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Newth Talks Tax: Investigation fee rates

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19th Jan 2009
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On 20 November 2007 Clive Griffiths disclosed that he and his colleagues had been having a debate about what accountants (or their clients) in and outside London would expect to pay for expert support in a difficult tax enquiry case. This was particularly relevant at the time of year when SA demands are high and time is tight.

Information is required regarding acceptable charges. The question arises from what appear to be wide fluctuations in rates charged and client expectations in various parts of the UK. Clive’s firm wishes to remain excellent value for money.

Anti tax replied to this one, and I reproduce the reply in full as follows:

‘I am dealing with two such cases now. They moved to us from a Central London firm. They were charging up to £300 per hour for partner time (they have four or five partners). For normal tax work we would charge at least £50 per hour which I personally think is low but I do not set the cost of our services. But £75 per hour is reasonable in Central London. However for investigations we would not normally charge extra unless we were called as an expert witness or there was a lot of personal meetings with the HMRC and where we were instructing directly a Tax Barrister in which case we might charge £150 to £170 per hour(much less than a solicitor I should add). The amount of time spent is likely to be substantial and because we are not overcharging the client would be more comfortable in spending a bit of time on his work. The work must be of the highest quality. I have seen many examples of poor workmanship from quite well known firms, because firms have been charging too much and as a result not sufficient resources at a managerial level have been employed on the cases’.

I do not wish to comment on the charge out figures, except to agree that £50 an hour seems low if it is for experienced staff. However, I would like to make some general points,

Investigations and enquiries are labour intensive jobs, but at the same time demand the attention of experienced staff. There is no routine that can be handled by juniors.

Costs to the client (or firm) can escalate very quickly, and in my view a payment on account should be obtained before work commences, with monthly billing thereafter, the client can then be aware of just how much work is involved.

In some cases professional expenses insurance taken out by the client or practice can be very helpful. My only proviso is that one has to find out what the 'policy cap' is. If the insurance provider will only underwrite costs up to a certain figure, this puts all parties in a very difficult position.

An engagement letter is also very necessary. The ICAEW have recently issued new advice about this, including the subject of investigations and enquiries. I covered this subject in Newth Talks Tax No. 130, which went online on 1 September, and Mark Lee, who was a leading figure behind the ICAEW venture, approved of my approach.

Finally any firm should ask themselves the question 'am I qualified to do the work?' Investigation work completed by someone without the necessary expertise and experience can be a disaster. A recent Comment article in Taxation magazine by Mike Thexton (who very kindly made reference to me) illustrated the almost perfect scenario. Mike was approached by a friend who had not been disclosing self employed earnings. Very sensibly Mike asked for advice from a well known investigations expert, and a conclusion acceptable to all was reached after the expert attended the meeting with HMRC. It must be stressed that investigations and enquiries are no territory for the novice.

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