Ten facts all accountants need to understand about tax avoidance schemes

The first five facts here essentially provide support for those accountants who have already chosen NOT to advice on such schemes.

  1. Accountants should only promote such schemes if they 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 fewer than one in ten clients will proceed once they understand all of the risks;
  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 such schemes;

And here are five further facts which should also be borne in mind by those accountants who are nonetheless tempted to look further into the subject:

  1. Encouraging a client to undertake a structured tax avoidance scheme is much like encouraging them to make a specific investment;
  2. It takes a fair amount of time to get to grips with all of the relevant details of a structured tax avoidance scheme;
  3. 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;
  4. Having committed all that time to learning about the scheme there may be a temptation to persuade someone to ‘invest’ even if they might not otherwise choose to do so;
  5. If, some years later, the scheme is ultimately held not to work the client may sue the accountant for failing to adequately highlight the risks.

Together these ten facts should provide support for those accountants who choose not to advise clients on structured avoidance schemes.

If your clients do need advise on how to reduce their tax liabilities, without causing problems for themselves or for you, it can still be worth speaking with one of the specialist Tax Adviser members of the Tax Advice Network. Just use the search facility on the home page here to find someone with the relevant expertise.

Full disclosure: I originally wrote these ten points in 2009 for the now defunct TaxBuzz blog. Much has changed since then but nothing that makes it easier or more acceptable for accountants to advise on structured tax avoidance schemes. On the contrary, the generally accepted Guide to Professional Conduct for those working in tax (PCRT) now makes clear that it is wrong for members of the main accounting and tax professional bodies to advocate such schemes.

 


How to get more work as a tax adviser

So you’re good at tax. You enjoy studying tax. You understand the rules and you can give advice that clients understand and appreciate. Well done.

This is all important of course but none of it is enough – especially if you want to be successful as an independent tax adviser.

To be a success you need to conquer the 4 Ps of tax advice. These are four essential skills you will need to master:

Promoting – You will need to be good at promoting:

  • your tax advisory service itself, ie: what you will be doing;
  • why clients should engage with you (rather than anyone else); and
  • how they will benefit from your service and advice.

Whilst you may have done all this to a degree if you previously worked in a larger firm, you probably also benefitted from colleagues and the firm as a whole doing much of the promotional work.

One of the benefits of being a member of the Tax Advice Network is that you can benefit from the promotional work that we do, our reputation and longevity (and thus our high ranking Google juice).

If you have previously focused on tax return compliance services, do bear in mind that these often sell themselves. Many people seek out an accountant because they need help to satisfy their legal obligations to file accounts and tax returns.  You will need to adopt a different approach if you want to successfully promote non-compliance tax advisory services.

Pitching – This becomes relevant once a prospect expresses an interest in your services. Now you will need to have a compelling, streamlined and speedy ability to win them as a client. This means finding out what they think they need, what they really need and satisfying them that you are the right person for the job. Thus you also need to be able to promptly summarise what you will be doing for them and the terms on which you will work. You are likely to lose out to others if your process is too slow or confusing. Think ‘Amazon vs retail shops’.

Pricing – Whether you are quoting for one-off advice or recurring tax advisory services you will need to be able to quickly set commercial fees that adequately reward you for your service and advice. This means developing the skill to be more confident and precise when quoting fees for tax services that perhaps you used to be in the past when you might have been able to get away with quoting wide fee ranges and/or hourly rates.

Providing – Clearly you should not offer tax advice on any subject unless you have sufficient relevant knowledge and are adequately equipped and experienced to do so. [NB: You can always find any additional support you might need through the Tax Advice Network.] You will discover that there’s a world of difference between a practice built on the provision of recurring compliance services and one that is focused on ad-hoc or niche tax advisory services.  The sooner you start adapting the more stable will be your foundations as you move forwards.

The reality

If you are like most accountancy, law and tax advisory firms, your website includes reference to tax advisory topics that rarely crop up in practice. You have included them in a list of ‘available’ services, but it’s rare for anyone to request them. And you rarely talk about them when you’re out networking.

