Practitioner's Diary: Where do we get reliable tax advice?
Our West Country general practitioner suggests some sources of tax advice for small practitioners - and somewhere to avoid.
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29 July - One place I DON'T go for tax advice is HMR&C (formerly HMC&E) VAT telephone helpline, or more correctly their "help"-line. Two clients have come to me recently with VAT problems having followed advice they allegedly received over the telephone.
The problem clearly stems from business people with limited or no tax knowledge trying to get VAT advice when they don't understand the significance of either their questions or the answers they receive. And they don't appreciate the need to request the advice in writing - although, given the fact that neither appear to have asked the right question, even a written opinion would have been of little use.
I confess I have phoned the VAT helpline on a couple of occasions to check that I was right on a technical point, but at that stage I had already worked through the problem in some detail and was fairly sure I knew the answer. I certainly wouldn't use them as my first source of advice though!
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24 July - Thanks for the comments Mike and David, and for the link - I wasn't sure if I could do that, but you're the editor!
The people I feel particularly concerned for are the sole practitioners. I am fortunate to work in a larger office where we have a couple of rules which help to prevent generalist staff making major gaffs.
Firstly, I have two CTA tax assistants and all tax returns and reports going out the door have to be reviewed and signed off by a second person. Despite trying to read Taxation every week and attend my quota of annual tax updates, I am still caught out by both old and new stuff and need someone double-checking what I do. We also produce all tax returns on specialist software so there should be minimal scope for filling in a return incorrectly or getting the tax calcuation wrong.
Secondly, we never give definitive tax advice on anyhting except the most basic stuff face to face. We will discuss generalities, collect information and produce our final advice in writing after the meeting. Any advice given at the meeting will always be specifically "subject to...". For example my assistant and I met with some clients the other day to discuss a trust tax issue. We had made some notes in advance and gave some outline advice at the meeting - however, having read the trust deed and the excellent CCH online tax reference manuals we came to the conclusion that we had completely misinterpreted the trust prior to the meeting and our report gave some very different advice! I can quite see how a busy sole practitioner could have come seriously unstuck in such circumstances.
Readers may ask where small firms can get specialist tax advice. Unless you have a handy contact with a big firm, this could become expensive. We offer fee protection insurance to clients and as part of the policy we receive unlimited access to the insurer's tax specialists - I suspect someone in the firm phones them at least once a day, every day! We don't get many tax enquiries to enable us to claim on the insurance, but the tax advice helplines are well worth the cost of the policy to the firm.
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23 July - O dear! Depressed general practitioners across the UK will be holding their heads in their hands (well, in one hand in many cases and a stiff drink in the other) if they have read Mark Lee’s recent comment piece in Taxation magazine. In a nutshell, he outlines the three reasons why he has given up giving tax advice –
• increasing frustration with developments in tax legislation;
• “a lack of confidence in my own ability to keep sufficiently on top of current developments”; and
• the growth in PI claims.
He says, “I didn’t want to struggle any longer to keep on top of the constant tax changes, many of which seemed capricious, illogical and in danger of bringing our tax law into disrepute.” This implies to me an unfortunate rose-coloured spectacle view of tax law – surely tax is inherently political, and as such will often by its nature be “capricious and illogical”. As for bringing tax law into disrepute, that depends on what you think of its reputation in the first place!
My problem with this article is two-fold. Firstly, Mark felt as a tax specialist unable to keep up to date – so what does that say for the general practitioner for whom tax is a big part of his or her work, although by no means all of it? How much less can any general practitioner expect to keep up to date? I don’t underestimate the work required to keep up to date, and I am sure we have all given advice that was, perhaps with hindsight, not 100% complete and breathed a sigh of relief when no enquiries were made by the tax authorities. But what is Mark implying here – that it is impossible for anyone keep up to date? If so, we’re in trouble.
Secondly, how long will it be before a judge or prosecuting lawyer quotes this article against Mr Small Practitioner ACA who is charged with giving negligent tax advice, arguing that if a former big firm tax partner and former chairman of the ICAEW Tax Faculty felt he could not keep himself up to date how could a small non-tax specialist ever dare to believe that he was competent to give tax advice? On reflection I think we’re definitely in trouble!
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21 July - While I believe in trying to give clients what they want, the MD's wife is one of the exceptions to the rule. I was due to meet up with the MD to go through his 2008 Tax Return this afternoon, and had agreed to meet him at home as I knew his wife worked in the office on Mondays.
For reasons I don't now recall, but very fortuitously as it turns out, I phoned the house before lunch just to check that the meeting was on - and Mrs answered the phone. Her husband had been called away on business but she wanted to see me - or, at least, she was offering to let me see as much of her as I wanted, etc! I think my reply was polite, I was sufficiently shocked to be fairly curt and hang up.
Looks like future meetings will have to be here in my office - and during office hours. In the meantime I am going to try to get the MD to meet with one of my senior female tax assistants to sort out his tax return, which should defuse the situation.
The question is, should I speak to him about his wife's advances, or will that make things worse?
