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SA pressure forces firms to overhaul tax return fees

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As the pressures of self assessment season continue to mount, many in the profession are beginning to consider how much their time is truly worth. 

21st Jan 2022
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While every practitioner has their own nightmare story of SA seasons past, a perfect storm of pandemic pressure and looming changes wrought by MTD has forced some firms into overhauling their tax return pricing in order to both stay afloat and stay sane.

This year many exasperated Any Answers contributors are finding that the standard £250 for a tax return just doesn’t seem worth it anymore. 

“It is like pulling teeth,” commented AccountingWEB reader SouthCoastAcc. “[Low fee clients] could quite easily take up almost all my time and I wouldn't even be earning min wage after costs.”

The practitioner’s solution is to ditch the low fee paying clients and crank up the minimum fee to somewhere between £1,000 and £2,400. 

Focus on high-value clients

By raising minimum rates, firms are finding that they can focus their time on high-value clients by decreasing their reliance on low paying clients and their overall volume of work. 

AccountingWEB contributor Jennifer Adams is a good example of this: 80% of her fees come from 20% of her clients. 

Others like AccountingWEB regular Slim are in the process of transitioning to a higher minimum fee, too. With wages at their highest rate in recent history, Slim is leaving “all the cheap tax returns for firms who have taken the volume approach”

AccountingWEB readers argue that the clients that stay will truly value the work of a quality firm and will see the benefits in increased level of service and responsiveness. 

But while some may find that simply raising their minimum rates and turning down smaller, more time-consuming clients works best for their practice, there are other approaches that some firms are considering as they look onwards into the new year.

Focus on your ideal client

AccountingWEB veteran Glenn Martin, for instance, has decided to turn away sole traders and tax only clients. This means that the only tax returns he does are directors of business clients. 

He called this the best thing he ever did, as tax only work was “a distraction and it impacted too much on the decent work we have”.

Instead, Martin is busy every month with reporting and coaching. Although this route isn’t the end of a busy January. There are still business plans to set up. 

‘Automate as much as possible’

However, while the urge to ditch low fee clients may be tempting, there is the counter argument that a lot of the teeth pulling stress can be removed through automation. 

AccountingWEB reader Winnie Wiggleroom charges only £160. “The initial setup is minimal these days if you have the right systems, what are you doing that takes you so long to onboard a client?”

Jason Croke agreed: “Automate as much as possible. It is the way to keep the fee low/margin decent.”

Play the long game

And before going scorched-earth on low fee clients, there may be some value in keeping them onboard. 

AccountingWEB member Ireallyshouldknowthisbut still has a couple of £150 +VAT tax returns on his yearly to-do list. It’s only three lines so it’s no hassle but they see it more as a loss leader. 

“It’s really a lot of bother for not a lot of cash, and once in a while one of the £250's ends up with a five hour saga for one reason or the other. The main reason we do small returns is that they might turn into other work.”

As an example, the reader had a sole trader who they charged a pittance for years that suddenly got VAT registered. “I had to move from "mates rates" for adding up 20 invoices to a commercial basis to a 'proper business',” they added. 

A more nuanced approach?

The argument for or against low fee paying clients may be too nuanced for the blanket overhaul that some practitioners have earmarked for their February practice planning season. 

As a middle ground, some Any Answers users are considering joining fees and subsequent loyalty discounts in order to raise capital and retain small, yet valuable clients.

“Hopefully [a £250 joining fee] puts off time wasters but not sure yet if it would also put off 'good' clients,” said Hidden Accountant.

As user Hugo Fair notes, following this approach offers firms “the advantage of qualifying-out those who are purely price-sensitive” while also giving them flexibility to offer discounted rates in the future. 

The digital elephant in the room

All this talk about a tax return overhaul misses the digital elephant in the room: MTD ITSA. 

HMRC’s digital transformation project is set to roll out in April 2024, and as AccountingWEB reader RedFive comments: “The days of the £200 annual tax return are fast diminishing.”