In effect, you’re not promoting  your tax advisory services for those topic areas. So, inevitably, no one is asking you to provide them.  Including them in a list on your website is rarely sufficient to effectively promote such services.  Fortunately you do get to identify specific areas of expertise in your profile on the Tax Advice Network website. So you can assured that the leads you get are by reference to the expertise you have identified.

On the odd occasion someone does approach you via your website and wants advice on one of those rarer topics you may not yet be adequately prepared to explain and to ‘pitch‘ your advisory services and skills so that prospective clients are sufficiently engaged.

Even if you manage that, are you able to price them quickly enough that prospects will sign up – and do you make the on-boarding process simple and quick?

Having sufficient experience, insights and technical knowledge to provide the service should be a ‘given’. It’s typically your starting point. But it’s rarely enough.

The better you plan for the 4 Ps of tax advice, the more likely you will make a success of your tax advisory services for clients.

Mark Lee – June 2020


SEISS appeals

As we explained in our newsletter on 7 May 2020, the self-employed income support scheme (SEISS) was rolled out without access for tax agents. This means your clients have had to submit their own claims, and will no doubt turn to you to sort out any muddles.

If your client has been told by HMRC that he is not eligible to claim SEISS, this may be due to fat finger mistakes when typing the UTR or NI numbers. You can double check the SEISS eligibility by using the online eligibility checker. There is an option at the end to complete a form to request a review by HMRC. You can do this as the taxpayer’s agent.

You may have told your self-employed clients how much SEISS grant to expect. Your client can forward to you the calculation of the SEISS grant which is reflected to him at the end of the claims process. If this figure is not what you expect you or your client can request a review.

The taxpayer should do this as part of the SEISS claim process, but you need to request the review through your own agent’s portal. You will need the following data about the client to hand:

  • grant claim reference
  • national insurance number
  • UTR number

You will also need to say why you think the HMRC calculation of the grant is wrong.

We outlined how the SEISS grant would be calculated in our newsletter on 16 April 2020, but HMRC has recently added more examples of how it uses the figures reported in the tax returns for 2016/17 to 2018/19. Read this guidance before appealing.


Homeworkers’ expenses

Many employees are now required to work at home as their workplace is closed. Some employers have been very supportive of their employees, providing all the equipment required, and reimbursing expenses, others not so much.

As we explained in our newsletter on 9 April 2020, employers can pay their employees a homeworking allowance to compensate for the additional household expenses incurred when working at home. Where the allowance doesn’t exceed £6 per week (£26 per month) the employee is not required to provide evidence of additional costs, and the payment is tax-free and NIC-free (ITEPA 2003, s 316A).

If the employer doesn’t pay the homeworking allowance, HMRC’s view was the employee could only claim a tax deduction for additional homeworking costs under ITEPA 2003, s336, which has much stricter conditions.

However, on 15 May 2020 HMRC changed its policy as set out in the Employment Income Manual (EIM32815). It will now accept claims for homeworking expenses from employees of £6 per week (£26 per month) under ITEPA 2003, s 336 with no proof of the costs required. The cost of business telephone calls can be claimed in addition to this deduction.

HMRC also implies that homeworking expense claims for periods before 6 April 2020 will be accepted using the rate of £4 per week (£18 per month). Such claims can be submitted on the SA tax return or using form P87, but they must be made within four years of the end of the tax year to which they apply.

In our newsletter on 9 April we also warned that where the employee has purchased office equipment to allow them to work from home, any reimbursement of those costs by the employer could create a taxable benefit. However, that problem will now be resolved by a change in regulations.

There will be a temporary tax exemption where employees are reimbursed for the cost of equipment needed solely for them to work at home, where the payment is made to the employee between 16 March 2020 and 5 April 2021.


Getting new leads without networking

Did you enjoy attending networking events before the lockdown?

One thing you learn pretty quickly when you start networking is that it’s really hard to find a new clients at networking events. It’s hit and miss. And most often it’s a miss. Quite simply no one goes to a networking event in the hope of finding a tax adviser or a new accountant.

