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HMRC and clients: The troublesome triangle

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31st Jul 2015
Tax Writer Taxwriter Ltd
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Judging from recent comments coming out of HMRC, it appears that there are three parties involved in the accountant-client relationship, writes Rebecca Cave.

Jim Harra, HMRC’s Director General for business tax, recently commented in an interview with Tax Journal “The key thing for me… is making sure we’ve got maximum value from having an agent in the relationship between HMRC and the taxpayer.” 

He went on to say, “When an agent represents a taxpayer, we will want to know what services the agent is providing. This could be a perfectly professional basic service or it could be one which offers lots of added value… so that an agent’s client presents to us as compliant or low risk.” 

I think most accountants would not see themselves as being in a relationship between HMRC and the taxpayer, but perhaps that is the reality. Do you feel you are playing the piggy-in-the-middle between your clients and HMRC?

If that’s the case, do HMRC understand the nature of the relationship between the client and tax agent? Perhaps they don’t, as they recently commissioned some research into  Factors affecting small and mid-sized businesses’ choice of tax agent.   

The researchers questioned 1014 business owners, and found that 86% paid a professional tax agent to assist with at least some tax or accounting tasks. Interestingly this figure is significantly higher than the 70% of small and mid-sized businesses which Jim Harra cited as using an accountant. Perhaps his data are out of date, and more businesses are turning to accountants for help as tax compliance becomes more complex. 

Those businesses that do use professional help are generally very loyal to their accountant; 49% of businesses stay with the same professional agent for more than 10 years. The business owners build up a good relationship with their accountant and will only consider moving if the relationship breaks down, or their business changes so they need a different mix of services which their current adviser doesn’t provide. Only 25% of clients move to a new accountant for cost reasons.

Business owners who don't use a tax agent tend to be running younger businesses or have less complex tax affairs, such as a low-turnover sole-traders. However, 20% of those business owners said they would consider appointing a tax agent in the next five years. The lesson for accountants is: catch the business in its early stages, give the owners a good service and they will stay with you for years.

This research also confirms the perception that personal recommendations are more effective than any other form of advertising in bringing in new clients. It found that when looking for an accountant 78% of business owners are strongly influenced by recommendations from their business contacts as well from family and friends. So the best way to acquire new clients is through your current clients, and other business contacts.

The main reason business owners gave for paying a tax agent is the knowledge and skills the professional applies to deal with complex issues, in contrast to the worry that the business will get something wrong if they do it themselves. A lesser concern is the time that tax and accounting tasks take, and whether it is cost efficient to pay someone else to perform that work.  

The research also looked at the businesses’ attitude to digital services provided by HMRC. Generally the where business has a low take-up of HMRC’s digital services they will pay tax agent to complete those tasks for them. The resistance to using digital services was related to a lack to IT skills and confidence on behalf of the business owner.

The businesses were presented with information about future HMRC online services including Your Tax Account – which will present all the businesses’ tax data in one place - and Agent Online Self Serve (AOSS), which will allow agents to perform more tax tasks for the business. The majority of the businesses questioned (63%) said the introduction of these services would not make them change their use of a paid tax agent.  

What do you think? Is HMRC trying to squeeze out tax agents by introducing more digital services, or will accountants always be required by the majority of businesses? 

Replies (17)

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By vinylnobbynobbs
31st Jul 2015 13:46

Squeezing Out

Having sat through a HMRC "webinar" on Working Together and "Digital Interaction with Agents" (I hate that word) presented by 4 HMRC officers all of whom are not involved with tax, I wonder if HMRC actually have any staff who work at the coal face.  Telephone and post response times would appear to suggest not. 

t is also clear that HMRC are constantly commissioning research into areas which are not there concern and should they be wasting money on this?

The "webinar" made it clear that HMRC no longer want WT meetings to be face to face as agents cannot be effectively managed and controlled by them.  By having digital meetings HMRC can have control over what is seen asked or answered under the guise of confidentially (the suggestion was that in the webinar some agents asked client, sorry customer, specific questions and that's why everyone could not see the full questions nor the answers. Complete Control.

Interesting that it being a national event but there  were only 62 attendees and I am not sure if that included the 4 HMRC attendees.

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By abaco
31st Jul 2015 16:00

HMRC should welcome agents.

