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Should I complete his tax return ?

Should I complete his tax return ?

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I got a call today about this person who is registered self employed but his total trading income for 2013/14 (first year of trading) was only £300 and wants me to file his tax return.  His income in 2014/15 is expected to be higher.  He had no other income.

He wants to pay my standard fee but loath to take his money when he hardly has earned anything. I am tempted to tell him just to declare it in the next return

What would others do.

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By duncanedwards
30th Dec 2014 23:46

Would need more details (eg, really no other income?) but if there's no tax to pay, I can't think anyone would get too excited pushing the income into next year - where it presumably potentially does get taxed.

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Replying to Accountant A:
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By HeavyMetalMike
30th Dec 2014 23:52

Ask client for proof of income at just £300. It is income or profit?

Verifiable to bank statements or cashbook?

If so then just do it and then add on 45 mins to 14/15 prep. 

 

We all lose more time in Dec/Jan, ie recover 90% instead of 95% (!?) so what's another 45 mins wasted. All about goodwill for the client?

 

Actually, I'd ask client for a box of chocs or a 4pack just to get client to show willing for having it done for nearly free.

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By Jane Dance
31st Dec 2014 00:09

Submit estimate

Get him to submit books to 5th April 2015(31st March) whichever - By May and calc actual figs then.  Have been out of this field for a while but that seems the obvious direction to me.

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By ShirleyM
31st Dec 2014 07:54

He'll have to submit a return

I wouldn't be convinced he only had £300 income unless I had gone through our whole checklist with him and checked his s/emp records. Many people new to self-assessment think the tax return is only for self-employed income and don't provide information about employed income, benefits, etc. unless prompted.

I would charge our standard fee. A person new to self-employment will require a lot of time regarding guidance of the records to keep, what they can/can't claim, sorting out mileage v running costs, how self assessment works, etc. The actual tax return is the easiest part of the job. It's getting the necessary information that takes up the time, and that can be a hard slog with some newbies.

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By petersaxton
31st Dec 2014 07:56

Do tax return

As Shirley says, you don't really know what's going on. I wouldn't think about messing about by including it in a different year. What about NIC?

I'd just do his tax return as normal no matter how small.

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RLI
By lionofludesch
31st Dec 2014 09:19

Do it

Yeah, I'd do it too.  You need to work out his tax position - you can't assume that shoving the income in another year will be neutral from a tax point of view.

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By bernard michael
31st Dec 2014 09:55

What does he live on?? Does he have other income taxed at source that should be declared.??

Sounds a bit too simplistic as though he's only answering the questions as put to him

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RLI
By lionofludesch
31st Dec 2014 10:24

Late in the year

I'm inferring that he started late in the year .....

Tell me if I'm wrong.

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By andy.partridge
31st Dec 2014 11:01

Difficult HMRC
Believe me, if HMRC want to make a big thing about income being disclosed in the wrong year, they will. I have one where the client got confused between 31 March and 5 April disclosures and HMRC seem to fe smelling blood.

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By DKB-Sheffield
31st Dec 2014 11:21

Okay,

To file, or not to file...

Firstly, prepare and file the 2013/14 return. There is little mileage in filing extra in 2014/15. Besides, if HMRC are expecting a return for 2013/14, don't disappoint them by not filing one or by filing a £nil return. It's not as if your new client is trying to get away with it (as many new clients would). He wants you to file his return and is happy to pay you money for it. If you advise against the filing and if HMRC ask the question/ investigate, you could be deemed negligent (or worse) in your advice.

As for the works...

1. Why did he have no JSA or other benefits in the year? This seems odd.

2. The income from 2013/14 is £300 - is this profit or turnover - clients always confuse the 2. If income, what are his expenses? If profit, a £300 profit can clearly be the result of a good number of transactions - some of which may be disallowed.

3. Question 2 is also true for 2014/15

4. You also state that the client's income is from gaming (by which I assume you mean affiliate programmes and similar. Check with your client that it does not include any winnings or losses from gaming/ gambling.

As for the fees...

I am in the quote as normal camp. New clients are messy and time-consuming. It is always pitching high (particularly as your client seems willing to pay). Once you have completed it, you can always go back to the client and charge him less.

I usually find that it is usually much better to quote £1,000 for a client's business and give £250 back when the work comes in at much lower than to quote £500 and then charge an extra £250 when the work is higher than expected. Clients love lower bills and hate increases (even if the overall values are the same).

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By Jason Dormer
31st Dec 2014 12:19

Losses

If he thinks his profit is £300 its probably much less once you have established all true expenses so is there an opportunity to create value by maxmising losses to utilise against employment income or carry forward? 

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RLI
By lionofludesch
31st Dec 2014 12:28

Starting in life ?

Is this a kid just out of school ?

If so, I can't see much point in not completing the return.  How much time can it take ?  What does he have to enter apart from £300 of income ?

And shifting £300 of 2013/14 income to 2014/15 - apart from being incorrect - would just mean that he'd pay extra tax at 20% and NI at 9% on the £300.  That £87 would go a long way to settling your fee.

