This was the message to accountants in a press release issued last week by the Tax Advice Network.   In it I warned that:

Accountants across the UK are likely to see a surge in requests for Tax Credit advice from couples considering getting married following the release of a controversial report highlighting the failings on the current Tax Credit System for married couples.

This followed on from The ‘Individualists Who Co-operate’ report issued last week by Civitas.

In fact I have been suggesting for some time that More and more accountants will find themselves having to advise on tax credits.

And this is also a  point I invariably make in my talks about How to avoid professional negligence claims and Mastering the Credit Crunch.

Question one
I always ask for a show of hands as to how many accountants in the audience advise clients about their entitlement to claim tax credits. I’ve spoken to groups of all sizes, from 20-180 and to date no more than 5 hands ever go up. This suggests to me that the vast majority of accountants are not currently advising clients about their entitlement to claim tax credits.

We know why don’t we. They are merely a new(ish) dressing for a social security benefit. Accountants have not traditionally advised on benefits. It’s not cost effective to do so and we don’t know all the rules. Some, but not all, accountants make clear in their engagement letters that they do not advise on tax credit related issues. That is their prerogative and in so doing they probably reduce the prospect of a client making a successful claim for negligence at a later date.

Question two
I then ask the accountants whether they advise their clients on how best to offset losses, on Capital allowance disclaimers, pension reliefs and (now) Annual Investment Allowances (AIA). Of course they all do. Indeed, securing tax refunds tends to go down well with clients. In fact, clients tend to value anything their accountant does that reduces the tax payable or that secures the biggest tax refunds. And if they perceive that their accountant isn’t doing all they could in this regard, they are inclined to switch to one who does.

Question three
So what happens if the loss claim, the AIA or other advice reduces the client’s income to a level whereby they would be entitled to claim tax credits?

So far as clients are concerned, tax credits are TAX credits.This means they are seen as TAX refunds. Exactly the sort of thing that clients expect to get help on from their accountant. And if their accountant doesn’t help in this regard then it won’t be long until the client switches to one who does. Especially if the client becomes aware that he missed out on claiming tax credits as his accountant didn’t tell him when he should have done so. (The 3 month limit on ‘back claims’ is a real problem here).

If the commitments I note at the end of my seminars and training sessions are anything to go by, an increasing number of accountants will be advising clients on their entitlement to claim tax credits. It doesn’t have to be time consuming and it can be done profitably.

Anyone know how much a client could claim in tax credits this year if they registered for them from April and , as a result of AIA (or losses) they have no taxable income this year? Assume partner has no income and there are 2 children.

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