At a time when there is pressure on HMRC to deliver more for less any attempt to squeeze out qualified agents would be a nonsense. The more efficiently a business owner's tax affairs have been prepared and computed the better it is for everybody; HMRC included.

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By AdShawBPR
03rd Aug 2015 11:13

I'd like a fourth party involved - the uber agent

I'm an agent - sole practitioner - and I'd pay for the servies of an uber agent for any time I have to actually get in touch with HMRC.  They would always know the appropriate number to ring, which department, what the right answer to the automated phone systems was, etc.  And when I did phone HMRC, they would also put the intital call in and call me back when someone had actually answered the phone - putting HMRC on hold obviously!

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By dgilmour51
03rd Aug 2015 11:33

Digital Duty of Care

HMRC has a policy which leverages the simple fact that they have no Duty of Care - esp. to provide correct responses to taxpayers.
The only 'defence' that the individual taxpayer has, as the complexity of the tax system approaches chaos, is to deal through an expert whose job it is is to comprehend these systems.
The reason why HMRC is so keen on direct digital access is so that they can leverage the impossibility of errors and thus increase the revenue from fines, interest etc. but this can only happen if they ruin the relationship between the taxpayer and their professional support.
This can be effected easily by the means elsewhere noted.
As an aside, I am interested that anybody has actually had a phonecall to HMRC answered at all (within a finite time) - one thing that I pay my advisor for is to spend days hanging on and on before redialling.

Frankly I am ever more diisgusted by the whole thing.

 

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By AndrewV12
03rd Aug 2015 11:41

Tax Agents

Tax agents, Accountants, book keepers, advisors, special advisors, my gosh i knew knew i had so many job titles, I wonder which one i am, and which one HMRC would prefer.

 

Yes i sometimes find myself in the middle, my client gets a fine and i get a email/ text/ letter from my client advising please appeal against it.  Never is mentioned a fee or a willing to pay for the appeal letter, remember banks can charge £20 for a COMPUTER GENERATED LETTER.

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Replying to KeyCrescent25:
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By AndrewV12
03rd Aug 2015 12:50

Thanks Owen K

Thinking about it, there are probably a long list of me being in the middle, caught between HMRc and the clients, its not always easy to find out the correct story. 

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By Ninian
03rd Aug 2015 12:28

HMRC

Most of the 'difficulties' which Mr Harra and his cohorts talk of are because HMRC appears to make it their business to distance themselves from Agents - yes, I have heard of 'Working Together' and rightly or wrongly I consider it no more than a sideshow; unrepresentative and possibly even a token to deflect attention.

I have practised through the nineties and earlier when:-

a) one could contact a local inspector up to DI level merely by picking up the phone - the answer time was measured in seconds rather than minutes and hours - and speak to effectively fellow professionals;

 

b) one could attend local society meetings with HMRC - usually a party of inspectors and TOHGs and discuss issues not as a national committee a la 'Working together' but as a group of local accountants, thus, nationwide vastly increasing the amount of contact. In my estimation a better understanding was developed from both sides and I don't think anyone from either party was tempted to 'turn native';

 

c) Inspectors were local and knew their 'patch' and the taxpayers and agents therein - for better or for worse.

 

The tragedy of computerisation is that whilst, when it works, it speeds things up, it has led to an enormous gulf appearing between HMRC and taxpayers/professionals and until HMRC recognise that meaningful communication is what matters in tax, as in all walks of life, then they can thrash around with research etc and blame everyone but themselves but nothing is going to improve.

 

And yes, unless HMG outlaws them, agents will always be there because the vast majority of individuals and businessmen/women don't like dealing with tax.

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By Red1960
03rd Aug 2015 14:23

HMRC & Agents

 

Having started my career during the 1980s with HMRC I can say that even in those times there was an institutional culture present and this was firmly opposed to the accountancy profession who were poorly regarded and often with a degree of outright hostility.

At that time of course Revenue culture still accepted that there was such a thing as a taxpayer and there was a sense that certain "taxpayers" wealthy enough to be represented by an accountant used their services in some undefined underhand way to deprive HMRC of taxes to which it was entitled. 

HMRC regarded their relationship with the profession in the classic gamekeeper- poacher model. Of course none of this was admitted publicly but it was there.