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By cparker87
31st Dec 2014 18:50

Time
Probably more time writing and reading this thread than preparing the return. I can't see that you can justify fraudulently shifting income forward a year. What's in it for you? The client is after paying your fee anyway and approached you for a return.

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By refs8
01st Jan 2015 17:13

Just do it for me. My biggest clients now were my smallest ones originally little acorns spring to mind and charge an hourly rate for the work. Don't believe in minimum fees as for me this is just turning good work away, unless you specialise in a specific area of work

 

 

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By lme
02nd Jan 2015 11:22

JDI and he will have a loss to cf

Agree, do it in this year, which is correct. Once you look into it and charge a fee, he will have a loss to cf (as he can't set off sideways etc) and it will soften the blow for next year. Agree it will still take time so you should charge as usual and apologise / explain, he sounds like he will appreciate your help, which is a good start to your relationship.

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By rawa363
02nd Jan 2015 11:30

Probably do it

I'd have a discussion to determine if there were other complications, other income, does he really understand it, is he just new to self employment etc. If satisfied I would do it at a lower price and make it clear I was doing a favour as my standard price is XXX times higher, Then if he was self employed next year you should get fees for additional work. Usually people who are genuine will appreciate what you have done and will come back next year for more services and you have yourself a client.

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By David Gordon FCCA
02nd Jan 2015 11:32

just do it

 

 As said some acorns grow into large oak trees.

 Years ago I devised an estimated personal budget form, 1.5 x A4 sheet of paper.

 This covers non-trading income & expenses.

 I regularly send it to clients with a polite request that they complete it, and then compare it to their business income. I tell clients that it is broadly based on the sort of information HMRC might ask for. (particularly on "Plastic" card accounts)

I stress that I do not need it back, but the purpose is that by comparison they should ensure that they have not made any errors in their "Books".

 I rather suspect that on a number of occasions, sufficient to make it a worthwhile exercise, this has forestalled serious embarrassment on the client's part.  

 

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By Mr_awol
02nd Jan 2015 11:38

Notice to file?

You say he is registered SE - are the Revenue expecting a Return?  Id imagine they are..........

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By mydoghasfleas
02nd Jan 2015 11:53

If his income was £200,000 would you be asking this question?

If you do the work on a fixed price, you should charge him.  If you charged by reference to the work done, you might consider passing the cost this year and picking it up next.

Your alternative is to register as a charity and live off donations.

You might be able to flip the cost into the next year but do you want to get into cash basis?

 

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By iknell
02nd Jan 2015 13:20

Has he registered as self employed?

If he registered as self employed prior to 5th April 2014 he would of been issued a tax return and therefore needs to complete one to avoid penalties.

I had a very similar client you made very little the first period of trading to 5th April 2012 in his case.  I completed the 2012 tax return in January 13 and the 2013 tax return in May 13 and charged him in May at 1.5 times my basic ITR rate i.e he got a a 50% discount.

His turnover is now around £300,000 from gaming videos and I have a limited company, payroll, VAT Return, CT Return and ITR to complete and invoice each year.  One of my better decisions to discount.

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By Michael C Feltham
02nd Jan 2015 21:35

Back to Basics!

OK: his "first year" of income, etc..........

However, under Current Year Basis of Self Assessment this would be the proportion of his starting date up to April 5th 2014. (Opening Year or Part Year). Unless he actually commenced trading on April 6th 2013.

Thus he needs his final accounts generated for a whole year: which then forms the Basis period for the 2014-15 Tax Year.

Then there are pre-trading expenses qualified for inclusion plus capital allowances, etc.

Cost: in order to just prepare and file an SA100 takes time and cost you money in terms of resources of software and your time. Say £175.00 + VAT.

Personally, I would proceed as follows:

1.  Check out his records in order to ascertain the integrity of his figures:

2.  If all OK, then sign him up for the current task plus the following year at your standard fee rate and take a nice chunk in advance.

 

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RLI
By lionofludesch
03rd Jan 2015 12:11

Time Charges

Good job we're not all charging for our time spent advising the client.

What a fuss over £300 of gross income !!

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Replying to Wanderer:
By petersaxton
03rd Jan 2015 13:43

Yes, but in theory

lionofludesch wrote:

Good job we're not all charging for our time spent advising the client.

What a fuss over £300 of gross income !!

There's a lot more work to come in from the client but I think I'll give that a miss.

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Replying to Wanderer:
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By Michael C Feltham
03rd Jan 2015 14:43

Pourqui?

lionofludesch wrote:

Good job we're not all charging for our time spent advising the client.

What a fuss over £300 of gross income !!

Why ever not?

Are you operating a sort of BOGOFF offer then?

Your professional time is your only asset: if it is not worth charging for, then it is not worth trying to sell it!

 

 

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Replying to lionofludesch:
RLI
By lionofludesch
04th Jan 2015 10:22

Missed the Point

Michael C Feltham wrote:

lionofludesch wrote:

Good job we're not all charging for our time spent advising the client.

What a fuss over £300 of gross income !!

Why ever not?

Are you operating a sort of BOGOFF offer then?

Your professional time is your only asset: if it is not worth charging for, then it is not worth trying to sell it!

I see.  How much have you charged for your time in making that post ?

