Why your website isn’t generating the leads you want

Whether you spent a lot or a little on your website I’m sure you hope that it will generate business for you and provide a return on your investment. How might that work in real life I wonder?

Actually we know how it’s supposed to work, don’t we?

Someone searches online for an accountant locally to them (as that’s what they tend to do). You hope that your website appears high in the search results and that the prospect follows the link to your site.

Then you have to hope that your website enables the prospect to quickly see that you can help them with their problem. And that they can see who you are and how to contact you.

If your website isn’t generating the type of leads you want, it’s probably because prospects cannot quickly find that they want on it and decide that you’re right for them. One easy to fix mistake is on your ‘about us’ and ‘contact us’ pages. However much (or little) business you are getting through your website, you will get more when you reveal your name and who you are (maybe even with a decent photo too). Most people want to know who they are contacting – not just the name of a firm.

What about when your website isn’t top of the search results?

Experience tells us that not all prospects search online for an accountant. Instead they search for ‘tax advice’ or for some other problem they have and for which they want an answer – or someone to help them.

This is one of the reasons why the new-look Tax Advice Network website now operates as a lead generation site for accountants like you.

If you search online for ‘tax advice’ you will see that the Tax Advice Network website is already highly ranked. As a result they have long received 3,000+ enquiries a month. But many of their visitors really need a local accountant rather than a specialist tax adviser. They just don’t think to search for ‘accountant’!

The Network’s new website, the first for 9 years, went live at the start of 2017. It’s already proven to be easier to use and is securing even more traffic than before. This is because the site has so much relevant history, inbound links, SEO links and content. And it’s all natural. They have never invested money in trying to trick the search engines. Instead they played the long game and  tax accountant subscribers are now reaping the benefits of the site’s genuinely high rankings and longevity.

The traffic the site attracts includes many visitors who are much happier to follow links directly to accountants (like you). These leads tend to be people who need the help of a tax accountant rather than a real tax specialist. And as they have searched for tax advice they probably don’t have an accountant (yet). So you also have the opportunity to encourage them to become regular clients.

Over the last 9 years the site has generated many hundreds of thousands of pounds of business for tax advisers. But far more tax enquiries weren’t suitable for a specialist tax adviser. That’s why the Network is now listing accountants on the website too.

It’s hard to imagine you not securing a really positive return on the low investment required. And there’s nothing extra to pay. So you pay nothing per lead.

If you would like to know more about this opportunity, take a look at the website now >>>

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More doubt spread re ‘approved’ tax schemes

If this blog was a redtop newspaper the headline might have read: “Tax Barrister blows the lid off Tax Schemes scam”. I admit I was tempted!

Regular readers will know that only very occasionally do I use this blog to reference tax related topics. When I do so my observations are still focused around helping accountants in practice.

I have long been dismissive of those promoters and commentators who have sought to encourage accountants that they MUST advise clients about tax schemes. By which I mean those schemes that HMRC regard as abusive or aggressive.

My cynicism about such schemes contributed to me choosing to leave the world of tax advice in 2006. Since then my stance has been justified many times over – see links below.

Jolyon Maugham, a tax barrister at Devereux Chambers, has now ‘blown the lid off’ what some of us have long suspected.

In a well written blog post Jolyon effectively accuses a small group of tax barristers of knowingly giving positive opinions of tax schemes that are unlikely to succeed.

The opening paragraph of his blog (which has been republished in Taxation magazine) gives you a flavour of his views:

I have on my desk an Opinion – a piece of formal tax advice – from a prominent QC at the Tax Bar. In it, he expresses a view on the law that is so far removed from legal reality that I do not believe he can genuinely hold the view he says he has. At best he is incompetent. But at worst, he is criminally fraudulent: he is obtaining his fee by deception. And this is not the first such Opinion I have seen. Such pass my desk All The Time.
Later he notes:

The [promoters] will then go out and sell that idea to taxpayers. In the case of individual taxpayers, they will sell it, typically, through IFAs to whom they will pay a sales commission.That sales commission, too, can be very substantial, running in some cases into hundreds of thousands of pounds for a single client. So the IFA can be strongly incentivised to persuade their clients that the idea works and – should the taxpayer client care about such things – that it is not aggressive tax planning.
What happens next?

The taxpayer will make their tax return, HMRC will disallow the beneficial tax treatment, and the taxpayer will challenge that disallowance in the tax tribunal (causing years of uncertainty and substantial professional fees). Should that challenge fail, the taxpayer will lose whatever money he put into the idea, face an unexpected tax charge and, very often, be publicly pilloried into the bargain.
Suffice it to say that Jolyon’s expose further supports my view that accountants can safely ignore all those promoters encouraging them to introduce clients to their tax schemes. Even those apparently ‘supported by Leading Tax Counsel’. Sad to say, these opinions may be costly to obtain but also potentially worthless. As we have seen so many times in recent years, ‘abusive’ schemes are being successfully challenged all the time – despite the assertions of their well paid promoters when clients were being encouraged to ‘invest’.

If you have clients being encouraged to invest in a scheme that seems ‘iffy’ to you, Jolyon’s blog will give you added confidence to provide independent constructive advice about the risks.

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Confessions of a tax avoidance scheme promoter

At last week’s annual Taxation Awards event I found myself chatting with someone who used to promote tax avoidance schemes. What he had to say was well worth sharing with readers of my blog.

First though let me offer some background. I want to provide enough details to justify why what Mr X had to say is so important. But I am respecting his preference not to be identified here especially as I made no notes at the time so I do not want to specifically attribute his comments.

I have known Mr X for 15 years or so. When I was in practice I attended many meetings with him and was always struck by his honesty and integrity. Although I was never a fan of tax schemes, when Mr X promoted a tax scheme I knew HE had always researched it thoroughly himself and understood exactly how it worked. He was in favour of making full disclosure on tax returns and was very choosy about the schemes he promoted – even before the DOTAS regime was introduced ten years ago.

Mr X has been a top private client lawyer and tax adviser for years. He belongs to a number of professional bodies; his expertise and independence are highly regarded and he frequently writes cogent and hard hitting articles for the professional press.

Our conversation started by referencing the latest media reports about the icebreaker tax scheme and Gary Barlow and Take That. See: Why weren’t all accountants promoting those tax schemes? This is a post I wrote when the same story first became news almost 2 years ago in 2012:  (It has since become apparent that the scheme dates back to 2004 – rather than only to 2010 as I suggested in that post)

When we talked I learned that Mr X has found that the market for tax schemes has dried up in recent years.

In his experienced and credible view NO professional accountant in their right mind spends time promoting tax schemes to clients any more. There is NO point in accountants spending time trying to get their heads around new schemes, as an independent conclusion will always be that the scheme will not survive attack by HMRC.

Mr X told me that in his view the only people still actively promoting tax schemes to clients are the naive and those whose independent view has been compromised by their need to earn a living. Oh, and the liars who know that their assurances are unreliable.

There will always be greedy people who will want to believe that they can reduce or remove a large tax bill by doing what they think the rich and famous do. And there will always be slick salespeople who can exploit that desire for a profit.

Mr X still advises on tax but confessed that he no longer promotes ANY tax schemes. He does however get involved in helping extricate people from schemes that have been found not to work or where this is now anticipated to be the likely outcome.

Supplemental point

When I was at Accountex last week I noted that two well known membership groups for accountants are encouraging their members to use the services of their preferred tax scheme promoters.  I tend to think there is a combination of naivety and greed involved in such arrangements.

Having said that, maybe this is the right approach for that handful of clients who want to know what their options are. Especially as they will only want to pay a fee if someone is going to help them pay less tax.

I must admit though that I wonder how often well advised clients actually choose to go ahead with tax avoidance schemes these days. I have noted previously that barely one in ten clients proceed once they understand what is really involved.