Since HMRC adopted a market led approach taxpayers have been re-branded customers and gradually the culture has adapted. In a market situation HMRC now regards itself as providing a service to its customers but it also apparently believes that the accountancy profession has not moved with times and retains it's poacher mentality.

As a provider of legitimate services HMRC now seeks to squeeze the illegitimate competition out of the market and create a monopoly over which HMRC control is absolute.     

The ground has been prepared for many years now.

  

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By Nebs
03rd Aug 2015 13:45

Going, going....

They will miss us when we are gone.

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Replying to Paul Crowley:
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By farrcorfe
03rd Aug 2015 14:53

Going, going

The Revenue miss us? You've got to be joking; they don't give a toss about agents or taxpayers (sorry, customers). Theirs is just a tick box mentality and only care about targets and squeezing small businesses dry.

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By raybackler
03rd Aug 2015 13:56

Taxpayers are not tax experts

Whatever our clients do in their businesses, is what they are interested in.  Compliance with tax matters is an irritation for which the majority would rather pay an accountant.  The accountant has to deal with a complex morass of legislation in order to represent the clients best interests.  

Apart from the very wealthy, who number near zero in most small accounting practices, most clients don't have the financial resources or the inclination to look at complex tax avoidance.  All we do for the vast majority of our clients is calculate their tax liability as accurately as we can, thereby freeing up the client to concentrate on what they do best.

Our clients will never be tax experts and nor should they be.  HMRC do not understand these basic facts and assume that we are conniving to reduce tax bills, when we generally can't.  We can, however, stop clients making the mistakes that would occur if they looked after their own tax affairs.  In that regard, we are responsible not for minimising tax bills, but for getting them right.

 

 

 

 

 

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By johnjenkins
03rd Aug 2015 14:30

When I started

in the 60's there was respect of the highest order between Agent (All Accountants in those days) and HMRC. Indeed HMRC would reluctantly stat an investigation and the agent new if one was started then it meant they had missed something.

Something happened (the eradicaion of values etc.) and it all went [***] up.

I would think Jim Harra is trying to get some sort of sensibility between Agent and HMRC before it really does go down the pan.

I do remember having a meeting with a Tax Inspector in the 90's who told me that a new breed of Inspector was on the horizon and it would mean the death of the Accountant/Inspector relationship. How right he was.

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By mikefleming3028
03rd Aug 2015 16:09

Is it time

to feel sorry for those poor HMRC  beggars who still have to work at the coal face with shrinking resource, poor training an even poorer leadership. The temptation is to pour scorn onto the heads of those in the firing line who in the main are expected to do a vey technical job measured against impossible targets set by their political masters. You only have to  look at HMRC`s Annual Report and Accounts to see that even the Comptroller and Auditor General has grave doubts over HMRC`s ability to deliver its ambitious change programme. (see R10 in the report) As HMRC along with other Government departments have since been tasked to prepare new budgets designed to produce more with less (25% to 40% less) then something has to give and that something will in all likelihood be standards. The future for any continued relationship between HMRC and an independent  agent community looks bleak and the next logical move on HMRC`s part is to recommend the adoption of say the American model where Tax Agents have to be licensed by The Internal Revenue Service and are required to pass a "Bar exam" before they can act in that capacity.This opens up another debate on the ability of  your average taxpayer being able to afford representation. There is currently a discussion document doing the rounds in which HMRC have asked  the question should a taxpayer wishing to lodge an appeal be required to required to make a payment into "court" as a cost/contribution towards Tribunal costs before the appeal can be considered, although this is a discussion document only does it not give an indication as to how HMRC wish to shape the future? Brave new world or what?                       

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By David Gordon FCCA
03rd Aug 2015 16:36

Well they would, would they not?

 

 As is their custom the professional bodies are letting HMRC warble on, and do damage.

  this because they wish to retain a "Working relationship" with HMRC.

 Well, I suppose, dropping your trousers and bending over, is a sort of working relationship.

 HMRC's legal executive are perfectly well aware of the exact nature of our agency agreements with clients. It does not include three in a bed.

 Indeed, I suspect that if a client were for one moment to suspect that we had a foot in both camps, this would engender a double quick exit on the part of the client.

