How helpful should you be to your clients?
Charlotte Barbour discusses when a practitioner might want to exercise some caution before advising a client and highlights professional guidance that is designed to assist in such situations.
What are your clients doing?
Always a relevant question but particularly so now due to the recessionary conditions and many businesses struggling. Changing circumstances such as this are often the reason clients change their minds and do something different. Will the client unexpectedly shut their business – and still be able to maximise tax reliefs? Will they sell a residential letting property but not realise that it needs to be reported for CGT within 30 days?
It could also be the case that the client’s business is changing tack and is now flourishing - but has the trade changed and therefore jeopardised loss reliefs? This was considered in an earlier ICAS article on tax, trading activities and COVID-19.
Should you assist your clients with all their queries?
Many advisers have assisted with issues that a year ago did not exist, for instance, on furlough claims. Other issues may crop up which an adviser would not normally cover as part of their work. For instance, an adviser who does not normally offer advice on tax residence might be asked about the tax consequences of employees working from home in the pandemic where home is outside the UK.
Or there may be matters that the adviser did not know about that have crept out of the woodwork – and if so, the PCRT Helpsheet on errors may be of assistance.
What do your clients expect?
The case of Hugh McMahon against Grant Thornton (2020 CSOH)50 illustrates what can happen when there is an unexpected turn of events. It also offers an illustration of what expectations may be placed on the adviser.
The client had unexpectedly decided to sell his trading company - he had been the sole owner of the company shares - and this resulted in a substantial liability to capital gains tax. The issue was whether the CGT might have been reduced had the shares been jointly owned by him and his wife – and was his adviser negligent in not having proactively advised him about this. In this instance, the decision was that the adviser was not negligent. However, it does provide a reminder to be careful about what is in the engagement letter and to be vigilant about what is expected by the client as, no doubt, no one wishes to go to court to settle such a matter.
Should you take a particular client on?
It is always tempting to accept every client and engagement because it is money in the bank. But not all clients are the right clients for you, nor you the right adviser for them. This requires constant reflection and assessment.
Professional Conduct in Relation to Taxation
There are many occasions when clients may do something unexpected or ask about matters which you might not be that conversant with. Situations such as this are more likely to occur now due to the current pandemic. While pointing your client in the right direction, caution may also need to be exercised.
Each engagement letter needs to be regularly considered, refreshed, and agreed with the client.
The cross-profession guidance ‘Professional Conduct in Relation to Taxation’ is designed to provide ethical guidance and to support members when faced with difficult decisions. It also includes guidance regarding the need for members to stay within their competencies:
Professional competence and due care
2.8 A member has a professional duty to carry out their work within the scope of their engagement and with the requisite skill and care. A member should take care not to stray beyond the agreed terms of the engagement; if they do exceed the scope, they should agree to revised terms with their client and check that their professional indemnity insurance covers the enhanced work.
2.9 A member is free to choose whether or not to act for a client both generally and as regards specific activities. However, where a member chooses to limit or amend the scope of services they provide to a client they should make this clear in writing.
2.10 When advising a client, a member has a duty to serve that client's interests within the relevant legal and regulatory framework.
2.11 A member must carry out their work with proper regard for the technical and professional standards expected. In particular, a member must not undertake professional work which they are not competent to perform unless they obtain appropriate assistance from a suitably qualified specialist.
Sometimes some caution about what work to undertake can be helpful.
Support may be sought informally to gain a sense check from a fellow practitioner, or from Practice Support at ICAS. For matters of more concern, or giving what could be a significant opinion, a formal second opinion should be sought from a fellow practitioner with appropriate PII and in writing. For the more difficult (and tax expensive) areas of practice (VAT or residence come to mind here as examples), specialist advice should be sought.
And remember – there’s something in the old adage – different horses for different courses!