As Mr X confirmed when we spoke, the outcome of any remaining tax avoidance schemes must be in some doubt. Because of the inevitable prevarication and argument the final outcome will typically only become clear over the next 5-10 years.

Much better, in my view, to simply seek the advice of a suitable experienced tax expert to help ensure that a client’s transactions etc are being arranged in the most tax efficient and non-controversial manner.  Mr X does this. And the Tax Advice Network provides a simple way to secure such input from independent tax experts around the country.

Related post: Why weren’t all accountants promoting those tax schemes?

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Do you take your own advice?

I don’t recall ever seeing a cobbler’s children running around without shoes. But I understand the old adage. Their father was typically too busy fixing his customer’s shoes such that his children had to go barefoot.

Perhaps it is for similar reasons that many accountants leave their own annual accounts and tax returns to the last minute. I applaud those who get such things out of the way earlier in the year, but I believe they are in a minority.

I wonder if there is any correlation between those accountants who leave their own tax affairs to the last minute and those who are still doing loads of clients’ tax returns in January? I wonder if those accountants who sort out their own affairs early are also better placed to encourage clients to do so too?

I know I’m not in practice any more but I despair at how many otherwise professional, competent and experienced accountants still suffer each January. They blame their clients who apparently ignore their accountant’s advice and encouragement to provide all necessary information earlier in the year. Maybe there some clients who will always be like this – regardless of the penalties their accountants impose and unmoved by the incentives to be better organised. But why do so many accountants still have so many problematic clients?

I’m curious. Do you take your own advice? Are your own tax filings sorted yet for the last tax year? And, if so, do you still have loads of clients who tax affairs need sorting? Or not?

 

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Perception is reality – Do you work for your clients or for HMRC?

I have heard it suggested many times that some clients think that their accountants are not working in their best interests. The clients perceive that their accountants are working on behalf of the Revenue.

I suspect that this is more an issue of those accountants giving the wrong impression to their clients. But, as I have long maintained, ‘perception is reality’.

Yet again this comes down to a question of how well the accountant communicates with their client. Sadly not all accountants are good communicators. The same is true of course of many other professionals.

Let’s consider three key facts:

  1. The local office structure within HMRC has all but disappeared.
    Whereas years ago local accountants might be on first name terms with local Inspectors of Taxes, this is rarely possible today. It also means that accountants need not be concerned that if they fight hard for one client that the local Inspector will get his/her own back. It is rarely going to be possible for one Revenue officer or Inspector to make life difficult for the accountant’s other clients. Whether this used to happen or not, it’s no longer feasible. If an accountant needs to speak to an Inspector about a client’s tax affairs he/she will generally only be able to speak to a call centre where an operator will call up the client’s information on a computer screen.
  2. Accountants have to focus on their clients
    A recurring theme within my blogs is the need for accountants to focus on their clients’ needs otherwise they will vote with their feet. Anyone who really thinks their accountant is more interested in what HMRC thinks than in fighting unfair attacks etc will look to find a ‘better’ accountant. That is one who they perceive is more focused on giving good client service. The switch often takes longer to arrange than would be ideal, but it does happen.
  3. The customer is always right
    Except when he/she wants to break the law. Professional accountants know the difference between what’s acceptable and legal and what’s unacceptable or illegal. A good accountant will ensure that clients appreciate the distinction and the consequences of choosing to do anything illegal.

I am reminded of a key point I used to stress with junior staff when I was in practice. Typically this would happen when the staff member was writing to the client after reviewing the client’s records or profit and loss account analyses.

When the staff wanted to write something like “I have disallowed [the £260 you spent at the XXX Restaurant]” I would encourage them to change the wording. “It is not for us, as the accountants, to disallow anything,” I would say. “The Revenue ‘disallows’ claims. We don’t and we mustn’t give clients the wrong impression. The precise words we use can have a big impact.” The offending line would then be amended to read something like “Sadly the Revenue will not allow you to claim tax relief for [the £260 you spent at the XXX Restaurant] so I have made the necessary adjustment.” Ideally we would also then identify another item, the tax treatment of which was not black and white, and seek the client’s confirmation that tax relief should be claimed, thus reducing their tax bill by £X.

Summary

If a client wants tips from their accountant on how to ‘cheat’ the taxman illegally, they will be disappointed.

If, having resisted any involvement in illegal activity, an accountant leaves their client thinking that they are working for the taxman, their communication skills are letting them down.

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Lifetime achievement award for Robert Maas

I was thrilled to be seated with Robert when he was announced as the winner of the Lifetime Achievement Award at the Taxation Awards ceremony last night. I am proud to count him as a friend and as one of my tax mentors.

In the light of last night’s award I think it appropriate to share my own thanks and admiration for Robert. Here is a man who really stands out in my eyes.

Whilst I no longer give tax advice I did initially start my career in tax shortly after qualifying as a chartered accountant in 1982. Robert was already well known and respected in the tax world even then. I believe he started in tax in 1965, the year that Corporation Tax and CGT were first introduced. It is also almost 50 years ago!

Some years later I think I met Robert at a conference. I assume I must have already started writing on tax matters as Robert recognised my name. He encouraged me to join the London Society of Chartered Accountants Tax Committee. Robert was the Chairman at the time. I was so proud and thrilled to be invited. In time I became Vice-Chairman of the Committee. Robert also then encouraged me to join the ICAEW Tax Faculty Committee, which in turn then led to me being invited to stand for election as Vice Chairman and then Deputy Chairman of the Faculty.

I benefitted from working with Robert on various Institute committees over the years including the ICAEW Tax Technical Committee, the Personal Tax and Finance Committee and the main Faculty Committee. I think I also provided a little support when he initiated the Faculty’s Younger members’ Tax Club and also the Faculty’s Tax Investigations Committee. Over the years Robert has kindly invited me to speak to various groups of which he is the prime mover. It is also due to this chain of events that he started which led to me recently being appointed Chairman of the ICAEW Ethics Advisory Committee.

In 2001 when I left BDO I seriously considered moving out of the tax world. I remember Robert, on hearing me suggest this after the CTA Address that year, taking me for a drink and persuading me to stick with it. He complimented my communication skills and said my departure would be a loss for the Tax World. I always thought he was exaggerating but I took his advice and this also allowed me to then go on to be Chairman of the Tax Faculty from 2003-2005. In the end I stayed active as a tax adviser until 2006 when I finally gave in and concluded that my brain just isn’t big enough.

During one of my talks (at least) I quote Robert. He taught me long ago that there is no shame in admitting you don’t know the answer to a tax question or problem. Despite his general reluctance to accept how highly regarded he is, he did tell me once that he couldn’t understand how any general practitioners could cope without ever engaging tax specialists. “If I have to stop and check with someone else every now and then, how much more likely is it that someone less experienced should need to do the same and more often?”

Robert is a giant in the tax world. But he is also a very unassuming man. Nevertheless I am aware that there are many other tax practitioners who have been influenced by Robert during their careers. Whether by attending one of his lectures, reading one of his books or articles or through his personal encouragement to join a committee. Many more people have been influenced by Robert than probably even he knows.

I recall attending Robert’s 65th birthday party some years ago – I have lost track of how many. I was so touched and proud to be invited. More recently Robert has taken up blogging. He loves tax and although he is still in practice at Blackstone Franks, he continues to write regular articles for the professional press. But if no one wants to publish what he has written he posts it on his blog – ‘Two cheers for the Chancellor’. This now has over 130 insightful and educational pieces on it and is well worth reading. Robert has also taken to LinkedIn but is reluctant to connect with anyone there he doesn’t know.

I don’t imagine Robert will ever retire. For now though his unswerving commitment to the tax profession has been recognised and rightly so. The announcement last night was met with a standing ovation. Robert is well-loved and much respected – with good reason.

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Are accountants the new bogeymen?

