Every now and then I hear about general practice firms of accountants which have determined that they want to provide a higher level of tax service to their existing clients. This is often the case in more forward thinking practices where the partners recognise that they are limited in their own abilities and that they need someone else to check out their files for tax planning opportunities, to put tax advice in writing and to attend meetings with clients to provide a more tax focused service.
Provide tax schemes?
Boosting the firm’s tax capability can be a worthy objective although sometimes it’s a euphemism for offering tax schemes and products. I addressed this issue in a recent blog post: Selling tax schemes is NOT a route to riches. If the partners do not understand this they WILL be disappointed.
Some firms recruit a tax ‘manager’ in the hope that he or she will fill the gap. And if the firm is lucky this may well happen. I always wonder however in such cases – How do the partners know that the tax specialist’s advice is correct? If there is no one else in the firm with the requisite expertise, this is a big risk, especially with a relatively inexperienced tax ‘manager’. Often they may feel under pressure to impress their new partners – especially if the carrot of ‘partnership’ depends on the partners’ perception of their performance. Again I addressed this in a recent post: Confidence is good – but not if it’s naive or deceitful.
If the new recruit causes a problem – which will often only become apparent down the line – either the partners will have to bear the loss or their PI policy will suffer a claim.
New recruits are also an expensive option. Over and above the recruitment costs and induction time it can be a while before they start to pay their way.
Merge with or takeover a tax only practice
I was asked my views about this possibility recently. I suspect it’s a dream that will rarely be realised. Tax only practices are generally set up specifically to avoid the distractions of providing accounting and auditing type services. Why would a successful tax practice want to merge with a general practice firm of accountants?
If such a merger or takeover occurs the tax specialists are likely to want to reduce the risks to the practice of general practice partners providing tax advice without it first being ‘checked’. This will often give rise to conflicts as the general practice partners are not used to having their advice double checked or to being constrained as to what they can advise on.
Merge or takeover a one-man band tax specialist
This idea suffers from much the same downsides as have already been mentioned. It can be worse however as there is the added risk of the individual retiring, dying, going sick or leaving shortly afterwards. Although such risks may be considered small the prospect of one of these may have been the prime motivation for the tax specialist agreeing to the deal.
The partnership will want to limit the upfront costs of recruiting a tax partner by requiring that the new person has a following. However very few tax specialists with a following would feel comfortable taking their clients into an environment that has not previously provided clients with specialist tax advice.
If the tax specialist or partner does join the firm their focus will be on their existing clients. What will motivate the specialist to make time to explore opportunities to provide tax advice to the firm’s existing clients?
Tax contractor support
In my view this is the best solution – at least as a first step towards building in-house tax expertise.
It will often be easy to identify someone who has the requisite expertise and is available to help out on a part-time basis. They remain self employed and provide their services to the firm on a contract basis, perhaps one day a week for a few months. This option is also more cost effective for the general practice firm as they bear no employment related costs. In the event that any problems arise the relationship can be terminated quite quickly and any claims made will be against the contractors’ PI policy.
It may be that more then one such specialist can be identified – perhaps one to focus on IHT issues, one on VAT and one on corporate tax matters. (There are many other such topics too of course).
Multiple adviser tax support
Whichever route a firm follows they should appreciate that, these days, hardly any tax adviser can cover off and advise on all tax matters. If you have just one or two in-house senior tax specialists, you should expect them to want to seek confirmation or support from a third-party ever now and then.
Tax Advice Network
This supportive network provides over 2,500 accountants with access to dozens of vetted independent specialist tax advisers across the UK. These tax advisers are categorised by their areas of expertise and location.
You can contact any of them for specific, general or tax contractor support as described above. And yes, as implied above, much of the time these independent tax advisers are providing second opinions and support to the tax specialist managers and partners in firms, as well as to general practice partners.