Friday, June 27, 2008

Ten top tips to avoid professional negligence claims

I created this list recently for a forthcoming article in the professional press. It’s drawn from my talk, How to avoid tax related professional negligence claims, which I have been presenting all over the UK for the last few years.

1 - When providing tax advice always state the known facts on which your advice is based - in writing;

2 – Equally state any assumptions you have made – in writing;

3 – Create contemporaneous notes of all material advice and of the assumptions you provide during meetings and telephone conversations;

4 – When advising, ask yourself whether you’d be happy for a close friend or family member to rely on the advice. If you’re not sure, do additional research, get a second opinion or involve a tax specialist colleague or trusted third-party (such as a member of the Tax Advice Network);

5 – When advising clients of forthcoming deadlines, focus their attention on the date that you need to receive the information to beat the statutory deadline;

6 – Avoid under-pricing work and introducing time-pressure that could exacerbate mistakes;

7 –Stick to what you know. If a client requires or requests advice on subjects outside of your comfort zone, involve a tax specialist colleague or trusted third-party (see above!);

8 - Stop working for those clients who are more trouble than they are worth. These are the clients who resist paying decent fees, don’t contribute to the growth of your practice and who are most likely to complain, given half a chance.

9 – Manage client expectations and avoid over-promising and under-delivery. Remember that a client’s perception of these may be very different from yours.

10 – Keep uptodate – eg: with the free weekly email containing practical topical tax tips for accountants in general practice from the Tax Advice Network.

Tuesday, June 24, 2008

Do you tell clients to: “Arrange a review of your taxation affairs”?

I recently read a tax briefing published by one of the larger firms of accountants.

I tend to think that such publications are a good way to evidence to clients that you are upto speed with current tax developments and that you want to help them avoid paying more tax than is absolutely necessary. Having said that I would never encourage a smaller firm to draft such a newsletter or tax briefing from scratch. Better to outsource this and simply to top and tail the briefing – after ensuring that you understand everything that it contains!

The one I was looking at was very impressive, helpful and well written, however I was amused to see the following at the end of the ‘welcome’ paragraph:

“Because of the significant changes made in the 2008 Budget we would suggest that you speak to either your usual contact at [XYZ – the firm] or a member of our tax staff to arrange a review of your taxation affairs.”

Why did that sentence in the briefing amuse me? It’s not the fact that the size of the firm means that they can’t be specific about who clients should talk to (“your usual contact”). Let’s also ignore the fact that the message implies that the ‘usual contact’ may not be capable of arranging a review of the client’s tax affairs – why else is the option given to going to a member of the tax staff?

No. My amusement is in part due to the absence of clarity in the suggestion that the reader should ask for ‘a review’ of their taxation affairs and the open-ended nature of such a request. But also the fact that the firm could be implying that it is simply reactive as distinct from pro-active. That sentence is all but saying ‘We’re here if you want to talk to us, but don’t expect us to raise any of these subjects with you’.

How much better if the sentence had included the following sentiments:

‘We’d like to talk with you about the impact of these changes on your tax position as there may significant tax savings to make and tax traps to avoid. Please speak with your usual contact here to arrange a convenient time and place’.

We have to remember that what we consider to be obvious is not always viewed in the same way by clients. We need to be careful to say what we mean and to avoid the opportunity for clients to draw their own (incorrect) conclusions.

Friday, June 13, 2008

Tax support from an accountancy firm or independent tax advisers?

I received a letter today (in error I suspect) from an accountancy firm that provides services to other members of the accountancy profession.

Funny that. It's what the Tax Advice Network does too. And we're not an accountancy firm so are not perceived as being in competition with the accountants who refer work to our members. No amount of assurance re a 'non client poaching policy' is going to change that perception. Especially as the fear is not that the accountant will poach the client but that the client will want to move.

These accountants tell me that they 'specialise in high level tax compliance (eg: company sales, reorganisations, employee share schemes, EIS etc) and sophisticated tax planning work (eg: corporation tax mitigation, profit extraction etc), Funny that. Members of the Tax Advice Network provide all of those services too although I would question whether profit extraction and the like is necessarily 'sophisticated tax planning'.

The letter tells me that the accountancy firm has a number of partners who have previously worked at top twenty firms. Is that attractive to smaller firms of accountants? I'm not sure. It's one of the reasons why we allow our users to choose which of our members they want to approach.

These accountants claim to offer a 'very personal service' (is there any other kind?) and suggest that this helps other firms by protecting their clients from larger predatory firms.

Over the last few years I have been surveying smaller firms and asking them what factors are important to them when it comes to outsourcing tax work and engaging with specialist tax advisers. The vast majority wouldn't go to another firm of accountants for fear of the competition. And who can blame them?

That's one of the reasons why I established the Tax Advice Network. We've come a long way in a short time and there's plenty more to be done.

How do I feel about knowing that a local firm of accountants is mailshotting other firms of accountants and offering to provide then with 'specialist tax services'? Delighted! It highlights the issue, reminds people of why they might want or need tax support and - I hope, prompts them to consider more attractive alternatives - like the Tax Advice Network.