Were you as angry as I was at the headlines and media focus on a clearly misguided element of the latest report by the Public Accounts Committee (PAC)?

Committee chairman Margaret Hodge said accountants seconded to government represented a “ridiculous conflict of interest” that should be ended. She had clearly made up her mind based on no real evidence and was determined to use her position to grab a few more headlines and to make sure accountants become the new bogeymen (sorry – I cannot find a gender neutral word).

Hodge referenced just ONE (non) example to justify her sweeping criticisms. Despite the paucity of her arguments the media is gleefully repeating Hodge’s criticism of all the Big 4 firms and, implicitly, accountants in general. Re Hodge’s single ‘proof’, what really happened I suspect is this:

The last LABOUR Gov’t wanted to introduce a tax relief to reduce taxes for those who qualify for the patent box regime. To ensure the relief worked as intended they sought outside help (from KPMG). Could have been any of the Big 4.

Once the law was introduced, KPMG (and all the others) then helped promote the concept so that the regime (introduced by LABOUR) would be a success. There were no loopholes to exploit. The advice given to clients was to ensure they could benefit from the new regime – as the Government intended.

I listened to Mrs Hodge being interviewed on the Today programme on Friday and was frustrated by her outrageous slurs on our profession. The Treasury also disagreed with the criticisms saying the PAC’s analysis and conclusions:

“bear almost no resemblance to the reality of what government is doing or what is happening. In particular, as a matter of principle, the suggestion that government shouldn’t work with business, and indeed anyone affected by its policies, is totally absurd.”

Treasury Minister, David Gauke, was also critical of the report, saying:

“The idea that we shouldn’t make use of private sector expertise in developing a tax system that would bring investment and development to the UK is absurd. They’re not going out to advise clients on how to dodge the legislation, they’re going out to advise clients on how to abide by the legislation.”

As the FT noted, also critical of the ill-informed PAC report were ICAEW, CIOT and the trade union that represents senior staff at HMRC (The Association of Revenue and Customs). But of course most of the media have chosen to ignore such criticisms. They seem to like having someone new to criticise even if the facts do not support this. The media have got fed up of criticising MPs and the bankers.  I fear that accountants are to be identified as the new bogeymen. What do you think and what can we do about it?

ps: The other thing that worries me is that I know how biased and inaccurate Hodge and the PAC are on this matter. It makes me very cynical as to the reliability of other reports produced by the PAC and, indeed any Parliamentary committee. If this one can be so far off the mark, it’s likely that others are too. How much reliance should be placed on any of them?

Some of the recent headlines:

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Why don’t all accountants promote tax schemes?

I had to laugh when I saw this headline in the Times on Saturday: “Barrister loses dispute over tax avoidance”.  I checked it out and it’s true. A leading Tax Counsel has failed in his claims that a LEGAL tax avoidance scheme reduced his tax bill. In other words, it was ineffective.

Ten years ago Rex Bretten QC devised a tax scheme that was within the letter of the law and he sought to take advantage of this. HMRC were not happy and the dispute went to Court. As so often happens many years have passed since the tax planning was put into effect. Times have changed and the tax tribunal has disagreed with Mr Bretten’s analysis. He is not entitled to any tax relief for the £475,000 loss he was claiming would reduce his tax bill for 2002/03 by £190,000.

Shock; Horror. It seems Counsel’s opinion was wrong. Not for the first time. (That’s a comment re Tax Counsel in general). Sometimes their analysis holds up, sometimes it doesn’t. The one thing on which they are generally correct is when they confirm that it is legal to take part in such a scheme – assuming  that the taxpayer and the promoter of the scheme make full disclosure of all salient issues.

Last year I wrote a series of posts to which this latest development is effectively a postscript that endorses my views. In effect, tax avoidance schemes are risky and are rarely worth an accountant’s time and effort. Such schemes MAY be legal but this does not mean that the hoped for tax savings will be secured. And, if the scheme fails then, for most people, the final outcome will be worse than had they not undertaken the tax planning involved in the scheme.

As tax avoidance schemes are often over hyped and do not always work, these days it rarely makes commercial sense for professional accountants to devote time and effort to checking out each new scheme or variation that is promoted to them.

Related stories:

 

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Mourning the death of Tax Facts

There needs to be a special reason to give over this blog to someone else’s words. This is one such occasion. It’s important for accountants to be able to debate the tax news stories of the moment with confidence and conviction – based on the facts. This has become increasingly difficult in recent months, as John Andrews explained in a recent speech.

John is a former CIOT President and founder of the Low Incomes Tax Reform Group. The comments below are taken from his acceptance speech after he became only the third ever recipient of the CIOT Council Award this week. This is a prestigious and very well deserved commendation for John’s tireless work since his ‘retirement’. He remains one of the most highly regarded and respected independently minded members of the tax profession, so his words deserve wide attention.

Towards the end of John’s speech he referenced a recent debate on tax avoidance in Parliament (the Bold emphasis is mine):

This was generally a more mature debate and a realisation that we have an international problem that cannot be solved on our own. However, some parts were filled with heat and very little light. Other parts contained a distinct lack of facts, accompanied by impossible dreams, misunderstandings and many unsupported assertions.

This reminded me of a report in the US press last year [credit here to Rex Huppke of the Chicago Tribune] which made Facts into a mythical person and then criticised US politicians for killing Facts. The event that caused the demise was when a Florida Republican announced, without any evidence, that at least 81 of his fellow members of the U.S. House of Representatives were communists.

This made me think that some tax debates may have pushed our equivalent of the mythical person, Facts, to an early grave here in the UK.

Facts had a long life and I believe was born in ancient Greece, the child of Aristotle who saw that evidence was essential for his nurture. As Facts grew up people like Edmund Burke observed “Facts are to the mind what food is to the body.”

Facts helped to discover gravity, break the Enigma Code, discover DNA and, perhaps, introduce self-assessment.

In 2012 however, people seemingly unable to understand how tax systems work, began to doubt and ignore Facts. Opinion became the new truth and reprinting of such opinion in the press confirmed this new truth as correct. No feedback from Facts was thought necessary.

Facts had suffered serious injuries at the time of the 10% tax rate debacle in 2008 and through the misplaced assertions in 2010 about millions of errors being produced by the new PAYE system.

His health was improving, when early last year he was laid low by the absence of any sensible discussion about the granny and pasty taxes.

But nothing was to prepare him for the cruel assault which led to his demise in the final month of twenty-twelve. Assertions in the press that you can judge the right amount of tax a multinational should pay by looking at its turnover; followed by the revelation that for certain there was a £69.9 billion tax gap caused by avoidance, caused Facts to have a major stroke.

He was still in intensive care in hospital when the final straw came. His cousin TaxLaw was the one to break the news. TaxLaw had been admitted to the hospital’s isolation unit and had been ignored by all and sundry, including, at times, the Public Accounts Committee. The oxygen was rushed to Facts when he was told that a coffee bean company was now to be the arbiter of the amount of tax that people should pay; but it was too late.

That news coupled with the whisper that a burger chain would set the CPI in future had done its worst.

You will have seen from his obituary that Facts was aged 2,372 and was buried, at his request, in the birthplace of Parliament – the Isle of Man. He is survived by two brothers, Rumour and Dogma and a sister Shout Loudly.

Donations in his memory may be made to HMRC in a brown envelope marked “corporation tax”.

It is to John’s credit that he didn’t name any individual carriers of the virus that killed Facts. He was making serious points, about which he cares greatly, under the guise of an amusing valedictory speech.  Sadly much of the media is unaware or does not care enough that they are helping the spread of a virus.

John Andrews’ acceptance speech can be read in full here.

