Key tax management matters for accountants in practice

1. Key tax management matters for accountants in practice Mark Lee FCA CTA (Fellow) MMC Chairman of the TaxAdviceNetwork 07769 692890 0845 056 0536 Mark@BookMarkLee.co.uk

2. Coverage • Practice related • Financial, subcontracting, procedural • Advisory issues • Tax, PBR related, Business • Going forwards • Planning, Marketing, the web, Networking • FOCUS • what’s changed and what is changing?

3. CASH is king

4. Financial Turnover is vanity, profit is sanity, Cash is King

5. Getting paid faster for tax work (1) • Quote in manageable chunks • When will final payment be due? • Seek payments up front • Especially from strangers/new ‘clients’ • Review fee quotes if timescales change • Discuss fees vs sending fee notes • Enforce standard payment terms • Why 30 days? • Fee notes with tax returns/accs

6. Getting paid faster for tax work (2) • Bill in manageable chunks • “When can I expect to receive your cheque or bank transfer?” • “Can I hold you to that?” • Offer credit card facility • Send fee notes by email with clickable link • Are you an accountant or a banker? • Consider ‘Premium Credit’ • Refuse further work until paid

7. Getting paid faster for tax work (3) www.payontime.co.uk • Credit management • Late payment legislation • Guides to the legislation

8. Negotiating fees - tough times • Existing clients – recurring and advisory • New clients – recurring and advisory • Desired outcome • Win:win – get paid and keep client • Get paid all or some and dump client • What’s the problem? • Mistakes, poor work • Perception – work, approach, advice • Cashflow

9. Sort it UP FRONT • Too late for current work • Offer payment terms • Are you a banker? • Advisory work • Manage expectations • Don’t give away too much for free • Quote and agree fees up front. • Secure (at least part) payment up front • Especially from new clients. ALL new clients

10. Tax Returns

11. Why is January still Hell? • Longstanding clients leave it late? • Loads of new clients? • Yet to be trained? • Lack of flexibility in your payment terms? • Monthly standing order cycle • No authority to charge more • Lack of staff communication? • You’ve given up asking? • Lower fees for rushed work??

12. February?

13. January needn’t be hell (1) • Review following intro of October d/line • Reconsider unconditional fee quotes • Penalty payments? • Seasonal quotes? • Incentives? • Lower fees • Money-off voucher (Happy hour) • Donation to charity • ‘Free’ business review meeting

14. New TR questions to ask clients • Checklist or memory approach? • Clarity as to what needs to be reported? • Activity on social networking and blog sites? • Leaving evidence to be found in the future? • When did hobby become start of trade? • Ebay or similar • Selling old stuff or trading? • Google Adsense, Amazon etc affiliates • Sums likely to be very small

15. Tax engagement letters (1) • New style for new business climate • Pack comprises • Guidance notes • Specimen covering letter • Specimen schedules for most tax services • Specimen standard terms of business • Available from websites • CIOT, ICAEW Tax Faculty, ACCA. IIT • ICAS, ATT, CIMA (members in practice)

16. Tax engagement letters (2) • Separate letters for separate clients • Or clarity as to who is covered • AND who is responsible for the fees • Scope of services • By reference to attached schedules • Fees • Key info in letter as well as full terms attached • Basis of estimates – so that you’re covered • No longer default assumption of fees for time

17. Terms of Business • Fees and payment terms • Authority to pierce the limited liability veil • Internal disputes with a client org’n • Limitation of liability • Loss caused by others • Circumstances beyond our control • Discovery of fraud • Unauthorised disclosure • Aggregate liability

18. Tax credits – questions (1) • Advise on clients’ entitlement to claim? • Help clients with claim forms?

19. Tax credits – questions (2) • Advise clients on best approach • Offset and utilise losses? • CA disclaimers? • Tax impact of pension contributions? • Annual Investment Allowance (upto £50k) • Incorporation and timing thereof? • Consequential low taxable income? • Subsequent increases in taxable income • That reduce entitlement to tax credits

20. Tax credits – Examples • Mr and Mrs Khan both work full-time. Between them, they earn about £25,000 a year. They have three children. They get about £55 a week in tax credits. (£2,860 pa) • If their income was higher, and they earned about £50,000 a year, they’d get about £10 a week instead. (£520) • Tax credits available even on income up to £58k • Losses = nil taxable income • Income disregard for year two = £25k • Tax credits that could be missed > £12k • What would you do if you were client?

21. Professional Conductfor those working in tax

22. Guide to professional conduct • Relevant to members of various bodies • ICAEW, ICAS, ACCA, CIOT, ATT, IIT, STEP and CIMA(MiP) • Incorporates fundamental principles • Integrity • Objectivity • Professional competence and due care • Confidentiality • Professional behaviour

23. Professional competence • “a member must not undertake professional work which the member is not competent to perform. In such circumstances he should seek help from an appropriate specialist” • “A member who is giving what he believes to be a significant opinion to a client should consider obtaining a second opinion to support the advice”

24. Tax support providers • Specialist tax consultancies • Training support providers • Larger firms of accountants • Local firms of accountants • Professional fee insurers • Freelance independent tax specialists • Vetted Independent Specialist Tax Advisers • In a trusted network ;-)

25. Compliance checks

26. Compliance checks • New regime from April 2009 • Enquiries, visits, inspections • New statutory obligation to be ‘reasonable’ ! • IT, CT, CGT, VAT, PAYE, CIS • ‘in-year’ inspections of records • Practice management issues • Unaccompanied clients? • Unreasonable officials