This can be quite frustrating if that was why you forced yourself to attend an event with a bunch of strangers.

Building a website takes time and money and then you are hoping that people searching online will find your website and get in touch.

This is partly why advertising has its place for tax services. Sadly most such advertising is, of necessity, of the ‘spray and pray’ variety. And it’s typically quite expensive too in terms of the ‘cost of acquisition’ for a new client. The cost of acquisition tends to fall if you can afford a targetted, focused and sustained advertising campaign – but this tends to require a hefty up front investment.

I am seeing an increasing number of accountants and tax advisers attempting to market themselves on Linkedin and on other online platforms. Such approaches are free from a financial cost but take a lot of time and effort before they really pay off and generate business. I have written plenty on this blog about the myths and misconceptions surrounding social media and Linkedin. This is why so many accountants and tax advisers struggle to generate business through these media.

There is another option of course. One with a low cost of acquisition, that requires no ongoing time and effort and which only generates leads from people who need your expertise. I’m thinking of this Tax Advice Network website. Maybe now is the time to register so that you can be found when people in your area are looking for help with their tax issues, challenges and problems. Or you can continue doing what you’ve always done and hope that things will get better. Except that ‘hope’ is never much good as a business strategy.

Mark Lee – May 2020


Benefits in lockdown

The UK-wide stay at home instruction arrived so quickly that many people were not able return a company car that they were no longer permitted to use. In such circumstances the car remains available to the employee to use privately and hence the taxable benefit continues.

HMRC will accept that the company car is “not available” and not taxable (even where it is parked at the employee’s home) in two circumstances:

The contract to lease or provide the car has been terminated, and the car keys have been returned to the employer or to an approved third party (eg the dealer).
The lease contract has not been terminated, but the car keys have been returned to the employer or approved third party, then 30 days after the keys were returned the car will be considered to be “not available”.
Remember all electric company cars have zero taxable benefit in 2020/21 (our newsletter 28 November 2019), so its not necessary to change the lease on the director’s Tesla.

Where the employee is using their company car or their own car for voluntary work during the coronavirus crisis, and the employer is reimbursing the mileage costs, those reimbursements are taxable. This is because the journeys undertaken for voluntary work are not business journeys. The reimbursed amounts must be reported on the P11D or included in a PAYE settlement agreement.

Some employees are living away from home while continuing to work, to avoid infecting members of their household with the coronavirus. Where the employer is paying for that alternative accommodation, that amounts to a taxable benefit, which must be reported on the P11D for the relevant tax year.

Employees who live on the site of their permanent employment, are taxed on the value of that accommodation unless one of these conditions are met:

Its necessary for the employee to live there to properly carry out their duties

  • The accommodation is provided to allow the employee to better perform their duties and it is customary for such employees to use such accommodation; or
  • There is a threat to the employee’s security and special security arrangements are in force that require the employee to live in that accommodation.
    NB: HMRC has not confirmed whether “security arrangements” includes health security, as it normally means a terrorist or stalker type threat.

“How can I get more tax work at a time like this?”

I was asked this question by a tax adviser who had started her own practice a year or so ago.

She had seen other people being criticised online for pitching for work. We’ve probably all seen the messages containing overt sales pitches. And others that include ‘special offers’ but which still come across as crass, unthoughtful and opportunistic.

Especially in these unprecedented times, none of us wants to damage our credibility through the way we promote our services.

Still though I would say that is fine, in principle, for you to try to win new clients at this time.

I would suggest however that your primary focus should first be on helping your existing clients. This is especially the case if your pitch to new clients is to offer the help that their current accountants have not provided. You need to practice what you preach!

As regards trying to win new clients I suggest you think about how you react to others who are trying to sell to you at this time. Or indeed, at any time. Few of us like it. Even less so when we have other important priorities. And we probably all have even more of these at the moment than ever before.

Now, the question I was asked was not: Is it ok to try selling my services at this time?

If that had been the question I would say, NO. Not if your focus is on ‘selling’ as such.