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8 Misconceptions about Limited Liability Partnerships

At Accountex friends of mine conducted a straw poll of attendees to ascertain attitudes to advising on Limited Liability Partnerships (LLPs). The straw poll was related to a project to which I have leant some support. The results were not wholly surprising but do reveal continued misconceptions and fear of the unknown:

  1. LLPs are perceived to be of marginal value: In fact they are the preferred business structure for anyone who wants the protection of limited liability, but does not want or need a limited company.
  2. LLPs are perceived to have limited tax advantages: In fact tax is rarely the key driver. The tax rules are effectively the same as for conventional partnerships. LLPs are transparent for tax purposes.
  3. The benefit of the limited liability aspect of LLPs is not well understood: The fact is that LLPs offer all the normal benefits of limited liability but without the inconvenience of a corporate structure.
  4. LLPs are perceived to be just another form of partnership with all the attendant management issues: In fact the move from conventional partnership to LLP status allows many such management issues to be resolved when the new membership agreement is drafted. In practice the real benefit over conventional partnership status is the added protection of limited liability.
  5. An inability to prepare LLP accounts as easily as for sole traders and limited companies: This shouldn’t be a barrier as all of the main accounts production systems have LLP modules. The practical problem is that some accountants have yet to access the LLP modules.
  6. LLPs are not perceived to be a key option for new business start-ups: This simply follows from many of the above issues. It is why I assisted in the creation of a business structure review checklist – to identify those occasions when LLPs should be seriously considered.
  7. LLP agreements are thought to be no more important than a conventional partnership agreement or a standard shareholder agreement: In fact LLP agreements are as importnat as shareholder agreements where there is any possibility, however remote, of a disagreement. The default provisions to resolve disputes in the LLP Act will rarely result in a fair outcome.
  8. LLP agreements between individuals and their own companies could be perceived as agressive tax avoidance: In fact the tax benefits of such a structure are a side-benefit. The principal reason for such a structure is to obtain the protection of limited liability without the administrative hassle and complexity that arises when running the business through a limited company.

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When I’m wrong, I admit it

This post is a post-script to a couple of posts I originally wrote for the TaxBuzz blog. As I no longer update that blog I have to comment here. And, yes, I HAVE to comment. Two people with whom I worked some years ago have been found guilty and imprisoned for their part in a fraudulent tax scheme. And I think there are lessons here for ambitious accountants in practice.

Three years ago, in October 2009, I set out my views on reports that: Vantis tax advisers to face charges of “cheating” re tax scheme. I admit that I doubted that Messrs Perrin and Faichney had done anything different to dozens of other promoters of tax schemes. I felt sure that HMRC were taking the case to act as a deterrent. I doubted that the accused had done anything beyond promote an aggressive scheme supported by “Counsel’s Opinion”.  As is well known, I am no fan of such schemes but equally, having worked with Perrin and Faichney, I found it hard to believe that they would do anything fraudulent.

I wrote two follow up pieces along similar lines: Wives of promoters of Vantis tax scheme also facing charges and Tax and financial advisers in court again re ‘failed’ tax scheme.

Well, in the light of the latest reports, I have to accept that, unless there has been a miscarriage of justice, “Faichney, who was managing director of Vantis Tax, worked with his deputy David Perrin to share £4.5m in profit from a fraudulent tax scheme“.

So, I was wrong and I admit it. I am shocked that two ex-colleagues bent and broke the rules to the extent now found proven in Court. When I worked with them I trusted them. Neither was a qualified accountant. I played bridge with David Perrin who was very bright and very commercial when it came to quoting fees for tax planning work. I worked more closely with Roy (Robert) Faichney who promoted me shortly after I joined WJB Chiltern in 2001. Both were involved in my recruitment to the firm.  (I should add that I have neither seen nor spoken with either of them for many years).

During my 4 years at the firm I attended many seminars at which Perrin and Faichney lectured to accountants about tax planning ‘opportunities’. Many of the more detailed technical arguments were beyond me but I was satisfied that their claims were supported by Tax Counsel and arguable interpretations of the law. Or so I thought at the time. And they clearly won over many accountants in practice too.

Now I am wondering. How robust were their technical arguments, really? Did they win me over with their charm and confidence? Did their plans, even then, go beyond the parameters of legal but aggressive tax planning? How many of the tax schemes that they put in place for clients really worked? By which I mean, how many such schemes, have been accepted as effective by HMRC after having been challenged? I wonder how many are still being negotiated? And I wonder how many accountants in practice were suckered into promoting the fraudulent tax scheme to their clients. Reports suggest that it was promoted via a network of contacts to over 600 clients including “an Oscar winning film executive, a celebrity psychiatrist, senior City bankers, top barristers and company directors.” I wonder how many other schemes devised and promoted by Perrin and Faichney have or will also be successfully challenged?

Faichney and Perrin were first interviewed by HMRC in 2006 in relation to the tax scheme in question which had been promoted some years earlier.  It has taken six years for HMRC to get a successful prosecution. Similar (and longer) time lags are commonplace when it comes to disputed tax schemes.

So what are the lessons for ambitious accountants? I would suggest just three:

  1. The fact that someone, whether a colleague or a client, seems to be honest when you first form a judgment as to their character, does not mean they will always resist temptation. Whilst we cannot go through life being suspicious of everyone, we should keep an open mind. We should not allow our faith in someone we trust to blind us to the possibility that they have overstepped the mark.
  2. Following on from the above, if a tax planning opportunity seems too good to be true, it probably is. Ask yourself whether fraud could be alleged – over and above any refusal by HMRC to accept the tax consequences of the scheme? If ANY element of the scheme involves a nudge-nudge, wink, wink, undisclosed agreements or arrangements, or any deliberately misleading statements, beware.
  3. And remember what happened to Perrin and Faichney. The fact that the promoters of any tax scheme seem credible and have a strong background of ‘success’ is no guarantee that all will be well in the future. Perrin and Faichney had loads of experience and their credibility was boosted by them working for one of the (then) top accountancy firms, Vantis Tax. Any promoters who approach you could seem just as credible but may themselves have got greedy. How would you know?

 

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Accountants discouraged by ICAEW from advising on aggressive tax schemes

Although Tax Avoidance is no longer headline news we continue to see the repercussions of recent media stories. Last week I referenced the comments of the CIOT President. He suggested that there may be a need to consider toughening up the financial services mis-selling rules to attack the promoters and sellers of tax schemes that have no real prospect of working. I wrote about this here under the title: Is tax scheme advice comparable with investment advice?

Now it is the turn of the CEO of the ICAEW. Michael Izza has posted on his blog the most forthright comments I can recall on the subject. His words will shock some members of our profession. Although I would suggest that in the main these will be:

  • that minority who have been active promoters of tax avoidance schemes; and
  • those naive followers who enjoyed the commissions they earned and who have yet to realise that their blind faith in the promoters’ promises may not be justified.

Two years ago I wrote what turns out to be a prophetic piece on this blog.  It included the following:

“There are plenty of people who will tell you that you can generate a good commission whenever you persuade a client to ‘invest’ in a structured tax avoidance scheme. They are right. Such schemes are (usually) legal and fully disclosed to HMRC. So what’s the problem?

Let’s start with the need, for most qualified accountants, to comply with their professional body’s fundamental ethical principles. These include acting with integrity, objectivity and professionalism. Clearly this means only advising on things you understand and being clear that the prospect of commission is not uppermost in your mind when advising clients.  Of itself this does not preclude you from advising clients to consider structured avoidance schemes.”

I then set out seven key points that it is too easy to overlook when presented with an otherwise compelling proposition by an enthusiastic promoter of such schemes. You can read the full post here. Last week’s posts covered related points: Why weren’t all accountants promoting those tax schemes? and Ten things accountants need to understand about tax schemes.

