News analysis - Tax 'supermarkets' hit the streets

H&R Block’s arrival in the UK was a question of when, not if. After years of speculation, rumour and negotiation, the US tax return giants plumped for a takeover of the modest 13-franchise network of advisers, The Tax Team, based in Horsham, Sussex, built up by former Chartered Institute of Taxation president Gerry Hart.

The carefully-planned announcement, predicted over 18 months ago by Accountancy Age, came a week after the launch of the UK’s new tax regime – self-assessment – and is the latest in a rapidly growing line of tax return services bidding to cash in on the virgin market.

The Inland Revenue continues to insist that taxpayers will not need help filling in the new forms. Expert opinion is divided, but the burgeoning range of help on offer shows that the tax specialists disagree.

Hart’s brainchild, founded in 1994, will continue to operate under its catchy brand name. It has ambitious plans to more than double in size, by expanding its network to 27 offices nationwide by the end of the year.

Leeds, Bristol, Reading Edinburgh and the London suburbs have all been targeted for expansion.

Kansas-based Block is the world’s leading provider of tax return services with 8,000 offices in the US alone, and 1,700 more in Canada, Australia and 15 other countries. Last year, advisers at Block’s ‘tax supermarkets’ served 17.4 million taxpayers.

Its success, claims the firm, lies in being a high-volume business with low costs and high reliability.

The UK experience promises to be an eye-opener for the Americans. By its very nature, UK self-assessment does not permit the traditional Block approach. In the US, almost every taxpayer files a return. Many have simple tax affairs, allowing swift and efficient processing for the bargain price of $60 – the prospect of a rebate from the IRS keeps taxpayers happy.

Here, only those eight million citizens with a more complicated tax life will self-assess – with just three million UK taxpayers still unrepresented by a tax agent – ruling out the cheap and cheerful approach.

Mass processing of forms is not an option. Tax Team charges will start at #75, firmly in the middle market of the products on offer. All its staff are, and will continue to be, fully qualified tax advisers.

Block, which has kept the financial terms of the Tax Team deal secret, is not bothered. It is leaving Hart as managing partner to develop the service, who in turn is confident of success.

‘We are not the cheapest in the market, but companies offering to complete a tax return for #50 to #60 will go bust,’ Hart predicted.

Like many other ‘tax shops’ opening up or expanding in the UK to cash in on self-assessment, Tax Team will offer a range of services, from basic to bespoke – mirroring the pricing structure of its US parent. Taxpayers with a plethora of schedules to complete can expect to pay significantly more.

Services being offered by Tax Team are also being expanded to create a one-stop shop for financial advice and accountancy services.

Block refused to rule out a chain of US-style high-street stores, although it confirmed it is locked in talks with several other UK tax preparation and accountancy firms. Reports last year suggested that the US giant was looking for an instant, convenient and accessible tie-up with an established high-street operation such as the Post Office.

Corporate affairs director for Block Linda McDougall dismissed the idea, but said: ‘We are discussing operations with several other companies in the UK.

‘There’s great potential in the UK self-assessment market. We can bring expertise as to how to set up a large tax return operation and provide financial support.’

Tax experts admitted Block’s arrival was inevitable. Price Waterhouse’s head of direct tax, John Whiting, said: ‘It’s been on the cards and setting up with an established UK practice was a very sensible step for it to take.

‘This is a clear signal that the UK tax return market is going to get even more competitive – there is going to be a lot of fighting at the cheaper end of the market.

‘Prices may have to come down, as this sort of thing can only work if it is priced and sold as a commodity.’

Whiting argued that Block must use its clout to secure market share.

‘Block’s outlets must be accessible. How else will it attract the three million taxpayers who do not currently have a tax agent?

‘A high-street chain must be in their thinking.’

Hart, however, was not keen on the high-street approach. ‘Block realises that the British probably would not want to pop into a tax shop and have their return done while they wait – there’s no demand for a form-filling service. The public is used to making appointments and coming back later.’