Does My Accountant Work For Me Or HMRC? Watch our latest video to find out now or read our blog below.
This is a question I’ve been asked quite a few times over the years because some people think that an accountant represents HMRC and is basically working on their behalf to make sure that you, the client, pays tax on time and pays as much tax as possible.
In reality, though, an accountant works for you. You pay the accountant. An accountant is there to help you.
So, what does that actually mean? As a director or shareholder of your business, you have a responsibility to your business to make sure it’s as profitable as possible, but also that it keeps as much of its income and cash as possible.
This, therefore, means paying as little tax as legally possible. And that’s the key word there, legally possible.
HMRC, on the other hand, have a responsibility to the government to collect as much tax as possible.
Therefore, on the face of it, you and HMRC have opposite objectives.
You want to reduce your tax bill. HMRC wants to increase it.
What does your accountant do?
Your accountant is there to help you, to help you reduce that tax bill and pay as little tax as legally possible.
Often, that involves knowing what you can and can’t claim as an expense to reduce your profit. It involves knowing the reliefs that are available. Perhaps you were unaware that you could claim a research and development credit or some of the capital allowances that are available. Or even, as a small business, just the rules about working from home.
As an accountant, we help you reduce that tax, while knowing precisely the rules that HMRC have. We make sure that we are using those rules to your advantage.
We are not breaking the rules. We are simply applying the rules that are there. And these are rules that you, as a business owner may not know about. To be honest, it’s not your job to know about them. You’re busy running your business.
Why is my accountant an agent for HMRC?
When we deal with HMRC, we’re dealing with them on your behalf.
Your accountant will usually ask you to sign a form, or get an online code, so they can act as your agent for HMRC.
Sometimes people think that means that we’re an agent working on behalf of HMRC but no, we’re not.
We’re an agent working on your behalf.
What the form does is authorise us to speak to HMRC on your behalf. After all, you and HMRC don’t want just anyone to be able to ring up and ask about your tax affairs.
The benefit to you ise that we can get any information from HMRC that we might need about your tax affairs. If you do need to speak to HMRC, we can do it on your behalf, saving you the stress, and also the time of doing it.
What if I have an HMRC investigation?
Every now and then, HMRC will investigate businesses. This might be for a specific reason. Often, before there is a large tax rebate, they’ll want to investigate you before writing the cheque. If you think about it, that’s quite reasonable. Perhaps you’ve submitted returns, or paid, late. Often, it’s purely random. They do genuinely pick businesses randomly to look at.
If you are investigated is the case, your accountant will actually represent you in the investigation. Your accountant will work for you, and liaise with HMRC to make sure that everything is correct – all the expenses you’ve claimed are allowable, whether that be for corporation tax or VAT, and have been accounted for correctly.
If there are any changes to be made, your accountant will liaise with HMRC to minimise the impact on you.
Ultimately, an accountant’s job is to help you, the client, pay as little tax as legally possible, but to do this within the rules allowed by HMRC.
Therefore, we do speak and liaise with HMRC to make sure we’re on top of those rules and that, if they ever investigate you, you’re absolutely clean, and that there is no additional tax owed.
One of my clients said to me a little while ago when he moved his business to us, “I didn’t know an accountant could work for me. I thought they all worked for HMRC,” because he felt with his previous accountant was actually pushing his tax bill up all the time. We’ve worked with him to bring his tax bill down, but we’ve done that by using the rules and the reliefs as allowed, and just understanding his business and knowing exactly what can be applied.
The problem with the previous accountant, really, was not that they were trying to increase his tax bill. They just didn’t understand his business and some of the reliefs he could claim to reduce that tax bill.
So, there you go. To be absolutely clear, your accountant works for you, not HMRC. They’re there to help you, and protect you from HMRC, and make sure you’re doing everything correctly to keep that tax bill down.
If you have any queries, please do get in touch with us on firstname.lastname@example.org or by phone on 0151 380 8081.