It is now six years since I chose to give up being a tax adviser. One of the reasons I did so was an increasing concern I had re tax avoidance schemes and the ‘moral’ issues. Rather than impose my views on anyone else I simply stopped advising on tax issues. I therefore welcome Michael Izza’s recent comments and I was absolutely delighted to see such a clear statement from the ICAEW.  You can see the original here but I have copied it below to encourage debate here as well:

“I believe that there is no place for our profession in the creation or maintenance of these sorts of tax schemes.

As ICAEW Chartered Accountants, our code of ethics, which is the foundation for how we behave, is clear that we must do nothing to bring our profession into disrepute. Any members involved in aggressive tax planning through the sorts of schemes highlighted by The Times are doing exactly that, and are risking the reputation of the vast majority of our members who provide valuable and honest support to businesses and individuals and who want nothing to do with such schemes.

Looking at it through the public’s eyes, people find it hard to appreciate, let alone condone, the difference between avoidance and evasion, especially given the sums involved and the current economic situation. Anyone behind the type of tax schemes outlined in The Times must be aware that what they are dealing with is beyond the bounds of what is reasonable and responsible tax planning – all the more so if the schemes cannot be set out fully in writing or rely on information being conveyed orally.

In my view, taxpayers will increasingly want to be reassured that their tax affairs are dealt with in a responsible and professional way. ICAEW Chartered Accountants should be trusted to abide by our Code of Ethics and in the coming weeks we will be looking at what more can be done to reinforce that trust.

In these difficult times, any ICAEW Chartered Accountants who are engaged in the kinds of schemes highlighted in The Times need to look at themselves in the mirror and ask – am I upholding the honour and reputation of ICAEW Chartered Accountants and am I seen to be doing that? If the answer is no then they need to ask themselves whether they want to belong to our profession or not?”

As implied, I feel that my long-held views on the subject are vindicated and that the pressure on accountants to promote such schemes should reduce. Of course there will continue to be some grey issues and I know plenty of people will miss the point of Michael’s statement. It’s not anti tax planning. It’s not anti tax avoidance. It’s anti aggressive tax avoidance schemes.

I’d welcome your views and comments below.

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Is tax scheme advice comparable with investment advice?

The CIOT has published a press release which I would encourage all accountants to read. It is titled: CIOT President suggests there may be a need to target promoters of dodgy tax schemes under mis-selling laws.

I welcome this statement as I have had similar thoughts myself. Many tax schemes require clients to make some form of investment. In effect they are making a judgement call (often not based on full information) that the scheme will produce a beter return than a conventional investment.

We know that financial regulations preclude us from recommending specific regulated investments. This is part and parcel of evidencing our independence – hence the further restriction on recommending tied investment advisers. Our professional ethics, which apply to those of us who are members of CCAB professional bodies, require us to disclose to clients all commissions and introductory fees etc that we earn from investment advice or from any other activity.

These same ethical principles also apply when it comes to advising on tax schemes. Commissions etc are disclosable to clients and we have a duty to evidence our independence.

The issue that has started to exercise my mind is why there is no commensurate restriction on our ability to promote unregulated investments – which would include loans, mortgages and funding providers as well as tax schemes.

Patrick Stevens, in his statement yesterday, suggests that

“there may be a need to consider toughening up financial services mis-selling rules to attack the promoters and sellers of tax schemes that have no real prospect of working.”

In my view this is only a step away from requiring accountants and tax advisers to be as cautious when recommending tax schemes as when recommending investments.

What do you think?

 

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Ten things accountants need to understand about tax schemes

In the light of media reports related to ‘selebs’ tax affairs and their use of K2, icebreaker and other ‘legal’ tax avoidance schemes, some accountants may find the ten facts highlighted below to be of value.

As I explained in my last blogpost, (“Why weren’t all accountants promoting those tax schemes?“) the media reports are misleading when they imply that structured schemes are pretty straightforward or ‘easy’. The only other people who perpetuate this myth are either investing a fortune in developing the schemes or earning a commission by promoting them. Either way they can hardly be relied on to be objective.

Implicit in most of the recent media reports about the use of ‘abusive’ tax avoidance schemes is the idea that they are only for the wealthiest of taxpayers. This is partly due to the level of fees payable before a client can utilise the scheme. Leaving this to one side there are ten things accountants need to understand and remember about tax avoidance schemes:

  1. Accountants should only promote such schemes if they are comfortable doing so and are confident that they understand ALL of the risks and consequences for their clients;
  2. Accountants do NOT have to advocate structured tax avoidance schemes;
  3. Accountants who promote such schemes honestly will find that typically less than one in ten clients will proceed once they understand all of the risks and downsides;
  4. Accountants do NOT have to notify all clients that such schemes exist;
  5. Accountants are NOT at risk of successful negligence claims if they fail to alert clients to structured ‘abusive’ tax avoidance schemes;
  6. Encouraging a client to undertake a specific structured tax avoidance scheme is much like encouraging them to make a specific investment – is it something a professional accountant can do if integrity and independence are important qualities;
  7. It takes a fair amount of time to get to grips with all of the relevant details of a structured tax avoidance scheme and even longer to compare one with another;
  8. HMRC may announce a change in the law at any moment – leading to rushed (and perhaps botched) attempts to revise the scheme by the promoters. It is only a matter of time before the long-threatened retrospective changes are introduced to negate the hoped for tax advantage;
  9. Even after an accountant has committed loads of time to learning about a scheme they must still resist any temptation to act unprofessionally and to persuade a client to ‘invest’ if they might not otherwise choose to do so;
  10. If, some years later, the scheme is ultimately held not to work the client may sue the accountant for failing to adequately highlight the associated risks.

Together these ten facts should provide support for those accountants who choose not to advise clients on structured avoidance schemes. This list is an updated version of such lists that were previously published on the TaxBuzz blog.

I’d be very happy to explain or expand on the ten facts above and also to receive and debate comments below if you have a different view.

Related posts about tax avoidance schemes can be found on the TaxBuzz blog:

– Tax avoidance schemes – a simple guide
– Naive promoters of tax avoidance schemes

I have written a 10,000 word ebook drawn from my talk on How to avoid professional negligence claims, containing tips and risk management advice for accountants in practice. You can buy the book or download a summary for free here>>>

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Why weren’t all accountants promoting those tax schemes?

I imagine that some accountants are concerned that clients may have complaints in the light of the latest media stories about tax avoidance schemes. Such complaints will rarely be justified and would only arise due to some of the misleading reports of the way that Jimmy Carr, Take That and other celebrities have used the K2 and icebreaker tax schemes to avoid tax.

This blog post is intended to clarify two distinct issues.

Firstly if these schemes are legal why haven’t all decent accountants recommended them to their clients?  And secondly, if these legal schemes are abusive, why have they not been blocked by HMRC or by the Government?

Why weren’t all accountants encouraging clients into such schemes?

Contrary to the mystique that the promoters of such schemes like to create, these schemes are not as simple or as straightforward as media reports imply. The schemes are sophisticated and complicated. The promoters of the schemes promised their clients that the arrangements are legal. This is VERY DIFFERENT TO PROMISING THAT THE SCHEME IS EFFECTIVE.

The key issue is that as long as the scheme is legal no one can ever justifiably criticise the client for EVADING tax. All they have done is to AVOID tax as the scheme relies on a justifiable interpretation of the relevant tax laws. This is often not the only interpretation however (see below) and it may well be both artificial and contrived. When clients understand the consequences, risks and downsides of schemes like this they typically decide it’s not something they want to do.

Jimmy Carr explained: “I met with a financial advisor and he said to me: “Do you want to pay less tax? It’s totally legal.” I said: “Yes.”  Many people have intimated that they would have done the same thing and that’s perfectly natural. But there’s more to it that that as such decisions have consequences that need to be understood too.

If someone tells you that there is a legal way you could reduce your tax from 40% to 5%, would you jump through all of the hoops of a tax avoidance scheme? If it were that simple then of course most accountants would encourage their clients to do so. No one wants to pay more tax than is absolutely necessary.

