Do I 'really' need an accountant?

brantwood150

NeilW wrote:

Everything you need to know about tax are published on the Internet in the Revenue's own tax manuals, including how the Revenue views things.

Granted, the Inland Revenue Manuals are helpful but they only give their interpretation of the law. Believe it or not this is not always correct, which is why the Inland Revenue often lose tax cases in the courts.

They can also be vague in areas where the law is poorly drafted so don't really help in some cases.

Use them, certainly, but be aware that just because they tell you something, it may not necessarily be legally correct.

Richie(UK)

brantwood150 wrote:

Granted, the Inland Revenue Manuals are helpful but they only give their interpretation of the law. Believe it or not this is not always correct, which is why the Inland Revenue often lose tax cases in the courts.

They can also be vague in areas where the law is poorly drafted so don't really help in some cases.

Use them, certainly, but be aware that just because they tell you something, it may not necessarily be legally correct.

Absolutely right.

If the manuals support your cause then quote them to HMRC - its difficult for them to argue that their manuals are wrong

If they don't support your cause then rely on the legislation (you may need to ask your adviser for help with this as its not always very easy to understand!). The legislation is what truly governs our tax affairs.

brantwood150

With apologies to everyone else but, for the tax geeks amongst you, I got Counsel's opinion today on a loan relationship technical point. Guess what, the Inland Revenue have taken a stance in the manuals which isn't supported by the legislation on this issue.

Pennywise

NeilW wrote:

Again a perennial myth peddled by the accoutancy profession eager to protect their inflated fees. The Revenue have centralised regional centres staffed with relatively low grade individuals who push buttons on computers. You are just as likely to get investigated regardless of who does your accounts. There are three reasons for investigation - your income isn't high enough for what you are doing, your costs are higher than average for what you are doing or you got selected by random on the computer. It's very rare for a real person to get involved these days unless a computer program has gone beep somewhere first.NeilW

This gives quite a distorted view of what actually happens.

Yes, the IR computers do "Identify" potential discrepancies, i.e. very low declared income, anomalies, high expenses, and lots of other "trigger points". However, what happens next will always be human intervention. The computer has no power to instigate enquiries or investigations itself, but only to produce a list of tax returns which potentially may lead to enquiry. It is then up to the more senior tax inspectors to look into each case highlighted by the computer, as well as any extra cases they personally want to look at for whatever reason.

The vast majority of "potentials" don't lead anywhere and are quickly closed, usually without the taxpayer even knowing the return has been looked at by an inspector - these are where a "human" review of the tax return, supplementary information, previous years returns and files etc explain the anomalies, show a valid trend, etc. Only if the tax inspector still thinks there maybe a problem will they launch a formal enquiry.

I have been told this by several IR employees of my acquaintance.

Having worked at a few different accountancy practices, it is clear that some firms get more investigation cases than others. My first firm, for example, had a terrible reputation and a very high number of tax investigations occured each year. By contrast, my second firm had hardly any, just one or two a year, despite being a lot larger and having several hundred clients. I also saw trends where an enquiry into one client would trigger several more enquiries into other similar clients - no doubt the IR hoping to catch them out on the same mistake!

My experience is certainly that there are fewer investigations on returns prepared by a reputable accountancy practice. Whether that is because the tax inspectors have more confidence in the figures presented I don't know. It may be that accountants ensure that tax returns and accounts "make sense" before they are submitted and include explanations of any "funny" figures.

On a slightly different topic, but still relevant to the original question. I've just met a potential new client who hasn't had an accountant for a few years because "they were expensive for what they did". In just a 30 minute session, I identified that he had paid far too much tax when he retired from his self employment business (a change of year end would have knocked thousands off his tax bill and is a perfectly legitimate and legal option). I also told him that he should have transferred a property into joint names to take advantage of both spouse's annual CGT exemption (he'd put the property into his wife's name to use her income tax allowances and lower rates but forget about Captial gains tax). He left as sick as a parrot once he realised he had come to see me a year too late.

WHA

My clients who pay the least for their accountancy fees are my long-standing clients where we've worked together for years. Client knows how I like to see their books and I know their affairs inside out.

Those that pay the most are the ones who've got themselves in trouble, by either ignoring book-keeping and tax returns and hoping they'll go away, or making a bodged-up job of their own tax return. The former end up paying lots of money in fines, interest and surcharges, and the latter either pay far too much tax or get investigated.

All prospective new clients get a leaftet I've produced (also on my website) making it absolutely clear that they don't "need" an accountant, explaining that most information they'll need is available on-line, explaining that the tax offices and local business links provide training courses, but also highlighting the potential for missing some of the common "tricks" that are perfectly legal, business development advice, and also highlighting the time and hassle of trying to do their own accounts and returns as opposed to earning money doing their own thing. The last thing I want is a client who clearly begrudges paying for my services and I often decline to take on a client where I suspect this to be the case.

Last year, I gave my car a basic service myself. I found it to be too much trouble and hassle to work out what parts I needed, go to buy them, get the right tools together etc. This year, I'm sending it to the garage again because I'd prefer to spend that time in doing something more productive, like playing with my 3 year old!