Choosing Your Next Tax Advisor 10 Red Flags to Watch Out For

What does a tax advisor do?

A tax advisor helps clients minimize tax risk and optimize their financial decisions to reduce overall taxes paid.

We at Edge Tax like to think of ourselves (and therefore all tax advisors) as a friendly and helpful bunch, who will always go the extra mile for our clients.  As our role as tax advisors we aim to educate everyone on complex tax mattrs, through advice and our marketing, However; as the market becomes more and more saturated, certain practitioners are turning to unethical marketing tactics to try and boost their revenue.

When assisting clients with disclosures to HMRC, one common theme we see is that the taxpayer had blind faith in their accountant or tax advisor.  Reliance on a third party is not a reasonable excuse when it comes to errors within a tax return – ultimate responsibility remains that of the taxpayer so this kind of trust should not be given lightly and without proper investigation. Therefore, please see below our 10 things to avoid when looking for your next advisor.

Title of just Accountant/Tax Advisor

Contrary to most people’s belief, the phrases ‘Accountant’ and ‘Tax Advisor’ are not protected.  This means that anyone can present themselves as such without having professional qualifications, or even experience in those fields.  The protected term for this profession carries the prefix of Chartered, many chartership programmes will provide individuals with corresponding letter for use after their name, such as:

CTA: Chartered Tax Advisor

ACA: Associate Chartered Accountant

ACCA: Association of Chartered Certified Accounts

Not having professional qualifications does not mean a person isn’t qualified by experience, so always remember that there is no issue with asking your tax advisor what their experience or qualifications are, and if you’re unsure what anything means, you can always ask a third party (or Google).

Within our senior staff at Edge Tax we are priviledged to have MD Anton Lane is a Chartered Tax Advisor (Governed by CIOT) and Jo Marshall a Fellow of The Institute of Chartered Accountants in England and Wales.( goverened by ICAEW)

Too-good to be true

My mother always told me that if something sounds too good to be true, it probably is – if a firm’s  price for services is significantly less than others are quoting, then it’s likely to be indicative of the level of service (or lack thereof) – it costs money to pay for quality staff, insurance, and access to resources.  As the saying goes: if you pay peanuts, you get monkeys.

They promise they can save you tax

It is not possible for an unappointed advisor to promise you that they will save you tax or guarantee a refund, this is because they have no knowledge of your finances or expenses. This is a common marketing tactic used by firms who use and promote tax avoidance schemes.

They will commonly file for things that are not HMRC compliant and disappear when HMRC comes knocking.

Unwilling to allow you to get a second opinion

If you are not confident with advice given by an advisor and would feel more comfortable with seeking a second opinion; your advisor should try their hardest to help you with any comments or concerns you may have, but they should not suggest that under no circumstances you seek another opinion. This should set off alarm bells and can mean that the advice you have received does not stack up with current legislation or working practices of HMRC.

Catchy-names

While I love a good pun as much as they next person – a firm’s name must comply with partnership and company law and should not convey an unprofessional image.

While catchy-names such as ‘We’ll save you money Ltd’ or ‘You can trust us LLP’ may grab your attention, they do not lend themselves to long and established business practices.  Often these companies will grab as much money as possible then disappear.

Short-history

Whilst we all have to start somewhere and can’t be born with decades of experience. Often young lone-wolf advisors with no experience will create their own firms. While there is nothing inherently wrong with entrepreneurship, mentoring is a vital and important step of actually learning how to properly working in Accounting or Tax.  If a firm is newly established, consider researching the main advisors on linked in or, if they are members of professional bodies, on that body’s website.

Contingent fees e.g. % of tax recovered

Contingent fees can carry increased risk, this is because it is in the best interest of the advisor to increase the tax saving and thus increase money they receive – this can mean they bend the rules a little.

When HMRC come knocking, they will often lean on their caveats in order to get out of liabilities or simply ignore your attempts to contact them.

No KYC – No Engagement

Certain businesses that work in either the professional or highly regulated sectors (such as estate agents, banks, solicitors and tax advisors etc) are required to undertake customer due diligent (CDD) at the outset of a client relationship in order to meet their Anti-Money Laundering requirements.  This is because criminals often seek to mask their true identity by using complex ownership structures. The purpose of CDD is to enable the firm to understand a client’s true identity so that risk of money laundering can be properly managed.

Firms that fail to ask for ID as part of their KYC (Know Your Client) process are not only not meeting their AML obligations but may also be mixing with some nefarious characters.

Management of funds

Whilst there are rules and regulations surrounding how and when firms are allowed to manage client money, alarm bells should ring when a firm insists on handling funds on behalf of clients. The “pay us and we’ll then pay HMRC” mentality may feel easier for clients; but, this can sometimes  lead to companies stockpiling client funds then disappearing, leaving clients with outstanding liabilities, late payments penalties and interest accruing.

Advice not given in writing

While we all find picking up the phone easier and more time-efficient, any advice given should always be in a written format, even if it is just in an email. If an advisor refuses to provide advice in a written format it can mean that they do not wish to have a paper trail of their ‘creative’ advice should HMRC come calling. Without this paper trail they are able to control the narrative of your non-compliance.

Whilst one of these flags on their own may not be the biggest cause for alarm, clients should exercise caution when a firm displays multiple of these characteristics.

So if you are looking for a tax advisor reach out to a member of the team and see if we are the right fit for you – contact us

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