Tax: A little knowledge is dangerous
Philip Fisher looks at the implications of a Deloitte survey suggesting that general knowledge about tax is woefully inadequate.
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I am somewhat surprised that you refer to having clients trying to claim "illegal deductions". The " we all meet clients like this on a regular basis", is not my experience. In over 40 years I can't recall any client mentioning claiming for 'imaginary' expenses (maybe they simply claimed them and had the sense not to mention it!).
Sure, I've had many clients trying to claim for private stuff and epic discussions have ensued over the years over Armani suits, breakfasts and suchlike. If your client trusts your knowledge and judgement you should only ever have this discussion once with a client.
In days of yore (though not in recent years ) I saw invoices within cash expenses and then statements (including said invoices) included later for a second bite, or receipts that are not those of the business (watch for the dodgy blokes in filing stations collecting dropped receipts and ask yourself how someone can say park their car in Edinburgh on x day but also have a parking receipt for Perth for which they would need to be The Stig to have managed), the advent of computers has surely increased the number of DIY prepared purchase invoices within records (to be fair never actually had (or at least detected) these but they are out there)
One of the drawbacks of MTD is that I suspect accountants do not do as much wading through the bits of paper clients have these days, it is that wading (and a good memory) that tends to spot these sorts of things.
The media and politicians add to the lack of knowledge.
"XYZ has turnover of billions and pays no corporation tax."
"Companies using transfer pricing to avoid tax"
"American company sells products in UK and pays no UK tax"
And so on.
Is it their ignorance or a deliberate campaign of confusion?
Back in the 90s I took over a small group of clients, mainly to help out the widow of an accountant who had just died. Many of them left me after I'd prepared one year's accounts and tax return because I wouldn't include the estimates that my predecessor had, particularly for those who were mostly paid in cash. This accountant had sometimes included in the accounts higher provisions for his fees than he actually charged.
In my experience, the average-joe does have very little knowledge of tax, but as the article says most people do just pay tax at source and therefore feel they dont need to know the mechanics of it. I think for those in the basic rate tax bracket, theres not an awful lot of need to know to be honest. Most people in that bracket just want to know what their monthly salary will look like and they can get this information from salary calculators available online like https://www.income-tax.co.uk/. I only really get asked for more in-depth information when an employees salary hits the higher rate bracket, when they want to learn how to reduce the higher rate of tax through contributions and such like.