It’s nearly 20 years since I was headhunted by a 12 partner of accountants in North London, who wanted to recruit their first tax partner. I explained to the headhunter why I wasn’t interested.

In the event I agreed to meet with the managing partner who tried to persuade me to reconsider. I explained why I wouldn’t be joining the firm – and suggested a different strategy. He clearly disagreed with me but I noted that the firm never succeeded in recruiting a tax partner – just as I had predicted.

My reasoning was simple. The 12 partners had been working together without a specialist tax partner for many years. They wanted someone to help them win bigger and better clients of the type they were losing to firms that introduced tax partners to prospective clients.   I’m sure the same is true today.

I explained though that a decent tax specialist would also want to be confident about the quality of the tax advice and work being done elsewhere in the practice. I doubted the partners would all welcome this new oversight – especially if, as seemed likely, there was the prospect that some tax related promises and assurances previously made to clients were naive  or overly optimistic.

The type of person they wanted to join them as a tax partner was unlikely to be attracted to join a firm where they would also need to manage the tax staff who had previously worked directly to general practice partners.

My advice back then was to recruit a strong manager to lead the tax department and to build relationships with the partners so that, in time, they would be happy to promote this person to partner status.

I never found out if my concerns were justified but the firm in question only secured their first tax partner many years later when they merged with another firm.

That experience always comes to mind whenever I hear about general practice firms of accountants that 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.

I remain of the view that I expressed all those years ago about how difficult it will be to recruit your first tax partner.  Fortunately there are more options available now than ever before.

Provide tax schemes?
Boosting the firm’s tax capability can be a worthy objective although for some time it has been a euphemism for offering tax schemes and products. I addressed this issue in an earlier blog post: Selling tax schemes is NOT a route to riches.  It’s less of an issue these days but if the partners do not understand this they WILL be disappointed.

Recruit a tax partner from another firm

This is probably the dream. Someone with proven expertise to operate as a tax partner in a comparable sized firm of accountants. Here’s the challenge: What can you offer them that they do not get in their current firm? Maybe ‘political’ or leadership issues are proving a challenge. Can you satisfy someone they won’t simply be jumping out of the frying pan into the fire?

An additional challenge these days is that tax partners may quite like the idea of working from home and of NOT being part of a partnership. The downside is that, if they work on their own account, they will be responsible for generating, billing and collecting the fees for their own work.  Some will be fine with this. Others may appreciate the camaraderie of a partnership – unless working from home remains the norm of course!

How attractive can you make joining your firm, rather than simply working with you and your colleagues on a contract basis? (See below).

Tax manager
As I suggested to the firm that wanted to recruit me, it ma be better to focus on trying to 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.

However, I always wonder, 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 have addressed this in a previous 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 as a mid tier firm had noted that some members of the Tax Advice Network own niche tax only practices.

Merging or taking over such a practice is probably a general practice firm’s dream that will rarely come true.

As I know from my conversations with those who are members of the Network, tax only practices are generally set up specifically to avoid the challenges of being in partnership with general practice accountants. And the related 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 ensuring that the individual 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?

Perhaps the best solution here is a tax specialist who has had to accept that their marketing and business development skills are not as good as their tax skills. They need someone else to help them generate business and they miss the security of working for a larger firm.

Independent 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 or clinic 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 thousands of 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 clinic 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. More info here >>>

I will be including a link to this blog post in today’s edition of the Magic of Success, along with other shorter, quick and simple practical tips and ideas for accountants and tax advisers who want to be more successful. You can join the thousands who get this each week by signing up here now>>>>