselves. Who needs Acts of Parliament and Statutory Instruments if tax can be collected like that?

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Last month our West Country general practitioner was surprised to find out how interesting rubber moulding can be April 2009 diary.