The question is whether Jimmy and other investors in the scheme were provided with sufficient information to make an INFORMED decision. Many accountants know that clients in possession of the full facts rarely decide to proceed with such schemes. I know not whether Jimmy later changed his mind or if he invested without being provided with sufficient advice as to the nature of the scheme. I have however repeatedly explained on my TaxBuzz blog (see below) that these schemes are risky and carry various downsides. The list of these now needs to be supplemented by reputational risk if the media find out!

I have long maintained that accountants should NEVER encourage clients into sophisticated tax avoidance schemes unless they are able to explain all of the risks and downsides to the client. When this is done properly only a tiny percentage of taxpayers decide to proceed with the scheme. And because of this, very few accountants, these days, spend much time trying to keep up with the ever dwindling number of tax avoidance schemes that are being promoted. And, as I have explained ad nauseum on the TaxBuzz blog this is a perfectly rationale approach to adopt. It is also professional, credible, independent and commercial.

Let’s also remember that the upfront cash costs of entering into such schemes often mean they are only even worth considering for the wealthiest of clients who are prepared to gamble the sums involved. Then there’s the time it can take to determine whether or not the client wants to jump through all the hoops. And so on.

Why haven’t these legal but abusive tax schemes been blocked or stopped?

Readers will recall that the Chancellor, in his Budget speech, spoke of his disdain for tax evasion and aggressive tax avoidance, describing both as “morally repugnant”. David Cameron and Nick Clegg have made similar observations more recently. So why don’t they do something to stop these schemes?

Quite simply the media reports of how ‘selebs’ are avoiding tax through LEGAL tax avoidance schemes do not tell the full story. The ‘selebs’ may THINK they have avoided tax. The promoters of the scheme may CLAIM they have avoided tax BUT until HMRC conclude their enquiries the REAL outcome is not known.  Of course, as long as Tax Counsel has confirmed the scheme was LEGAL the taxpayer will not be prosecuted for tax evasion.

All of the schemes referenced in recent media reports are already or will now be challenged by HMRC. Media reports of HMRC investigating the K2 scheme and the Icebreaker scheme insinuate that this is only happening due to the media attention. What rot!

Our tax system has inbuilt delays in it when it comes to challenging someone’s tax position. Take That, for example are reported to have invested in the Icebreaker tax shelter in 2010. This would have been in the tax year 2010/11. HMRC enquiries into those tax returns didn’t start until they were filed (probably in January 2012). HMRC often highlight their concerns re schemes like these on the Spotlights page of their website. But until the Courts confirm HMRC’s view, as distinct from that of the promoter’s of the scheme HMRC cannot do much more. They often hold back from adding further complexity to our tax system unless they genuinely fear that the scheme works. In such cases they may recommend that new tax rules be introduced immediately to block such schemes. However HMRC often still challenge them in case all the steps and paperwork were not properly completed. This is another of the risks that taxpayers run. The scheme works in theory but only if all necessary steps are taken in precisely the right order, adequately evidenced and truthfully represent the underlying transactions. Often this is not the case and the hoped for ‘legal’ tax savings have to be repaid.

The interpretation of tax law on which a scheme depends for it’s success and legality will often be the subject of lengthy debate and legal hearings.  These challenges often drag on and on.There are some promoters of schemes who claim to have never lost a case in the courts. However when they make such claims it is rarely clear whether all avenues of challenge by HMRC  have yet started, let alone been exhausted.  Regardless of what the promoters assert, there are always risks of failure and of the hoped for tax savings being denied even when a scheme is LEGAL. And many years may pass before we learn whether or not the scheme was EFFECTIVE and the tax savings were permanent. So, the alleged tax savings enjoyed by Jimmy Carr and Take That may yet need to be repaid to HMRC.

EDIT 20 July 2012: We now have contemporaneous evidence in support of the above explanation. The Court of Appeal has just pronounced on a tax scheme promoted by PwC ten years ago. The case, Howard Schofield v HMRC, has already been through the first tier and upper tier tribunals and this is the 3rd time HMRC have won. This case alone involved potential losses to the Exchequer of about £11m. It seems likely that around 200 other taxpayers who entered into the same scheme (being advised by PwC that it was LEGAL) will also be affected. The tax they all thought they had saved will now become payable plus interest. Whether they will be able to recover the fees they paid to PwC for the decade old advice remains to be seen.

Related posts on the TaxBuzz blog:

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A brave accountant admits he needs help and asks for it.

An accountant approached me last week to ask whether any of the members of my Tax Advice Network would be willing to work with his practice on a regular basis? The answer was ‘yes’.

The background to this accountant’s question was not uncommon. What I admired however was his desire to address the issue. And I was pleased he had chosen to ask for my input.

It wouldn’t be appropriate to identify the practice but the following broad summary suggests his situation is far from unuusal:

  • He is in his forties and has built up the practice over the last few years
  • He has a broad range of mostly business clients
  • His in-house (part-time) tax manager knows her stuff but is not someone to put in front of clients. And her letters and reports always need to be rewritten
  • He fears that some clients may be missing out and paying too much tax due to his reluctance to initiate conversations about anything beyond the most basic of tax planning; but he doubts many would be interested in ‘aggressive’ tax schemes
  • He has realised the practice needs higher level tax expertise but cannot afford to invest in a full-time person with appropriate level and breadth of knowledge. This also means he is unwilling to approach recruitment agencies
  • He has no idea how to go about finding someone appropriate or whether such a role would appeal to anyone good enough
  • He is concerned that he could end up with someone who is simply more expensive but otherwise similar to their existing tax lady.

Firstly I confirmed that I know there are plenty of independent tax advisers who work with accountancy firms like this one. In each case the parties agree an arrangement that suits them. This could include:

  • Weekly or bi-weekly visits
  • Flexible visiting arrangements
  • Ad-hoc telephone/skype and/or email help and support
  • Working as part of the firm or as an external consultant. Some accountants say their clients know the accountant is taking things seriously when he refers to his tax expert. (ie: Clients take the same attitude as patients do when their GP recommends a consultant).

Fee arrangements can also be flexible and may involve:

  • A weekly or monthly retainer – against regular invoices
  • PAYE for regular work as a part-time employee (with consideration of overtime arrangements if required)
  • Hourly invoiced rate for support provided by phone, email or face to face
  • Fees invoiced to the firm or to specific clients (the latter is only common for outsourced tax investigation cases or other situations involving substantial fees)
  • Or any other arrangement that suits both parties and reflects the arrangements between them. These may need to be reviewed after a few months

To proceed I suggested that the accountant use the simple search facility on the Tax Advice Network website to identify those advisers who are comfortable advising on ‘business tax’ issues. And then to add his postcode to sort the advisers and to show those located closest to him. He can then contact them by email or phone and have a chat.

Starting with our website means that the accountant is dealing with someone I have vetted as to their technical experience, is committed to undertake sufficient CPD and has a reasonable level of PI cover. Many general practitioner accountants might be less well prepared and yet it is important to check all such elements when recruiting tax support (whether to be on staff or only on a consultancy basis). Having said that every accountant needs to make their own assessment of the suitability of the tax people they engage directly whether or not they are found through the Tax Advice Network website.

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Is a ‘me too’ Budget summary worth sending to anyone?

Last year I awarded a (notional) prize for what I considered to be the  best Budget night ‘commentary’ that I saw the following day.  The winner, and runner-up to a lesser extent, stood out among the dozens of ‘me too’ pieces that were, frankly, not worth anyone’s time and effort.

Many years ago the Chancellor’s March Budget heralded tax changes that would take effect from the following 6 April. In those days there was a real client service need to summarise the Chancellor’s announcements, what they would mean in practice and what action clients might need to take as a result.