The reader muses that they would be happy to lose their lower paying ITSA clients in favour of the 130 ‘monthly’ clients that bring in £150k turnover. 

But with clients getting priced out by firms increasing their fees or cutting out low fee clients altogether, this discussion begs the question: will HMRC end up having a lot more unrepresented taxpayers come MTD ITSA? 

Replies (9)

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By indomitable
21st Jan 2022 11:16

Reminds me that I still have a few of these low value annual clients that I need to try and get rid of. Absolutely agree that low value clients <£250 per annum are not worth it.

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By Hugo Fair
21st Jan 2022 11:34

"will HMRC end up having a lot more unrepresented taxpayers come to MTD ITSA?"

Well the real underlying question is - when will HMRC notice (at least to the point of caring)?
And the answer is not until piles of EOPS (or whatever they're called by then) EITHER fail to turn up at all OR are found to be unrelated to what's been digitally filed so far - i.e. April 2025 onwards.

Lack of (or late) returns + inaccuracy (in a selected number of areas) appear to be the only things that HMRC's systems identify.
And if these are first identified in 3+ years' time, then (from the perspective of any middle/senior management employee within HMRC) that's going to become "someone else's problem"!

Nevertheless, a neat precis of a lengthy & meandering thread ... so thanks, Will.

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By johnjenkins
21st Jan 2022 11:51

Everything is going up so Accountants fees going up is no surprise. It's nothing to do with SA pressure.

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By DMBAcc
21st Jan 2022 12:48

As someone said on another topic it is likely that lots of small businesses will move into the black economy simply because they won't know how to submit a tax return nor afford accountancy fees. These businesses would have been happy to carry on completing the paper returns but all this is going to be taken away from them. For goodness sake they don't even want the facile smart phones. Is it any wonder with Facebook, Twitter and every other social media platform wasting most of the population's time. Most of my clients have lives to live. So let time move people like me off this planet without ramming yet more needless complexity down our throats. Yes I am retiring in 2 years before MTD ITSA but many of my clients are long time friends. They will struggle to find another local accountant.

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Replying to DMBAcc:
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By Geoff56
21st Jan 2022 14:01

I pretty much echo everything you say.

I still have a fair number of low price tax return clients who have been with me for many years. They regard me as a friend (which I do try to be) and their gratitude for what I do, is humbling. I have no intention of cutting them adrift, although I do worry for them as I intend to retire before the MTD ITSA nightmare comes into being.

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David Ross
By davidross
22nd Jan 2022 10:46

Predictable, but silly, article and responses so far

Our most profitable clients are the 'sweet little fishes', where the hourly rate is sometimes embarrassingly high.

Anyone for whom £1000 has to be a minimum is up their own ar*e

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Replying to davidross:
Mark Telford Chartered Accountant
By Mark Telford
22nd Jan 2022 14:47

Anyone for whom £1000 has to be a minimum is up their own ar*e

[/quote]

Why is that?

Their business, they decide who they work with.

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Mark Telford Chartered Accountant
By Mark Telford
22nd Jan 2022 14:46

We have never had many tax return only clients and don't intend to.

Our focus is on bigger business who value what we do.

Tax return only clients tend to view the services of an accountant as a cost.

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Replying to Mark Telford:
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By Winnie Wiggleroom
23rd Jan 2022 19:13

Mark Telford wrote:

We have never had many tax return only clients and don't intend to.

Our focus is on bigger business who value what we do.

There is something I find a bit sad in this comment.

That is of course your prerogative, however speaking only for myself I am proud to support all kinds of small businesses, there are thousands of fantastically diverse people out there with no desire to become a big business but who make a huge difference to those they interact with and provide goods or services to. I count myself among them I hope providing a good service and making a difference to them.

Will it make me rich? no
Will it make enough money to have a comfortable life? yes
Will it make me happy? It has so far

Oh and by the way, I know for a fact that they value what we do.

Each to their own

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