 It is worth repeating that clients engage us not because they love us and want to have our babies, but because they need (Not want) a fence between themselves and HMRC.

 I rather suspect that if, God forbid, this further attempt at black propaganda was to gain ground it would be counter-productive. This because the very clients that could most use our services will claim "A plague on both your houses". 

 As to HMRC "Not understanding the facts" this is nonsense. Being "Civil Servants" does not make them fools. The only alternative would however be, them admitting that there is increasingly something of a fundamentally incoherent philosophy and autocratic mindset within the current management of HMRC.  Aided and abetted by parliamentarians of all colours who really do not want to get involved, or have to understand.

 The Jewish sages of old defined Kabbalah (The real thing, not Madonna's wierd version)  as an attempt to define the undefineable, and explain the inexplicable.

I think they were talking about HMRC.

 

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By pinnocchio
02nd Sep 2015 18:22

First tier tax tribunal coming up... and its no joke

Well, I should say to anybody thinking of embarking on a first business (especially as a sole trader) is Do NOT BOTHER !

The dice are loaded and you would need a good accountant to get even the basics right.

In total I employed three accountants (one at a time) to do my business accounts and also to audit my clients account.

None of them did an adequate job - even though they were acceptable as auditors to my professional body...

Net result was that , when I sold my business as a going concern, HMRC have tried to assess me capital gains tax on just about the whole of the consideration received upon sale of the business (even though not all of my initial investment had been recovered prior to the successful sale of the business). The net result of this (if they get away with it) would be that although I benefitted from the entrepreneur's rate of CGT, I would still pay (effectively) a 40% tax rate rather than the 10% which is supposed to be the case for asset sales after mid-2010.

Of course I am going to tribunal to state my case. However, it would have cost me in excess of £20,000 to have employed professional help with this - so I have been having to spend my retirement amassing the level of tax and case-law knowledge which really any new sole-trader would need before even setting up a sole-trader business.

Most sole traders will maybe have an argument with the HMRC over maybe £20,000 or less - so self-instruction is the only route really open to us.

I realise this is an accountancy audience; but if a politician ever reads this I hope they will spot that to anybody that might ever ask my advice about setting up a new sole-trader business the answer will always be.. DO NOT BOTHER.. the tax system is ridiculously complicated with most allowances very tightly time-limited and self-assessment might better be described as financial-suicide... Happily, I like a challenge:-) Pinnocchio

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By David Gordon FCCA
03rd Sep 2015 10:53

dear pinnochio

 

 Well you clearly believe you have had a rough deal.

 I appreciatie that you currently have a jaundiced view of accountants, but (There is always a "But")

 Your first port of call should be to submit your grievance to the professional standards department of the relevant accountancy body. With a copy to the accountant(s) concerned.

 The accountant has a strict time limit to reply. The departments concerned in spite of the regrettable usual snide comments from the uninformed, do take these matters seriously.

 Alternatively you may take a free assessment meeting with a Professional Indemnity lawyer.

 He will tell you whether in fact you have any claim to make against the accountant(s) concerned.

 Notwithstanding this, be advised that Capital Gains Gains is a very odd beast. It does happen that taxpayers regularly sign off accounts which give them a current advantage, but which may at the end of days bounce back to bite them on the posterior. 

 If you really are intent on taking this to a tax tribunal, on your own. I strongly recommend that you spend time attending at your local court, to listen into any financial cases which may be open to the public. This so that you appreciate the need to present clear objective evidence with supporting documents,  in a clear dispassionate manner.

 The tribunal may not take it kindly if you had not previously given HMRC opportunity to review the matter, or had witheld relevant documents from HMRC.

 Under the freedom of information rules, you are entitled to ask HMRC for sight of your tax file, complete with notes of any research or discussions HMRC officers may have had.

 

 

 

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By raybackler
03rd Sep 2015 23:06

@pinnocchio

I am sorry you have had a rough deal and David Gordon offers some sound advice.  Representing yourself at a First Tier Tax Tribunal is fraught with difficulties.  I would have thought it was essential to get professional advice and as an accountant in practice, I know the limitations on my expertise, so I am not offering.  It is important to differentiate between what you think should have happened, from what a dispassionate view of your circumstances may assess.  In an ideal world they should be the same thing, but when emotions get involved, who knows?

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