We've had Tesco Law, why not Tesco Tax?

Last month the papers were again reporting that High street shops will sell legal services within two years. For the moment TescoLaw seems to be limited to a bookshop offering DIY legal guides.

What is it about legal work that is thought to be so attractive to Tesco, the AA and other large companies?

Tax vs Law

Surely more people need help with their tax each year than need any legal services? I’m sure that more people complete tax returns than need conveyancing services for example. OK, even more people need to prepare a will than complete a tax return, but what other legal services are so in demand that large retail operations would want to move into the legal marketplace?

Accountants

There is no restriction on who can own an accountancy or tax practice. Indeed anyone can call themselves an accountant or a tax adviser - without the need for any professional qualifications. Even my own body, the ICAEW, long ago relaxed its rules to allow upto 25% of a Chartered Accountancy practice to be owned by non-Chartered Accountants.

The big question

So why have we not seen Tesco Tax (which is more alliteratively attractive than Tesco law anyway)? Why no offering of Barclays Bookkeepers? or AA Accountants?

It's obviously not that these big companies see the provision of legal services (and tax is arguably a legal service) as too far removed from their main customer service offerings? Tesco and others already offer various forms of insurance amongst other non-conventional service offerings under their own brand.

So why the focus on legal services? Is it because it's never been possible before? When the Legal Services Bill was introduced in the Queens Speech in 2006, the Times reported that the "Era of 'Tesco law' is upon us." The Legal Services Act 2007, is now in place although the clauses allowing Alternative Business Structures have yet to come into effect. These will enable big companies such as supermarkets and motoring organisations to own law firms and to employ lawyers and offer legal services directly to their customers.

Mass Tax Services

There is some degree of precedent as regards the lack of interest in branded tax shops in the UK.

When the self assessment tax system was first introduced here in 1996 there was talk of high street tax shops to help those who couldn't do it themselves. Amongst others, H&R Block dipped a toe in the water but the idea did not catch on. This is because there are some significant differences between taxpayer obligations in the UK from the USA where H&R Block is a household name with a taxshop on every street corner.

I've long been waiting for the large insurance companies to offer tax return and related tax services. Indeed this would arguably be easier to arrange than for accountants to provide financial services to clients.

However over the last ten years neither the banks nor the insurance companies have really entered the mass marketplace - so perhaps this is why there is no talk of Tesco Tax.

Transaction vs relationship

There is one key difference as between legal advice and tax return services. Legal work tends to be transaction based rather than relationship based. Could that be the key factor. To avoid the provision of services where an ongoing relationship arises. In this respect annual tax return, accounting and bookkeeping services are very different to legal services.

What do you think? Please add your comments to this posting below.

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.

The end of the old paper bag jobs?

The provisions in Schedule 36 and 37 of the Finance Bill 2008 have the potential to revolutionise the way that accountants deal with smaller clients and will increase demand for quality bookkeepers.

Schedule 36 includes, at part 2, new powers for any officer of HMRC to enter into business premises to inspect....business documents...if such an inspection is 'reasonably required for the purpose of checking the tax position of any person'.

In effect this anticipates the prospect of 'in year' visits for direct taxes in the same way as has long been the norm for VAT and PAYE inspections. Only, in future, these checks may be designed to risk assess the quality of the accounting records DURING THE PERIOD OF ACCOUNT and with the provisions in Sch 37 in mind (see below).

Schedule 37 deal with 'record-keeping' and makes a small but important change to the existing fairly general requirements in s12B TMA 1970. New subsection 3A permits regulations to be introduced to provide:
- for certain specific records to be kept; and
- that those records may have to include specified SUPPORTING DOCUMENTS.

In due course when those regulations and supporting guidance are issued, it surely won't be long before HMRC start using their new powers to make spot checks and 'in year' visits in an effort to ensure that all is as good as it could be.

Once this all becomes commonplace I suspect that the demand for good bookkeepers will grow dramatically.