The Truth Hurts
There’s an unspoken truth when it comes to tax advice for business owners, there’s a complete lack of clarity and understanding over what tax consultancy and advice is…..and what is expected to be delivered. This means:
…..Your client may have unrealistic expectations of you
…..You end up doing work for less money than it is worth, or even worse free!
But this isn’t your fault.
Tax advice is an area that hasn’t been set out as a universally defined and priced service before. Not like say, bookkeeping. If a client says they need bookkeeping, you’ve got a process ready for pricing. It probably goes something like…..you ask several questions about their business, the number of transactions, etc and you give a price based on the requirements of delivery.
Tax advice shouldn’t be any different but currently, it is.
There’s no straightforward definition to enable a good understanding of both you and your clients, which is an uncomfortable territory.
Even if you are doing more tax advice for your clients than most accountants, there’s always that risk of being undervalued and under-appreciated. This means it’s likely you’re being underpaid for what you are delivering.
The risks of undefined tax advice
CLIENT: “Yeah, I trust my accountant. He’s more like my mate now. I’ve been with him for 15 years and he’s got my best interests at heart. He’s an expert and I know he’s giving me all the advice I need.”
TAX PARTNER “Based on our chat though, there are at least 3 things I can identify that would have saved you about £20,000. Are you sure he’s got everything covered for you?”
CLIENT: “Really? I can’t believe he would let me down like that.”
Trust, it’s a funny thing. It takes years to build and can be destroyed in a heartbeat.
How confident are you?
Put yourself in the shoes of this client’s accountant. Would you feel confident you had absolutely everything covered? This is where the unspoken truth of tax advice hits hard.
If you can’t say to that client with confidence….
“We have discussed our tax consultancy service, but it is additional to the package you have signed up for. I can predict the things that might apply to you (which I have), but to have absolutely everything covered it requires a focused review. That’s why I’ve been advocating this tax package to you.”
….the trust is lost.
If a client needed tax advice, but you missed it, how are you going to explain why without coming off as the bad guy? Breaking down the unknowns of tax advice means your client will understand your tax services, you can charge with confidence and make sure your clients get the tax advice they need.
Tax compliance, advice & consultancy
Tax advice should be treated the same as any other service. It needs clearly defined service levels, outlining who the level of service is suitable for and why. Then it can be priced accordingly.
To do this, the thing to understand first is that tax services for clients are broken down into three areas:
Most accountants will have a tax compliance service that is priced or built into their packaged services; with tax advice delivered and charged for ad-hoc, based-on situations that arise.
Tax consultancy though? This is a bit of an unknown. It’s where most of the value sits but it hasn’t been defined as a consistent and repeatable service before. There is no universally used system for, reviewing a client’s overall affairs & motives and applying tax legislation to their situation, to see where they may benefit from advice retrospectively, presently, and in the future.
Tax Consultancy: Define and price
So, 95% of your clients tend to be your typical clients – business owners who want accounts and tax from you. They don’t want to pay too much tax and they’d like to mitigate tax where possible.
Business owners don’t know this, but at each stage of a business’ lifecycle, there are different tax advice options to consider, to make sure a business is paying the most efficient amount of tax.
Here’s a breakdown of a business’s lifecycle and the tax advice areas to consider:
The levels of tax consultancy service are linked to the lifecycle stages of a business, rather than being about tax. For most clients, they will probably understand that they get the following:
• Help to pay the right amount of tax that is due
• Help to ensure that the salaries/dividends split is sorted for them each year
• Help with ad-hoc tax advice like an R&D Tax Claim, or VAT advice.
To deliver more, it’s critical you stand by the value and charge for subsequent levels of service.
And if clients have only ever received the starter level of tax consultancy but they want to make tax savings for their growing business, using a tax diagnostic review will almost certainly produce a saving greater than the fee charged.
To find out more about Diagnostax visit our website.