If something looks too good to be true it probably is. The Capital Allowances Partnership Ltd highlights some of the risks of appointing recently established capital allowances advisers.
Over the last few years there has been a rapid growth in the number of firms claiming to offer capital allowances services. In particular, new capital allowances marketing websites seem to be appearing every few weeks or so. As a result, established firms like us have increasingly been contacted by accountants and business owners seeking a second opinion and fee proposal. Normally after speaking to us they decide to appoint us.
From these discussions we have been able to identify a number of dangers associated with the appointment of 'newcomer' firms:
We have commonly seen recent entrants to the capital allowances market making inflated predictions about the tax savings that they might achieve. Many clients seem to have been led to believe they will get a large immediate repayment from HMRC, even if they have not actually paid any tax in the first place! The intention seems to be to get a client ‘signed up’, regardless of whether there is a valid claim. Further to this, we are aware of these advisers suing clients for payment, even when HMRC has rejected the claim.
Perhaps most worryingly, some claims seem to have been prepared on an aggressive basis which contains many errors and ignores HMRC’s published views on how the legislation works. This can lay the client open to severe penalties. Making negligent claims for tax relief in the hope they won’t be picked up is not a wise course of action!
We have repeatedly seen new capital allowances firms quoting eye-watering and inflexible percentage-based fees that, when you work the numbers through, can be seen to absorb all of the first few years' tax savings.
By way of contrast, The Capital Allowances Partnership Ltd always tailors fees to reflect our client's circumstances and we are happy to quote on a results basis, or for a fixed fee, or both. By speaking to an established firm like us, who will give a realistic appraisal of the anticipated tax savings and how the cash flows should arise, the risk of obtaining poor value for money can be avoided.
Capital allowances are tax relief for expenditure upon property and if you get this wrong there is the risk of a tax investigation, increased tax bills, interest and even penalties.
However, some recent entrants to the capital allowances market appear to have no specialist experience; instead, they come from unrelated backgrounds in financial sales (eg, pensions advisers and mortgage brokers) or ‘no win, no fee’ general financial claims (eg, endowment and payment protection insurance claims).
In contrast, established capital allowances specialists generally come from professional tax, accountancy or surveying backgrounds (or, like us, a combination of all three) and therefore have the appropriate skills to advise upon tax relief for property expenditure.
Unlike established firms like us who are proud of the expertise and experience of our team members, and have the skills to carry out all work in-house, recent entrants are often coy about the identity of their people. This is typically because the work is being carried out by unqualified or inexperienced staff who are being trained at their clients' expense, or they rely on anonymous non-specialist sub-contractors with little or no experience.
However, this doesn’t stop them making exaggerated claims, for example we have heard assertions from some newcomers that they are the industry's "biggest" or have more than 100 specialists, whereas in fact there are probably no more than 100 genuine specialists across the whole capital allowances industry!
We have seen recent entrants using all manner of high-pressure sales techniques and making exaggerated, misleading and sometimes downright untrue assertions during their marketing process.
These include highly questionable statements about their size and track record (see above) as well as false claims that they are 'approved' by HM Revenue & Customs (HMRC), or need and use expensive HMRC licences to undertake capital allowances work. We know that HMRC has warned them of this ‘blatant misrepresentation’.
Sometimes other purported benefits are highlighted, which prove to be 'red herrings' (eg, having extraordinarily high levels of professional indemnity insurance (PII) by virtue of unrelated business activities).
Regrettably, all too often there is little substance behind a slick website and commission-led sales force.
Directors and staff of the Capital Allowances Partnership are members of the Institute of Chartered Accountants, the Chartered Institute of Taxation, the Royal Institution of Chartered Surveyors or the Association of Tax Technicians. We act in accordance with the regulations and ethical guidelines of these bodies and have the required level of PII and an independent complaints handling process to protect our clients in the unlikely event of any problems.
New entrants often do not have this combination of expertise, or adequate PII. Look for Institute logos on websites.
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