97% of accountants are failing to give even the most basic of tax planning advice to their unincorporated clients – and as a result are letting their clients down and missing out on the opportunity to earn fees of up to £21,000 per client.
Yesterday I took a straw poll of 100 partners during a seminar in London. Only 3 out of 100 even claimed to have discussed with every one of their incorporated clients in the last 12 months whether it was now appropriate to incorporate.
Some of the underperforming 97% had no doubt talked to their clients at some earlier point. But quite frankly that is nowhere near good enough. After all, in any year there could be significant changes in one of more of the following key factors that determine whether or not incorporation is right for a client:
- The client’s profits
- The client’s drawing aspirations
- The tax regime (eg the new 50% income tax rate, for example, will soon tip the balance for many)
- The client’s appetite for tax savings (many accountants are telling me that their clients are now more keen than ever to save tax)
- The client’s attitude towards the value of limited liability (in these challenging times the fear of losing their home if they stay unincorporated is greater than ever)
- The client’s attitude towards the extra hassle involved in going limited
However well they know their clients, the 97% cannot possibly know for a fact whether or not there have been changes in all of the above in the last 12 months. But given the unprecedented changes in the economy over the last year, it IS a safe bet that things won’t be exactly the same as the last time they talked to their clients about the issue. Therefore it is our professional responsibility to raise the issue and do the maths with every single unincorporated client in 2009.
Why are 97% failing to do this? Quite simply because there is not enough time in the budget.
And why is there not enough time in the budget? Quite simply because the prices accountants charge are too low.
In contrast, if you follow Ninos Pucacco’s value pricing approach – see here for how he charges up to £21,000 for an incorporation http://www.accountingweb.co.uk/topic/practice/tips-trade-how-we-earned-e...
– you will have the time in your budget.
So we have a clear choice.
Charge too little, kid ourselves that we provide great service, but actually let our clients down (as 97% currently seem to be admitting to doing).
Or charge more and actually give our clients great service (as currently only 3% even claim to be doing).
In the first instance we delude ourselves that we are being professional. But ICAEW ethical guidelines make it clear that we are, in fact, being unprofessional (ie in section 240.1 its says “a self interest threat to professional competence and due care is created if the fee quoted is so low that it may be difficult to perform the engagement in accordance with applicable technical and professional standards for that price”.)
In the second instance we are doing the right thing for our clients and for ourselves.
I for one know which of the two approaches represents the kind of professional I want to be.
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Don't say nothing
Whatever fee an accountant agrees with his customer, if s/he spots some activity in that business while preparing the accounts that is tax-inefficient, s/he should highlight it to the customer. To say nothing is a failing in service.
If it be incorporating to save tax etc, well the accountant should receive a higher fee anyway, since there is more accounting work in the ltd business. That is where the return comes in. f there is some benefit-in-kind juggling and that kind of thing that could save a business owner some tax, he would offer the idea at a slightly increase on his fee, paid out of the tax gain.
The idea that one has to pay up front to get an accountant to switch on his "pro-active" mode is a bit strange. Tax is their field and they should spot tax-efficient issues a mile off and highlight them as a matter of course, as part of their service.