That was then. This is now. Few tax changes take immediate effect any more, other than the closure of fancy tax loopholes. And when that happens more detailed analysis is required than will ever appear in a Budget commentary. Also long gone are the days when the Budget Night press releases contained sufficient detail to enable accountants to say something constructive. Now we have to wait for subsequent announcements that appear long after the Budget newsletter was published. And most of the next tax year’s rates and allowances were announced a few months back – as has become the way for some time now.

But still many firms produce their own summaries or buy in a commercially produced ‘overnight’ Budget commentary to send out to their clients. I’ve heard the arguments for this. “Clients expect to get one from us.” “They get one from every other accountant in the town.” “They like them” (really?). To my mind there are plenty of better ways for accountants to distinguish themselves from the competition and to provide real client service. These standard Budget emails, newsletters and booklets are of very little value and rarely contain anything more than appears in the daily paper or in generic news (or even tax news) email updates. And they have little in the way of ongoing value.

So why the awards last year? Quite simply because the winner’s approach was distinctive and better than all of the standard stuff that I received from dozens of accountants around the UK.  Elaine Clark of CheapAccounting.co.uk published ‘Not a Budget newsletter‘. It was client focused and recognised the fact that there was next to nothing of immediate impact in the Budget itself.

This year Elaine has already published her summary of the key tax data that the media will only think to announce after the Budget – despite the fact that the information was announced long ago.

I announced a runner-up award last year for informanagement as they had at least divided up the announcements:

  • Budget Summary March 2011 – New tax changes announced today
  • Budget Summary March 2011 – Future changes announced today
  • Budget Summary March 2011 – Changes previously announced for 2011-12, now confirmed

So here is a challenge for readers of my musings and blogs. If you can avoid a ‘me too’ attempt and you adopt a different, client centred approach this year, please let me know. If I agree I will give you the 2012 award (which simply means you get a mention on my blog and a link through to your website).

Of course if you want to argue the case for ‘me too’ summaries I’d also love to hear form you via the comments facility below.

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500 entrepreneurs clearly need new accountants

I had to read the letter in today’s Telegraph twice after I first saw the headline that referenced it:

50p tax rate is damaging economy and delaying recovery from recession, warn 500 business leaders

The key point I wanted to flag was the implications drawn from the following extract from the letter:

“The tax which is in effect a 58p tax after national insurance is taken into account, puts wealth creators like us in a very awkward position.”

The comment article notes that  the business owners have also provided examples of the damage being done to the economy by the levy.

They say that by taxing their personal income so highly they have less incentive to invest their own cash in their firms or try to make them more successful.

I have never met an entrepreneur who would deny him/herself the opportunity to build up their business to make it more successful. It makes no sense. More successful businesses generate bigger profits when sold. And the owners then pay Capital Gains Tax (at between 10% and 28%) on the profits they make. Not 50% income tax. Or “58p” either.

Most entrepreneurs can decide for themselves whether to draw surplus profits out of their business (typically as dividends). If they do this then these monies are indeed subject to top rates of income tax. BUT the corollary is true too. Higher rates of income tax make it more cost effective to leave money in the company to help it grow. This is the complete opposite of what the entrepreneurs are reported to have said they think the position to be.

The comment also suggests that these entrepreneurs think that they can only invest more money in their business by drawing cash out first, paying 50% tax on it and then reinvesting it. This is clearly a nonsense. Retained profits are not subject to income tax and the business itself pays corporation tax on its profits.

All in all, I conclude that these entrepreneurs clearly need better accountants to help them understand how our tax system works and that making their business more successful faster means paying LESS income tax at 50% – rather than more. In other words, their letter is not well argued.

So my advice today is to check out the list of entrepreneurs who have signed the letter and approach those in your area. It’s likely that they could benefit from your intervention. But I guess they won’t appreciate being told that their argument is misguided – even if we can agree that the 50% top rate is not ideal.

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Do you ensure your clients get the best advice or just your advice?

Accountants are naturally cautious about involving third party advisers. They don’t want to be forced to bill their clients more than last year. They also don’t want to bear the cost of seeking a second opinion.

This atitude means that some accountants muddle along and avoid admitting to clients that they have limited experience in certain areas. They allow and even encourage clients to assume that their accountant can advise on all areas of finance, business and tax. In taking this approach the accountant may take the risk of advising on specialist matters outside of their day-to-day experience.

Other accountants simply avoid advising on such issues even if they suspect that these could be to their clients’ benefit. And, despite the risk of negligence claims and of being reported to their professional body, this approach appears to pay off.

Few clients are aware of the ‘better’ advice they could be receiving. Few clients will know that their accountant’s advice is untested and based on out of date knowledge. And even fewer will be aware that their accountant actually has no first hand experience of dealing with similar problems or issues for other clients.

Why do so many accountants feel that it is a sign of weakness or incompetence to admit that they require specialist help? By way of analogy no one expects their local GP to be an expert in all areas of medicine and health. Indeed we would be pretty worried if a GP suggested we hop up on the bed so that they can open us up and have a look inside to see what’s troubling us. We expect to be referred to specialists and to different specialists for different ailments.

The best accountants operate on a similar basis. They ensure that their clients know the limits of their expertise. They have built up trust so that their clients are happy to talk to a specialist when necessary. And they have made clear to their clients that extra work and extra advice means additional fees.

What’s your approach?

I will continue this theme in my next blog post. In the meantime, if you want to get in touch with specialist tax advisers who can help you when issues arise outside of your day to day experience – simply go to the Tax Advice Network.

The above comments are taken from my contribution to a report, ‘GRF is killing the profession‘,  published by Bob Harper in 2011. He says it contains contributions from “leading thinkers, advisers and consultants to the accounting profession.”  (Ron Baker, Bob Harper, Dennis Howlett, Mark Lee, Mark Lloydbottom, Michael McKerlie, Finola McManus, Steve Pipe and Paul Shrimpling)

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Incorporation fright – a taxing horror story

Regular readers will know that Incorporation has long been one of my pet subjects. I’ve written two tax digests on the subject and numerous articles. It’s also one of the seminars I am frequently engaged to provide to audiences of accountants.

I was chatting with a business associate (‘Steve’) recently who told me that he had changed his accountants last year – 3 or 4 years after they persuaded him to incorporate. Whenever I hear that someone has changed accountants I always ask ‘why?’

Steve had been with the old firm for ten years. He’d never been especially impressed by them but he stuck with them until they messed up.  In fact at one stage he’d been almost impressed. They persuaded him to incorporate his longstanding partnership business. He wasn’t convinced this was the best thing to do but he remembered the accountants were quite insistent. They said that they would be at risk of a complaint to their professional body if they didn’t incorporate the business due to the tax that could be saved. (This is rubbish of course. Clients can choose whether or not to take advice. It’s their decision. All the accountant has to do is to give the advice AND to ensure that the client only proceeds if they are aware of all the related issues – not just any potential tax saving. But I digress…)

Expecting tax savings Steve was shocked to get a demand for £36,000 ADDITIONAL tax from HMRC some two years after filing the first year’s accounts for the new company.  How did this happen? Steve explained:

His bookkeeper used to work for the accountancy firm who knew they could rely on her work.  After incorporation he had asked the accountants what to do when money came in re invoices issued by the old partnership. They told him to bank it as usual (there had been no change of bank account). The bookkeeper annotated all such receipts in the cashbook as being ‘re partnership’. For reasons I cannot fathom it seems that the accountants ignored the green ink annotation and reflected these receipts as being company income.  The additional tax bill was for the income tax due on the income excluded from the final partnership tax return. (Hopefully the accountants secured a refund for the additional corporation tax paid in error).

This is a shocking story.  It’s no surprise Steve changed his accountants. What steps would you have taken to avoid such a situation arising?

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The advisers’ guide to HMRC products

As a long time supporter of the excellent work done by LITRG I’m pleased to note that they have recently launched www.revenuebenefits.org.uk for accountants and other advisers.

