HMRC and clients: The troublesome triangle
Judging from recent comments coming out of HMRC, it appears that there are three parties involved in the accountant-client relationship, writes Rebecca Cave.
Jim Harra, HMRC’s Director General for business tax, recently commented in an interview with Tax Journal “The key thing for me… is making sure we’ve got maximum value from having an agent in the relationship between HMRC and the taxpayer.”
He went on to say, “When an agent represents a taxpayer, we will want to know what services the agent is providing. This could be a perfectly professional basic service or it could be one which offers lots of added value… so that an agent’s client presents to us as compliant or low risk.”
I think most accountants would not see themselves as being in a relationship between HMRC and the taxpayer, but perhaps that is the reality. Do you feel you are playing the piggy-in-the-middle between your clients and HMRC?
If that’s the case, do HMRC understand the nature of the relationship between the client and tax agent? Perhaps they don’t, as they recently commissioned some research into factors affecting small and mid-sized businesses’ choice of tax agent.
The researchers questioned 1014 business owners, and found that 86% paid a professional tax agent to assist with at least some tax or accounting tasks. Interestingly this figure is significantly higher than the 70% of small and mid-sized businesses which Jim Harra cited as using an accountant. Perhaps his data are out of date, and more businesses are turning to accountants for help as tax compliance becomes more complex.
Those businesses that do use professional help are generally very loyal to their accountant; 49% of businesses stay with the same professional agent for more than 10 years. The business owners build up a good relationship with their accountant and will only consider moving if the relationship breaks down, or their business changes so they need a different mix of services which their current adviser doesn’t provide. Only 25% of clients move to a new accountant for cost reasons.
Business owners who don’t use a tax agent tend to be running younger businesses or have less complex tax affairs, such as a low-turnover sole-traders. However, 20% of those business owners said they would consider appointing a tax agent in the next five years. The lesson for accountants is: catch the business in its early stages, give the owners a good service and they will stay with you for years.
This research also confirms the perception that personal recommendations are more effective than any other form of advertising in bringing in new clients. It found that when looking for an accountant 78% of business owners are strongly influenced by recommendations from their business contacts as well from family and friends. So the best way to acquire new clients is through your current clients, and other business contacts.
The main reason business owners gave for paying a tax agent is the knowledge and skills the professional applies to deal with complex issues, in contrast to the worry that the business will get something wrong if they do it themselves. A lesser concern is the time that tax and accounting tasks take, and whether it is cost efficient to pay someone else to perform that work.
The research also looked at the businesses’ attitude to digital services provided by HMRC. Generally the where business has a low take-up of HMRC’s digital services they will pay tax agent to complete those tasks for them. The resistance to using digital services was related to a lack to IT skills and confidence on behalf of the business owner.
The businesses were presented with information about future HMRC online services including Your Tax Account – which will present all the businesses’ tax data in one place – and Agent Online Self Serve (AOSS), which will allow agents to perform more tax tasks for the business. The majority of the businesses questioned (63%) said the introduction of these services would not make them change their use of a paid tax agent.
What do you think? Is HMRC trying to squeeze out tax agents by introducing more digital services, or will accountants always be required by the majority of businesses?
Source: Accounting Web