Accountant and Tax

HugoSP

Ok, so my accounts are a little complicated for various reasons so I have taken to using an accountancy firm to compile unaudited accounts and then fill in the tax returns.

However I am a little surprised that they don't automatically think about how best to present the accounts in the most tax efficient way.

Without going into too much detail, we have gone from a £270 tax bill down to a rebate for my wife. (We are still benefitting from losses carried forward, but this will be their last year I suspect).

Is it normal to have to hand back accounts with suggestions as to how they mar reduce your tax bill? This year we deliberately left time for this discussion to take place, and it appears to have paid off.

BoGoF

I think you are going to have to go into more detail and give an example of what you mean. What exactly do you mean 'how best to present the accounts in the most tax efficient way'. What aren't you happy with ?

HugoSP

Well, it's all sorted now.

The basics are:

The business went from a sole trader to a partnership Jan 2007.

Originally the income and expenditure in total had been apportioned over the 12 months, but on inspecting the accounts against the books I had handed them I found that there was a loss in the period from when the partnership had come into effect to the end of the tax year.

This was important as my wife had made a lot of profit from her share of the property portfolio, as I had from mine, but she also has a part time job that tipped the balance or earnings to her.

When I went back to them about this they took one look and quickly agreed that apportioning the turnover in the months it actually occurred would halve my wifes tax bill whilst having no effect on mine.

Then, today after being given another nudge by me, they have investigated the partnership agreement that they drew up for me last year, and remembered that the profits/losses from the business can be apportioned as decided amongst the partners, hence my wife's tax bill will now not exist, in fact she gets a rebate, again with no effect on my tax position.

It seems that I am paying them this money, yet I am suggesting tax efficiency to them, rather than the other way around.

Cook_County

It would be helpful to know what professional bodies the accountant is a member of as you may also be able to use their grievance procedures.

HugoSP

Cook_County wrote: »

It would be helpful to know what professional bodies the accountant is a member of as you may also be able to use their grievance procedures.

Thanks but that isn't what I want.

All I really want to know is whether or not I am expecting too much for my fee or whether they need to be a bit sharper.

If I could get some feedback on this from some professional accountants here then I may be in a better position to talk to them in a few months when our next set of books go in.

It seems to me that on the one side some accountants will push the boundaries of reason with HMRC, and risk investigations as a result, but on the other they will do absolutely nothing to consider different ways of utilising personal tax allowances etc to improve the client's tax position. Mine seem to be vering towards the latter, especially as they had no issues with what I suggested.

I think I got a competent but overworked individual dealing with my books, who is under pressure to get self assessment forms in by the end of Jan. When I have given them a reasonable amount of time to do my little job I don't think it's unreasonable for them to pay due diligence. The fees are fixed

iazms

Interesting post as I know someone else who complains about their accountant in similar way....However being a novice, I would like to know a little more about what you mean when you refer to apportioning in the quotes below if you don't mind explaining that is..

HugoSP wrote: »

Originally the income and expenditure in total had been apportioned over the 12 months,

HugoSP wrote: »

When I went back to them about this they took one look and quickly agreed that apportioning the turnover in the months it actually occurred would halve my wifes tax bill whilst having no effect on mine.

HugoSP wrote: »

Then, today after being given another nudge by me, they have investigated the partnership agreement that they drew up for me last year, and remembered that the profits/losses from the business can be apportioned as decided amongst the partners, hence my wife's tax bill will now not exist, in fact she gets a rebate, again with no effect on my tax position.

Cook_County

I am interested to learn the degree of advice they gave following the Arctic Systems case and the advice they are giving you now on the new income splitting proposals.

A good qualified tax adviser (not necessarily an accountant) would have considered the former and discussed the latter at this stage.

In short, your proposed split of the profits (presumably calculated according to GAAP) could be challenged by HMRC & a good accountant may be trying to protect both of your returns from HMRC challenge.

Without knowing the advisers qualifications it is impossible to comment on the level of tax education you should expect him to have.

HugoSP

Thanks for the replies.

It seems from Jimmo's frank reply that I am probably expecting too much from my accountants for the fees that I am paying. This is in response to him.

The accountans are qualified and I have been paying a fixed fee for them to complete tax returns and compile unautided accounts.

You're right, my tax is complicated, but I have put steps in place to simplify it.

I could do the figures myself but TBH it's the aggrevation and time taken. I do the book keeping myself then pass these over to the accountant who does the accounts and the tax forms.

We've now agreed that for the service I need I will have to pay them a bit more. I don't mind doing this as it keeps me focused on what I can do best.

red_bertie

This rung some uncomfortable bells personally! Thanks to all for a thought provoking thread for me, :T it was illuminating to hear from both sides of the fence.

I found myself in a similar situation, expecting my accountant to be a tax adviser as well - he wasn't and it caused bad feeling [on my part]. I do pay a % fee to them every year and they are quite a big company, but the accountant only does the accounts :rolleyes: .

I was discussing the 'problem' with fellow small business persons and we all came to the conclusion that maybe

1] we all expected more than we got from our accountants [which I guess is a telling conclusion in itself]

2] maybe we should look to smaller accounting companies who would be a bit sharper [not in the bent sense]

3] if necessary we'd pay more for more

4] the possibility of employing a qualified tax adviser who would be a bit cuter in terms of knowing all the wrinkles might add to annual fees but could well be worthwhile.

Think a major factor for us all is by nature of self-employment, it makes you insular [too much work, not enough networking] and you tend to get into the
:mad: '!!!!!y' mindset.

RB

Pennywise

"Accountant" is a very generic term for lots of different activities. It is unrealistic to expect a single person to be able to everything for everyone. Knowing all there is to know about VAT for example is a full time job in itself. UK income tax is a full time job. No single person could possibly know it all about everything.

I liken the typical "one man band" accountant or partner in a firm of accountants to a medical GP. They know a bit about a lot of things but aren't particularly specialised in any single topic. A firm will employ several staff, most of which will have their own specialisms. A one-man band will probably use subcontractors or consultants for anything unusual. Even the larger firms will outsource particularly complex tasks.

If you go to the typical High Street accountant, a clerk if you are lucky, or the trainee if you're not, will be the one spending most time on your books. They're trained to prepare accounts, they're not trained to do tax planning. It is a conveyor belt system, going through the different tiers of staff. If your instruction was for them to prepare accounts and tax returns, then that's what they'll have done. The tax specialists dealing with planning and the partner would probably go nowhere near your books or returns.

If you go to the small one-man band type firm, you are more likely to get a more balanced view as the "boss" will probably be a lot more personally involved and may even be doing it all himself. Even if you havn't asked for tax advice, he would probably pick things up himself, by actually being hands-on, and be a bit more proactive. The problem, though, is that a one-man band is not going to know everything about everything, so it only really works if your business is very standard and generic or if the one-man band specialises in a particular trade/profession, eg there are some exceptional one-man bands for actors, musicians, etc. who have very peculiar accounts and tax returns.