I think that you may have missed the point ......

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Replying to carnmores:
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By Michael C Feltham
04th Jan 2015 12:59

The Point Is.............

lionofludesch wrote:

Michael C Feltham wrote:

lionofludesch wrote:

Good job we're not all charging for our time spent advising the client.

What a fuss over £300 of gross income !!

Why ever not?

Are you operating a sort of BOGOFF offer then?

Your professional time is your only asset: if it is not worth charging for, then it is not worth trying to sell it!

I see.  How much have you charged for your time in making that post ?

I think that you may have missed the point ......

If a practitioner fails to value his/her time then the client never will, either.

People do not value that which costs nothing: if you call out a domestic repair "engineer" (And that's a good laugh to start with!) they will charge a call out fee of circa £80 plus VAT. Same with BG and BT.

Why ought accountants work for nothing? Goodwill? Try banking it!

After 40 years in practice I realised early on, the world is full of takers and few givers.

If a stranger seeks my advice then they must pay for it: those who do not wish to pay for it can seek out a charity or a philanthropist.

 

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Replying to carnmores:
RLI
By lionofludesch
04th Jan 2015 13:24

Thanks

Michael C Feltham wrote:

If a practitioner fails to value his/her time then the client never will, either.

People do not value that which costs nothing: if you call out a domestic repair "engineer" (And that's a good laugh to start with!) they will charge a call out fee of circa £80 plus VAT. Same with BG and BT.

Why ought accountants work for nothing? Goodwill? Try banking it!

After 40 years in practice I realised early on, the world is full of takers and few givers.

If a stranger seeks my advice then they must pay for it: those who do not wish to pay for it can seek out a charity or a philanthropist.

So .... how much do I owe you for that advice ?

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Replying to Wanderer:
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By DKB-Sheffield
03rd Jan 2015 14:53

Good point, well made

lionofludesch wrote:

Good job we're not all charging for our time spent advising the client.

What a fuss over £300 of gross income !!

I was thinking the same. The first question was, to some extent valid (although the validity would have been increased 10-fold if the question had been "Should I take on a client who is unwilling/ unable to pay the fees" as opposed to "the client is willing/ able to pay my standard fee". However, many hours later and we seem to still be arguing the same question.

I can see the client invoice now...

Charge for preparing and filing tax return £160
Charge for advice on whether or not I should take on the client £2,500

I'm about to take on 3 or 4 new clients... can anybody help? Haha

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By ShirleyM
03rd Jan 2015 15:01

I don't understand why the question was asked

No offence intended, but if he had self-employment in that tax year, and HMRC have requested a tax return, then it should be submitted.

Unless, maybe, the client hadn't yet registered as self-employed? That would make more sense of the question.

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By andy.partridge
03rd Jan 2015 15:18

What is the problem?

'He wants to pay my standard fee but loath to take his money when he hardly has earned anything.'

On that basis, any client who makes a little or a loss should be told:

a) I don't want your business, or

b) I will do the work for nothing, or 

c) Do nothing this year, come back next year and we will just pretend nothing happened last year 

 

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By birdman
03rd Jan 2015 22:17

window cleaners

Would you expect your window cleaner to worry about his fee if your windows were not all that dirty when he came? If you choose to have a window cleaner you accept his charges, as he's performing a function you cold do yourself but would rather pay someone else to do. In my experience giving time away leads to an expectation of free advice - the only time I'd consider it is to help out a good long-standing client who's having a tough time, or a relation/friend of an A1 client who needs one-off assistance.

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By David Gordon FCCA
05th Jan 2015 10:28

Last post

 Before I deal with those clients who persistently are late with their tax return information:

 years ago the ACCA used to publish a statement to he effect that it is unethical for a member to charge a client on the basis of profits made or tax saved. That is for regular tax and or accounting work.

 I include the above noted statement in my standard explanation of fees , adding the polite note that my firm does expect a share of your profits. That being so, it is reasonable that we do not expect to share your losses.

 It has always brought a wry smile to my face that the ancient saying "A cobbler always needs his shoes repaired" applies equally well to us accountants.

We are excellent at giving meaningful text book advice to clients regarding the matters of pricing and or credit control. nevertheless many of us are hopeless at applying similar advice to our own affairs.

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Replying to stepurhan:
Hallerud at Easter
By DJKL
05th Jan 2015 10:56

I think a NOT has been omitted

David Gordon FCCA wrote:

 Before I deal with those clients who persistently are late with their tax return information:

 years ago the ACCA used to publish a statement to he effect that it is unethical for a member to charge a client on the basis of profits made or tax saved. That is for regular tax and or accounting work.

 I include the above noted statement in my standard explanation of fees , adding the polite note that my firm does expect a share of your profits. That being so, it is reasonable that we do not expect to share your losses.

 It has always brought a wry smile to my face that the ancient saying "A cobbler always needs his shoes repaired" applies equally well to us accountants.

We are excellent at giving meaningful text book advice to clients regarding the matters of pricing and or credit control. nevertheless many of us are hopeless at applying similar advice to our own affairs.

 "the polite note that my firm does (NOT) expect a share of your profits."

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