Of course it does depend on how you define selling. I prefer to think about it more as being of service. The process often starts by gaining an understanding of someone’s needs, problems, challenges and difficulties. This process includes clarifying the negative impact (financial, strategic, emotional etc) of these problems etc and then discussing potential solutions and the positive impact that could flow from these. Being of service in this way is way of helping people, not selling to them.

When you approach people with genuine interest and positive intent you are not exploiting or taking advantage. You are helping. If it doesn’t come across that way, you’re doing it wrong! Effective communication is never defined by your intentions but by how well it is received. If others misunderstand you then YOU have to change the way you communicate. You can’t force anyone to listen differently!

And of course, it’s even easier if they are approaching you because they want help with a specific tax issue, challenge or problem. And, of course, that’s what happens when they search online and find you via this Tax Advice Network website.

Mark Lee – May 2020


VAT rate changes

On 30 April the Government announced two VAT rate changes from standard rate to zero rate, for digital publications and personal protective equipment (PPE), both to take effect from 1 May 2020.

The rate change for digital publications was due to apply from 1 December 2020, as announced in the March 2020 Budget, timed so subscriptions taken out as Christmas presents would qualify for the lower rate.

However, during this coronavirus lockdown sales of physical newspapers and magazines have plummeted, while students are having to use digital materials to continue their studies. The Government has therefore decided to lower the VAT rate immediately.

Publishers may have missed this change in the middle of the other chaos, so check that your clients have changed their systems to account for the correct VAT rate from 1 May 2020. Pricing policies may also need to be reviewed.

Clubs and societies which distribute a physical magazine will also benefit as currently they need to apportion part of their membership subscriptions to the zero-rated magazine. Now they will not be penalised by switching to 100% digital publications.

The change in VAT rate for PPE is only temporary; it applies for sales made between 1 May 2020 and 31 July 2020 inclusive. Where businesses have recently started to produce say hospital gowns or face masks, check that VAT has been correctly accounted for.


Advertising your services online

Is it worth paying to advertise on LI, facebook, Google or elsewhere?

Clearly it depends on who you’re targetting and where you can best reach them.

Also whether you’re prepared to invest sufficient in a campaign rather than in ad-hoc adverts.

But there’s another key point that is often overlooked.

Even if you know WHO you are targetting and even if you can focus your adverts to appeal to such people. There is a key factor that probably limits the outcome of your advertising efforts in a way that many marketing people seem to overlook.

This is whether your target audience are the sort of people who will respond to an advert for a service when they could ask for referrals, follow natural search results or ask their connections.

Over the years the Tax Advice Network website has remained consistently close to the top of Google for many tax related search queries. This is partly due to our longevity and the hundreds of back links to our site. This is also why so many tax advisers and tax accountants remain members of the Network. It’s s pretty cost effective route to securing relevant leads and new business.

Mark Lee – May 2020


VAT deferral and MTD

The VAT due for the quarter to 31 March 2020 is payable by 7 May 2020, and where a direct debit is set up the amount due would normally be collected by 10 May. However, as 8 to 10 May is a long bank holiday weekend, the DD will be collected on 7 May 2020.

Where your client wants to take advantage of the deferral of VAT payments between 20 March and 30 June remind them to cancel their DD for paying VAT. This can be done the online VAT account or by contacting their bank. Agents can’t change banking details on behalf of a client.

HMRC has updated its guidance concerning the VAT deferral, confirming that annual account advance payments due between 20 March and 30 June can also be deferred, but not VAT MOSS payments or import VAT. Any deferred VAT will have to be paid on or before 31 March 2021.

Many businesses may be due a VAT repayment in the current VAT period as they have little or no sales, but still have bills that include VAT. To obtain these repayments quickly the business can change to monthly VAT returns by altering their VAT periods in their online VAT account.

If you have taken on a new client and you want authorisation to act for VAT, the online authorisation form asks for the box 5 figure from the “last VAT return”. However, since the VAT returns submitted under MTD enter HMRC via an API, the authorisation system can’t see them. To answer the question correctly you need to supply the box 5 figure from the last VAT submitted before MTD.