More and more accountants will find themselves having to advise on tax credits

The current issue of the ICAEW's Tax Faculty's Taxline magazine includes a topical and timely reminder as to the potential impact of the new Annual Investment Allowance (AIA). It serves to reinforce a point I make in my talks about How to avoid professional negligence claims.

Question one
I always ask for a show of hands as to how many accountants in the audience advise clients about their entitlement to claim tax credits. I've spoken to groups of all sizes, from 20-180 and to date no more than 5 hands ever go up. This suggests to me that the vast majority of accountants are not currently advising clients about their entitlement to claim tax credits.

I know why. Tax credits are merely a new(ish) dressing for a social security benefit. Accountants have not traditionally advised on benefits. It's not cost effective to do so and we don't know all the rules.

Some, but not all, accountants make clear in their engagement letters that they do not advise on tax credit related issues. That is their prerogative and in so doing they probably reduce the prospect of a client making a successful claim for negligence at a later date.

Question two
I then ask the accountants whether they advise their clients on how best to offset losses, on capital allowance disclaimers, pension reliefs and (now) AIAs. Of course they all do. Indeed, securing tax refunds tends to go down well with clients. In fact, clients tend to value anything their accountant does that reduces the tax payable or that secures the biggest tax refunds. And if they perceive that their accountant isn't doing all they could in this regard, they are inclined to switch to one who does.

And, tax credits (so far as clients are concerned) are TAX credits.This means they are seen as TAX refunds. Exactly the sort of thing that clients expect to get help on from their accountant. And if their accountant doesn't help in this regard then it won't be long until the client switches to one who does. Especially if the client becomes aware that he missed out on claiming tax credits as his accountant didn't tell him when he should have done so. (The 3 month limit on 'back claims' for tax credits is a real problem here).

If the commitments I note at the end of my seminars and training sessions are anything to go by, an increasing number of accountants will be advising clients on their entitlement to claim tax credits. It doesn't have to be time consuming and it can be done profitably.

Please share your views as comments on this blog whether you already advise on tax credits or you have no intention of doing so.