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Commission for removal of HMRC tax demand

Is it reasonable to charge my client commission for removal of HMRC tax demand?

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Is it reasonable to charge my client commission for removal of HMRC tax demand?

Due to non submission covering 3 years they where hit with a £6.2k tax demand that has now been eliminated all bar £900 of penalties due to the returns now being filed and losses in each year.  Although I have already invoiced for the corporation tax returns (£400 per return) someone has advised I should have also charged commission on the penalty that has been eliminated by submitting the overdue returns.

I am not sure whether I should or not as have already charged for the completion of each return - does this seem a reasonable thing to do and if so what percentage of the demand should it be -  5% / 10% or some flat fee?

Thanks in advance for responses.

 

Replies (26)

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By Wanderer
21st Oct 2020 18:41

No.

Thanks (2)
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By Paul Crowley
21st Oct 2020 18:50

Client has the right to know the fee basis
Commission is peculiar beyond reason

Thanks (2)
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By Andy556
21st Oct 2020 18:53

Charge for the work completed.
Why should you charge more based on a guess of tax owed by HMRC?
If HMRC said they owed nothing, would you work for free to complete the returns?

Thanks (3)
Psycho
By Wilson Philips
21st Oct 2020 19:07

Whatever you agreed with your client.

Let me guess - you didn’t.

Thanks (2)
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By frankfx
21st Oct 2020 19:18

Commission?

May be better described as added value.

You take on the work.

Agree the fee basis, which may include a premium..... based on outcomes.

No nasty shocks.

Client may feel that you are indulging in snake oil

Client then decides .

Some R and D claims firms have a fee % based successful outcome.

Capital allowance claim firms likewise.

Some CIS refunds are % based.

You could present your service in that light.

Often the above are one time services.

Marketing gurus suggest you invoice at the £££ rate and time,

"when the tears of gratitude are still moist in the client's eyes"

But you must prepare the client for that moment.

Often a blink of the eye!

Your moment has passed, I fear.

Thanks (1)
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By M1ck
21st Oct 2020 19:30

Thanks all for your prompt responses.

I don't intend to charge as like your responses it suggests underhand and over indulgence for work already completed.

Also as a reasonable sort my conscience doesn't really allow me. Ha ha.

Thanks (0)
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By the_drookit_dug
21st Oct 2020 22:22

No, doesn't sound reasonable.

Thanks (1)
RLI
By lionofludesch
21st Oct 2020 23:20

Just charge for your time.

You'll stir a hornets' nest if you're not careful.

Thanks (1)
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By SWAccountant
22nd Oct 2020 08:18

I think this is perfectly acceptable provided:
a) It isn't your fault the returns weren't submitted
b) The tax is legitimately eliminated (ie you're not falsifying or exaggerating savings to increase the fee)
c) The client knew this beforehand.

As you seem to have already accepted, and as others have pointed out, this is not ok after the fact.

Thanks (1)
By SteveHa
22nd Oct 2020 08:55

Commission based accountancy provides an incentive to maximise the position for the client, regardless in many respects of whether it is done correctly, or even lawfully.

I wouldn't touch it with a barge pole.

Thanks (3)
Replying to SteveHa:
Psycho
By Wilson Philips
22nd Oct 2020 09:01

R&D cowboys being a prime example of the (mal)practice.

Thanks (3)
Replying to Wilson Philips:
Lone Wolf
By Lone_Wolf
22nd Oct 2020 12:58

Wait a minute! Some of the R&D firms I've encountered are qualified, so how can they possibly be cowboys...

John? I thought it was unqualified folk that were cowboys.

I'm so confused.

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By Justin Bryant
22nd Oct 2020 09:05

What we really want to know is what trick did you employ to discharge the penalties (or if it was just the tax determinations/assessments that's been reduced due to the SA returns being filed then clearly you cannot charge a % for that, as that would just be ripping off & exploiting the client!)?

Thanks (2)
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By M1ck
22nd Oct 2020 10:27

Again, thanks for the further responses.
This is a great site, thankyou to all contributors. Very beneficial when you local peer pool is not significant.

The tax demand was removed legitimately through submission of lawful o/s returns with an appeal of penalties having been submitted for which I am awaiting a response.

The client has an expectation there could well be commission for removal of said tax demand (their own thinking) but I will not be charging for this and instead deem as a goodwill gesture - win win for both parties.

Thanks (1)
Replying to M1ck:
Psycho
By Wilson Philips
22nd Oct 2020 10:35

A tip for the future - be complete and accurate with the information in your question.

You originally indicated that you were thinking about charging commission for removal of the penalties (nothwithstanding the fact that thay have not yet been cancelled) but in your comment immediately above you are suggesting that the commission would be charged for removal of the tax liability.

Academic now in this case, but a pointer for the future.

Thanks (0)
Replying to Wilson Philips:
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By M1ck
22nd Oct 2020 12:50

Thanks WP - fair point and will note for future questions.
Appreciate your and others responses and clarity.

Thanks (0)
Replying to M1ck:
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By SWAccountant
22nd Oct 2020 12:05

I think I retract my position now that its clear all you had to do was actually file the returns.

If you'd spotted something that had been missed and amended returns, or otherwise provided something to trigger a legitimate tax refund/saving then a % based fee is fair game if agreed, but not where you haven't really added any specific value.

Thanks (1)
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By sallycox
22nd Oct 2020 10:28

No.
What does your Letter of Engagement say? I expect it is silent on this scenario.

Thanks (1)
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By sallycox
22nd Oct 2020 10:28

No.
What does your Letter of Engagement say? I expect it is silent on this scenario.

Thanks (0)
RLI
By lionofludesch
22nd Oct 2020 10:47

The problem with a 10% commission for refunds is that you might be expected to contribute 10% of future tax bills.

Is that not only fair ?

Thanks (2)
Replying to lionofludesch:
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By M1ck
22nd Oct 2020 12:45

Aha, hopefully not lol. Point taken.

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By Montrose
22nd Oct 2020 11:12

Commission- no. Success fee indicated in engagement letter-yes.
What is fair fee for discovering an esoteric tax provision[picked up on internal review] acknowledged as applicable by HMRC
which reduces settlement of unpaid taxes at 10% of sum client has alreasdy faced up to paying?
Hot tears !!

Thanks (1)
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By Montrose
22nd Oct 2020 11:12

Commission- no. Success fee indicated in engagement letter-yes.
What is fair fee for discovering an esoteric tax provision[picked up on internal review] acknowledged as applicable by HMRC
which reduces settlement of unpaid taxes at 10% of sum client has alreasdy faced up to paying?
Hot tears !!

Thanks (0)
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By 356B
22nd Oct 2020 18:46

Are you a solicitor? If NO, then don't act like one.

I once had a client incorrectly assessed on a gain of £6.4 million. If only I'd thought to charge commission on reducing it to £40,000.

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By Calculatorboy
22nd Oct 2020 22:32

I thought professional ethics prevented a % bounty because it might detract from objectivity when acting .. that is assuming you are part of a recognised professional body as opposed to not ( aka cowboy).

I can't remember the reference but to be honest most of the icaew professional ethics are so intuitive you don't need to even read them....

Wow I've actually complemented my professional body after years of slagging them off ...must be getting old because years ago they sent me another certificate free of charge . Yes I've been an old bstrd fellow for many years

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Replying to Calculatorboy:
Psycho
By Wilson Philips
22nd Oct 2020 22:52

They (I’m talking about CIOT here) don’t prohibit such fees, but do stress that the member needs to ensure that his conduct will stand up to scrutiny should his objectivity and integrity be questioned.

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