Outsourcing: tax efficient

Outsourcing tax work is generally viewed as something conducted by larger accountancy practices involving the transmission of data overseas to process thousands of tax returns.

But what about the smaller firms ­ the sole practitioner or two-partner firms that help so many of the UK’s businesses?

They can take advantage of the same idea and so keep ­ and even gain ­ clients who are becoming increasingly knowledgeable and demanding in terms of the lead time, breadth and quality of the advice given.

The provision of this service is becoming a key element of client retention and business growth.

Time-consuming

Consider how much time is spent completing a tax return from start to finish. Tax software helps enormously, but data still needs to be entered in the correct box ­ the old adage of ‘garbage in, garbage out’ still remains true. The tax calculation needs checking to ensure against transposition errors, omission of data and so on. The client should be provided with an explanation as to how and why the under/over payment arose.

All this takes a substantial amount of either your own or your employee’s time which could be spent on something utilising their particular expertise and therefore be more profitable.

An alternative is to outsource. Simply scan and email the information and receive back a completed return ready for your client to sign. As an added bonus, the consultant may also provide suggestions for tax-saving or tax planning to put forward to your client.

Often small practitioners will be required to provide tax advice on an irregular, sporadic basis. Outsourcing the tax queries can be beneficial in terms of time and money, but perhaps more importantly, mean that you are reducing your exposure to a PI claim as you will not have to advise on tax issues in areas where you are unsure how the legislation works.

Such ad hoc queries could be quickly answered either by email or telephone a nd if there are further issues or planning points, these would be brought to your attention by the consultant. This would improve your status from the client’s point of view as you have supplied some ‘added value’ with a consequential improvement in client satisfaction and retention.

More regular enquiries normally means taking on a part-time employee to deal with the tax issues arising. But consider the risk, expense and administration involved ­ holiday pay, sick pay, pay as you earn compliance, employer’s national insurance contributions, employment law compliance, health and safety issues... the list goes on. By making use of someone else’s tax services you have none of these issues and you only have to pay out when there is work to be done.

Many accountants are reluctant to outsource their tax work for fear of their clients’ details being ‘stolen’ by the consultant. This is an unfounded fear ­ no outsourcer would stay in business very long once word got out that they had tried to steal the clients of ‘ABC accountants’. They should be happy to sign a legally binding ‘no poaching’ agreement and for most queries there will be no need to provide your client’s name ­ a simple reference will suffice. Furthermore, bear in mind that an employee is in a far better position to steal your clients’ details than any outsider
would ever be.

The bigger UK firms of accountants already outsource considerable amounts of their tax work. Why continue to struggle to understand sometimes complex and convoluted tax legislation with the potential risk of getting things wrong?

Why continue to work long, stressful hours in order to meet tax deadlines? Why risk losing clients because you have failed to provide or given incorrect tax planning? Copy what the ‘big players’ do and eliminate all these issues and outsource part, or all, of your tax work.

Workload out – expertise in

Richard Wise of Accounting Matters Ltd says: ‘We receive a continuous flow o f legislation and information relating to taxation issues. Much of this is specialised information which needs to be absorbed and understood.

‘By [outsourcing tax] we can concentrate on those items relevant to our core accounting functions and basic taxation work. Our consultant reviews all new tax-related information and is therefore ready to provide current and accurate responses to specific and general taxation questions and provide proactive advice on changes that may impact on our clients.

‘This arrangement works very well indeed for us.’

Susan Mason works at Worsley Taxation Services

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