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16 July - While pricing tax advice is something we need to work out, I have come up with a solution in another situation where clients are sometimes resistant to fees. New businesses often struggle with the initial costs of getting everything set up, and we often fail to recover much of our costs. So now I give them an alternative – all the tax forms for new businesses are online, and company formations can be done very cheaply online too these days. So where fees become an obstacle I have a series of helpsheets that I give to new or prospective business owners that tell them where to go and what forms they need to fill in. These helpsheets don’t give any tax advice or explain any of the rules, and I lay it on pretty thick and make sure I cover EVERYTHING so they appreciate how complicated it is – I tell people that the advice is what they pay for, but that I’m happy to help them get started in the hope that they will come back to us for ongoing accounting and tax support.
I do the same with tax returns, explaining that “self assessment” has been developed so that taxpayers can do it for themselves, so if clients don’t want to pay us I point them in the right direction to do it themselves. Why turn work away? Because the client has made it clear that they don’t want to pay me what I think the job is worth – I would rather not have the work than charge a fraction of what I – and other clients – think it’s worth. Of the people who go away and do it themselves, quite a number realise they undervalued our services and come back next year and ask us to do it. Often we have to repair the return they did and they end up with a tax refund so it’s even better value! Those who don’t return are generally happy with the initial help we gave and will hopefully recommend us to others who might want to pay for our services. If not, we haven’t lost anything, so it’s a win-win situation.
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14 July - We're well into the 2008 tax season. We seem to have sent out more SA returns for signature than we had at this time last year, pats on the back all round for the tax team because I think I have probably done one so far this year!
But as we get into tax season - especially having just finished P11Ds - it seems like a good time to take a breath and ask: Are we giving clients what they want?
On the tax side, what do they want - or to be specfic, what do they want to buy from us? I fear that may be a very different thing to what tax practitioners across the country want to sell! Tax experts have an insatiable desire to "get it right", whatever the cost. Now don't get me wrong, I agree that as a profession we have a duty to get our clients' taxes right. I just wonder whether the lengths we go to to do so aren't sometimes out of all proportion with what we earn from them. It certainly gets harder to recover hourly rates as tax specialists get more experienced (and their hourly rates go up) if they then use their growing expertise to take longer over tasks (because they now have a better understanding of all the ramifications).
So how do we become more profitable in our tax practices? Do fixed fees work? They do for packaged products such as PAYE and routine tax returns, but open-ended advice is a tricky one. But that's the challenge for this year - get the tax team to agree more fixed fees with clients - that way, they will understand what value the client attaches to their work, they will have clear budgets to work to, and - most importantly - they will have a basis for walking away from work which clients don't value and don't want to pay for.
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11 July - Some sound advice posted by Bob Harper below. I hesitate to get back on the hourly vs. fixed fee bandwagon again, but the recent AccountingWEB fees survey highlights the growth in firms offering value-based fees, so clients muct like them.
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9 July - Had a surprise visit from the MD's wife today. She came by herself - that is she arrived unaccompanied, which caught me off guard. At least in the security of an open plan office with glass partitions she had to behave herself! There was a sudden enthusiasm among the male members of staff to offer her coffee or tea, which was probably due to her characteristically immodest dress sense that seemed still to be in overdrive today (as was the male hormone level in the office for the rest of the day!). Her visit was officially to deliver some tax certificates for her and her husband's tax returns, but turned into an extended marriage guidance conselling session. They are not a happy couple by the sound of things, but he is doing the typical macho male thing and living in denial.
I listened mainly, I'm not sure if I did much more, although she was here for a couple of hours. So the question is, can I charge for my time? The subject matter went somewhat beyond the terms of our engagement letter. Or do I just bury it in the audit fee? Or write it off?
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8 July - Well, at least A TOTs is happy with his vision of the sexy, if not speedy, lady accountant. Sadly, the rest of us have our eyes glued to the road ahead, or - in this part of the world where they have had an intensive speed camera breeding programme - one glued on the road and the other on the speedo.
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7 July - Sadly I think those who take Paul Koumi’s advice from last month’s diary may be disappointed when they look up “sexy accountants” on Google. According to Google Trends there was a pretty close correlation between the web searches for “sexy” and “accountant” from 2004 to 2006, but from 2007 the gap began to widen, with “sexy” being far more popular. Bad news for we general practitioners then. However, some members of our profession seem to attract more interest. The closer correlation continued in 2007 and 2007 for “sexy” and “auditor”. However, the volume of searches for “tax” frequently exceed those for “sexy”, so tax looks like the business to be in!
This analysis may, of course, be totally spurious in that I’m comparing two unrelated search terms. The sad fact is that when you ask Google Trends for a report on the actual phrase, it reports that “Your terms - sexy accountant - do not have enough search volume to show graphs”. Says it all really!
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4 July - The MD’s wife succeeded in getting me into bed last week. Not perhaps in the way she would have liked though! I am sure it was being in close proximity to her cloying perfume that set off my asthma last week, but after my last visit to review the audit progress I ended up off sick for a couple of days. The break has unfortunately only put off the closing audit meeting with the client, so I’m going to have to make another visit sooner or later – sooner if I want to issue the final invoice!
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To catch up with our West Country general practitioner's previous scribblings, take a look at his June 2008 diary.