One thing that most accountants have to face is a desire on the part of their clients to pay less tax. In this context it can be helpful to ensure that clients appreciate what is and what is NOT possible/achievable.

For example is it legal to legitimately minimise your tax liabilities. This includes:
•    Claiming all available allowances and reliefs
•    Claiming tax relief for expenditure incurred “wholly and exclusively” for business purposes
•    Planning your affairs to keep your tax liabilities as low as possible within the law

On the other hand it is ILLEGAL to deliberately/dishonestly evade tax. This includes:

• Claiming tax relief for non-business expenses;
• Telling untruths on your tax return or in the way you describe transactions;
• Failing to include all of your taxable income in your accounts;
• Withdrawing money for personal use from an incorporated business (company) and not making any attempt to make sure it is treated correctly for tax purposes;
• Failing to declare all of your taxable income and gains on your tax returns;
• Failing to ask for or to complete tax returns to report your taxable income and gains.

The consequences of illegal activity include: Revenue investigations, back taxes, interest on late paid tax and penalties (up to 100% of tax), time, hassle, professional fees, and if you’re very unlucky, ill-advised or stupid – prosecution and prison.

Clients also need to understand that if they get involved in structured tax avoidance schemes they are also highly likely to suffer a tax investigation – even though the scheme may be legal and fully disclosed.

I almost admire one promoter who told me his approach. Apparently he explains that clients who would be worried sick by the inevitable Revenue enquiry, the letters, the demands, the time it takes to resolve and the inconvenience should NOT get involved in his schemes – even though he claims they are legal, have full Counsel’s opinion and are fully disclosed to HMRC.

He manages clients’ expectations and makes clear that the enquiries often last 3 – 7 years; and even though he claims they are usually resolved in favour of the taxpayer, he admits there are no guarantees.

I always mention this issue in my talks on ‘How to avoid professional negligence claims and worse‘. If clients have been forwarned as to what you can and can’t do there is less chance of them subsequently complaining.  In this context though I would refer you to an earlier post on this blog. (I told him. Once. 12 months ago. How dare he forget). It contains a salutary warning.

What do you do to manage your clients’ expectations? Please add your comments to this blog post.

2 Responses to “Managing client expectations re tax avoidance”