This new website is designed to provide advisers with access to the latest information on various HMRC ‘products’, including tax credits, child benefit and guardian’s allowance, national minimum wage and more.

LITRG has been keen to do more to support advisers who have to grapple with the “giving” side of HMRC activity, in particular, tax credits and child benefit. The new Revenuebenefits website was created with the support of HMRC and in partnership with Rightsnet.

Those who have heard almost any of my various talks over the years will also know that I routinely stress the importance of being able to advise on these issues – especially tax credits which, for example, may be due to clients when their business falls on hard times – but only if they have pre-registered.

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Tax specialists leaving general practice accountancy firms

I’ve commented before on the challenges that face accountancy firms that look to recruit their first full time dedicated tax partner. Recently I heard about an unexpected development – Tax specialists leaving general practice accountancy firms.

It’s a sign of the times. The reasons vary but include:

Tax partners’ reluctance to promote dubious tax schemes – to the disappointment of general practice partners (who naively consider their tax partners’ approach to be uncommercial);

Tax partners wanting a bigger share of the firm’s profits – to better reflect their contribution. The tax partners may perhaps be focusing on the level of their billings for tax advice. I hope that in such cases the tax partners are rainmakers and able to generate fees without the input of general practice partners who reel in new clients for recurring accounts and related work.

I’m told that at the CIOT Annual Conference last week there were a number of tax partners who have recently left their firms and set up by themselves.  Clearly I welcome this development and hope that the better ones get in touch and join the Tax Advice Network.

I’d welcome feedback as to why you think tax partners are leaving firms and setting up as standalone tax practices.  Do you think it will continue?

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What is ‘Cheap accounting’ all about?

I wonder how many readers of this blog had heard of Elaine Clark before I awarded her the ‘best overnight budget summary‘ last week?

Elaine qualified as a chartered accountant in 1988 and now and runs one of the fastest growing online accountancy practices in the UK. She established it in 2007 and has a number of associates operating their own practices under the same brand name. Indeed Elaine offers a mentoring service for those who want to establish their own practice and benefit from the leads that come from web searches and her related online engagement.

I must admit that I was initially doubtful about the name of her practice: Cheap Accounting, although I do accept that it’s very attractive for online searches. After all, no one googles to find an expensive accountant do they?!

I was always taught that ‘cheap’ went with ‘nasty’. That we should not encourage clients to choose their accountant solely by reference to price – and that a focus on being cheap encourages them to do so.  And then there is the theory that although most clients want accountancy services provided (1) fast, (2) accurate and (3) cheap – they have to choose  just 2 of the 3 .

Having discussed this with Elaine I must admit to being wrong.  I now understand Elaine’s passion and her business model. Her practice offers ‘cheap’ accounting services in that they keep costs down and run an efficient and focused service. They can do this through a reliance on computer-based book-keeping packages and other technology that allows them to operate in a very cost-effective manner.  As explained on her website: “Quality is in no way compromised. CheapAccounting operates to a set of very high service values”.

Inevitably, perhaps, most of Elaine’s clients have straight forward accountancy and taxation needs. Needs that her experienced network of CheapAccounting.co.uk accountants are well capable of addressing. However from time to time there may be a more complex tax issue which requires more specialist advice.

I am delighted to announce that Elaine has chosen my Tax Advice Network to provide tax support when required. We have agreed a working alliance which is clearly promoted on her website.

For obvious reasons I do  not give permission for just anyone to include our logo on their website. Indeed Elaine is the first person to have that authority – beyond the tax adviser members of the Network of course.

I hope that readers are sufficiently intrigued to want to check out the Cheap Accounting website. It’s very different to most accountants’ websites. It’s also popular and successful at drawing in the sort of business that Elaine is targeting. Oh, and it even tells visitors how easy it is to change their accountant. I think we could all learn something from her approach.  Let me know what you think….

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And the award for best budget night commentary goes to…..

I’ve long been critical of the ‘me too’ type of overnight budget commentaries. Indeed, these days ‘overnight’ is slow and many commentaries appear online within hours.

I have seen dozens of such identikit commentaries since the Chancellor sat down yesterday. Almost all contain pretty standard lists of the headline measures, cut and paste extracts from the budget press releases and sundry similar ‘commentaries’ containing the initial views of the author or a ‘senior tax partner’. There are a few that contain bog standard ‘advice’ and a few firms have provided commentaries on specific measures – although most of these note that we don’t have enough detail yet to know how the proposals will work in practice. Others reference what the writer would like to have seen or how limited the proposals are in specific situations.

If you really think it’s worth sending one out I’m an advocate of using a tailored version produced by one of the key tax publishers.

Of course there will be many more such commentaries that I haven’t seen. There’s a limit as to how many I can pick up through the email lists I am on and through links contained in tweets on twitter. Still, two very different budget commentaries stand out and deserve an award*

If you’ve come across any others that are clearly distinctive do please reference them in the comments section below and provide links if possible. Many thanks. I’m also keen to receive feedback challenging my view that the effort devoted to these overnight commentaries is a waste of time. By all means share your experiences of how and why you feel differently. Any evidence of the value would be great too.

Runner up – and with a special commendation for dividing up the announcements: Informanagement

  • Budget Summary March 2011 – New tax changes announced today
  • Budget Summary March 2011 – Future changes announced today
  • Budget Summary March 2011 – Changes previously announced for 2011-12, now confirmed

And the winner is………

….Elaine Clark of Cheap Accounting for her blog post: Not A Budget Newsletter!

It won’t suit everyone but I love it!

* ‘Award’ in this context simply means to be acknowledged on this blog with an online link! 😉

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Partnership tax planning: You get what you pay for…

This is a bit of a rant, which is not my preferred style of blogging. I have just returned from a local group of tax advisers evening training session. It was supposed to be ‘Tax planning with LLPs”. That was the title in the promotional note, on the website and on the cover of the notes. (Actually they weren’t notes, just copy slides).

The title slide though didn’t mention tax. It was ‘Partnership structures’ and the lawyer who largely read her talk verbatim even started by admitting she wasn’t going to talk about tax. And she didn’t. Barely a mention, other than on the odd occasion when she noted that the audience probably knew more about tax than she did.

I felt short changed. As a regular speaker for groups of professional advisers I wouldn’t dare do what this lawyer did. She ignored the subject she had been asked to speak about and chose a subject of her own. Of course she could afford to do this. She is a partner in a large firm and almost certainly wasn’t being paid for giving the talk on a cold winter evening. No wonder she spoke on her preferred subject rather than the one she had been asked to present.

Maybe she thought she knew better than the committee who had booked her to speak as to what would be relevant and topical. How arrogant. How insulting and how unprofessional. There were almost 200 local tax advisers and accountants in the room. Some may well have found elements of her talk interesting. But it wasn’t on the subject they made time to go and learn about.  I’m sure many will feel they should have stayed at home (or the office!)

Maybe it serves me right. I had only booked to attend the session as I have a series of talks on partnership tax to present over the next few months. The first is next week and the slides AND NOTES are  already done. But I thought I’d see if there were any new ideas I should mention. Well I didn’t pick up any tonight that’s for sure!

I get paid to present my talks. If I didn’t keep to the subject I was booked to present I would be concerned that my fee might be withheld. And I would never be so arrogant as to insist on presenting a different subject to the one I was booked to address. I think tonight’s speaker was disrespectful, rude and unprofessional in her approach. But to an extent, you get what you pay for. As noted above I’m sure no fee was due to be paid to her. I charge a decent professional fee and present and operate in a professional manner (if you don’t mind the odd magic trick to liven things up a bit!)

If you were in the audience tonight do let me know if you’d like to attend my forthcoming half day talk on Partnership tax planning, tips, traps and news. Full details here. Anyone can come but I’ll extend a discount to those who also felt short changed tonight.

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