27. New penalties regime • First returns • VAT – 3m to 31/3/09 • CT – a/c periods starting on/after 1/4/08 • IT/CGT – tax year 2008/09 • 4 new scales • To ensure more consistency • To reduce scope for negotiation/bullying • Practice management issues • Previously acceptable bookkeeping

28. TAX advice - recession

29. Tax issues (1) • Losses • Forecasts, impact on payments on account • Earliest possible relief • Extending accounting period • Cessation of business • Restarting later? • Forecasting effect of AIA • First £50k of qualifying cap expenditure • Share incentives rather than cash

30. Tax issues (2) • Companies facing insolvency • End of accounting period • Prospective gains on disposal of property • Continue trading post appointment of IP? • Do not delay realisation of capital losses • Terminal loss relief • 3 year carry back from final period of trading • Impact on group relief claims • Year ends ceasing to be co-terminus? • Inter-company debts

31. Tax issues (3) • VAT • Flat rate scheme • bad debt relief • Dividends • Distributable reserves – lower than expected • 100% relief for ‘green’ cars • CO2 emissions below 110g/km

32. ‘Green’ cars include TOYOTA Prius 1.5 VVT-i Hybrid 104g/km HONDA Civic Hybrid 1.4 IMA ES 109 g/km

33. Good news for tax advice • Depressed values – property/shares • Transfers between connected parties • Extraction from family companies • Crystallise capital losses • For offset against capital gains – current/future • Revisit probate valuations • ‘Loss on sale relief’ within 4 years of death • Secure backdated tax credits award • For year in which loss arises/is relieved • And following year if income <£25k

34. Redundancies – advice required • Statutory redundancy pay – tax free • Further £30,000 – no auto exemption • Taxable if: • Contractually due • Typically paid/expected • Tied to work done/to be done • No auto tax relief in year of closure • Evidence • Eg: “To secure the orderly winding down or transfer of the business”.

35. Client co going into liquidation • New fee notes for related advice • Avoid creating a ‘preference’ • “Pay my old fees before I’ll help further” • Preferred debts can be set aside • Would mean you’d have to repay company • Your debt would then rank alongside others

36. Professional ethics • Under pressure to • Massage figures? • Overlook non business expenditure? • Push the boundaries for tax • All cards face up on table? • Guide to professional ethics generally • Guide to professional conduct in tax • For all those involved in advising on tax

37. Professional fee insurance • Excites some people • Others have yet to be convinced • Tell clients it’s available • Negligent not to do so? • Are you regulated? • Effective promotion • Ensure you know what’s not covered • Clients understand what’s not covered • Outsource the administration

38. Tax avoidance schemes

39. Handling tax schemes • Everything you ever wanted to know about tax schemes but were... • ... too professional to ask • ... too confused to ask • ... too brow beaten to ask • ... too greedy to ask • ... too busy to ask

40. The Spectrum of Schemes Pure - unobjectionable • Spectrum runs from unobjectionable to unacceptable • Intended by the legislation • Encouraged by the law (eg: ISAs), • Planning and mitigation • Artificial • Contrived • Abusive • Fraudulent Unacceptable

41. Opinions and behaviours Fraud Eg: Non-disclosure, distorting facts Opinion 100% provable fact Abusive Passive Behaviour

42. Seven promotional lines • “The risk of failure is very low” • “We have Counsel’s opinion” • “Clients have been getting their tax refunds” • “It’s approved by HMRC” • “HMRC haven’t challenged our clients” • “It comes with a guarantee” • “Success fees are not payable until later”

43. Related issues to check • Are the promoters salesmen or taxmen? • What is their track record? • What are the commercial risks? • Have disclosure obligations been satisfied? • Who checks all the paperwork • The minutes, the notes to accounts, TRs? • Will promoters d/w all HRMC corres – timely? • Do promoters stress or skate over tax risks? • Cashflow – payment of fees vs tax back/saved • What does it cost to give up the fight?

44. Commissions and referral fees • Obligations imposed by professional body • Remain objective • Commission should not affect judgement • Full disclosure to client • Whether rebated or retained in full or in part • Ethics • Commission = commission

45. Today • Cash is King • Tax returns, letters of engagement and terms of business • Professional Conduct • HMRC new compliance checks and penalties • Tax advice topics for the recession • Tax avoidance schemes • Commissions and referral fees

46. Tomorrow • Focus on three tax management issues • Consider who else needs to know • Plan for changes that are coming • Keep in touch – Happy to help if I can • Register @ Tax Advice Network • Choose the specialist support that’s right for your practice

47. Key tax management matters for accountants in practice Mark Lee FCA CTA (Fellow) MMC Chairman of the TaxAdviceNetwork 07769 692890 0845 056 0536 Mark@BookMarkLee.co.uk

48. And when you need specialist tax support use our simple search facility to find a cost effective independent expert tax adviser Register today for your FREE weekly tax update written specifically for accountants in general practice

49. Contact details • Mark Lee FCA, CTA (Fellow), MMC • Accountants’ Business Coach • M: 07769 692890 • T: 0845 003 8780 • E: Mark@BookMarkLee.co.uk • www.BookMarkLee.co.uk • Download free resources • Sign-up for email newsletter • Further info re Mark’s services • Mark’s blog for ambitious professionals