How do you charge for tax advice?

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How do others charge for tax advice? Do you charge per hour, quote a fixed fee or a % of the tax savings?

I know I should have gone along to the talks on how to become a millionaire accountant at Accountex.

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By James Green
02nd May 2019 22:42

If I’ve never done it before, I charge by the hour.

If I’ve done it before I say: “the last time I did work like this it cost £x. How does that work for you?”

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Scooby
By gainsborough
03rd May 2019 09:46

Ha - me too, I could be sitting on my yacht by now.

Personally, I've done all three in the past with the first two being the most common. As most of my fees are fixed, I usually try to quote a fixed fee for tax advice or at least set an upper limit so the client has some idea of the maximum charges that could be involved.

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By paul.benny
03rd May 2019 10:21

What sort of advice - is it basic compliance work or complex planning? And what sort of sums are involved?

A sole trader with £20k revenue will be much more price sensitive than one with £1m revenue, even if the time/work involved differ by little.

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Replying to paul.benny:
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By Matrix
03rd May 2019 10:28

No, not tax compliance but not that complex planning either.

I mean tax planning such as husband/wife share transfers, restructuring etc saving the client, say, £10k in tax. So yes the turnover is 6 or sometimes 7 figures.

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By Maslins
03rd May 2019 11:21

My view is that, at least in the small biz world:
- clients are prepared to pay for compliance, but don't value it.
- clients value advice, but aren't prepared to pay for it ("why the hell are you charging me £200 for a chat?!").
I think that's why many firms (including ourselves) are drifting towards what could be seen as a high fixed price for compliance, but advice included "free".

I appreciate this isn't always viable.

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By Matrix
03rd May 2019 11:33

I completely agree about clients not valuing the advice and not being prepared to pay for it. But if I restructure to save them a 5 figure sum in tax because their previous accountant did not give tax advice, then I am trying to work out how much to charge for it. I don’t want to increase compliance fees as this is bespoke advice.

I assume you give IR35 advice so do you charge for that or how will you charge for advice when the off payroll rules come in, if you don’t mind me asking? I assume I will have to do calculations to help them set their new day rates/contractor to perm rate but I will probably charge an hourly rate.

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Replying to Matrix:
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By Maslins
03rd May 2019 12:27

No extra fees for any of that...but some of it is stuff we won't do. Eg IR35, we'll give some generic guidance. If the client wants a formal opinion with some legal weight behind it, we point them to QDOS's insurance/contract reviews.

Personally I feel a previous accountant being rubbish doesn't give new accountant carte blanche to charge a high fee for some quick stuff that any decent accountant should spot/be able to provide. I would just see it as an early win, making the client think "wow, glad I switched to this firm". One month in they'll be recommending you to all their friends. I totally accept there are opposing arguments which are perfectly valid.

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By Sheepy306
03rd May 2019 15:59

Entirely agree with Maslins. Blow your own trumpet and make it clear how much you've saved them, but I simply charge a reasonable fixed price for handling what is fairly straight forward stuff, albeit I'd probably charge at the upper end in my mind if I was feeling confident in the relationship with the client. This will inevitably lead to further work with them, and referrals.
I'm just not comfortable with charging a percentage of tax savings extrapolated over 5 years etc, but then I have a small practice with close and long-standing relationships with clients, may be different in the more corporate world where clients come and go freely. I listened in for 2 minutes yesterday on a seminar at Accountex from the usual band as I was passing by, it clearly must work for some practitioners but 2 minutes was sufficient to remind me that I'm just not that kind of sales guy.

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Replying to Sheepy306:
ALISK
By atleastisoundknowledgable...
03rd May 2019 16:13

Sheepy306 wrote:

Entirely agree with Maslins. Blow your own trumpet and make it clear how much you've saved them, but I simply charge a reasonable fixed price for handling what is fairly straight forward stuff, albeit I'd probably charge at the upper end in my mind if I was feeling confident in the relationship with the client.
I'm just not comfortable with charging a percentage of tax savings extrapolated over 5 years etc, but then I have a small practice with close and long-standing relationships with clients, may be different in the more corporate world where clients come and go freely.

Agree.

Last big thing like this I did was with a loyal client (moved with me from my last employment), saved about £35k in CT by putting a holdco in to get group relief. Think I charged about £300 for the CoSec admin & the same for the advice. Actually maybe it was £750 in total. He really appreciated it and has stayed with me ever since, even though we’ve made a few minor errors that he’s picked up on.

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Red Leader
By Red Leader
03rd May 2019 11:30

In Guineas.

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By Moonbeam
03rd May 2019 15:21

I am increasingly charging more for established businesses moving to me when they themselves tell me their current accountant is rubbish. But of course whichever way you dress it up, none of them really want to pay an extra fee to sort out the past.

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By Matrix
03rd May 2019 19:16

Thanks all, I am not a natural salesperson and am not going to change so I know I am not going to be a millionaire accountant, but at the same time there is value in the advice I am providing. So this is mostly billable work and it looks like agreeing a fixed fee or a fee range in advance based on time may be the way to go.

For example, I have not charged for advising a client who was on £45k basic salary to reduce to the primary threshold (EA was used up so was costing over £6k a year). However this advice won me the work and I managed to persuade him to move month 1 rather than after year end. I will charge for a few hours for transferring shares to his wife in due course.

On a new cash rich client I have identified husband/wife planning/joint shares, unused pension relief, profit extraction, R&D etc. I will probably charge hourly and this is the one where I think the value to them is more than my hourly rate but I will also take a long term view as others have suggested.

Thanks again.

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By Rgab1947
07th May 2019 15:44

Advice? Always by the hour. If they feel its too much, go elsewhere. No compromise. Rather fewer clients and happy me then many happy client (who do not value the advice as cheap) with unhappy me.

And if they argue because the man in the pub had different advice I charge for that argument too!

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By djn
07th May 2019 18:05

If it's a new client then sometimes we would do that exercise right at the start to show what savings can be made. On an existing client we would look at it each year as part of the job.
We would charge a few hundred quid if we had to mess around with shares and appointing directors etc but not huge figures.

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