THE past year for tax practices has been defined a dizzying maelstrom of bills, acts, consultations, edicts, missives, reports and all sorts of other very important fiscal changes and musings.
That, and the advent of political pluralism in the UK, which made May’s General Election incredibly difficult to call in the weeks leading up to the polls, has meant firms had to devote an awful lot of time to simply keeping abreast of the change taking place around them.
By the end of the year, we will have had in effect three Budgets (if you count the Autumn Statement) and a change in government; each bringing significant change to an already baffling tax system.
For some, that can have a rather destabilising effect, but for a good portion it presents opportunity. And so, given those factors, the overall numbers coming out of this year’s Top 50+50 supported by Wolters Kluwer are solid, if not inspiring.
The top ten tax firms made a combined £2.5bn in fee income, up 3.72% rise on 2014. The Big Four occupy their usual spots, although they are rather stratified with PwC taking £714m, Deloitte £562m, EY £470m and KPMG £318m.
BDO and Grant Thornton, too, make up the top six, but in what is perhaps the biggest surprise at the top end of the market, BDO grew 17% to take £116m in tax fee income. Grant Thornton, on the other hand, grew an anaemic 0.76%, taking £92m. Baker Tilly – soon to be known simply as RSM – continued its growth following its merger with RSM Tenon, posting a 14% increase to £73m.
A more sedate undercurrent can be attributed to the diminished interest in tax planning and avoidance following the shift in public opinion against it, and the work of the Public Accounts Committee (PAC) over the last parliament, BDO tax partner Andy Butterworth says.
Lower down the market resistance to fee rises has also hit firms.
“A lot of the work of the PAC and the controversy has definitely drained the appetite of the corporate world to involve themselves in tax planning. There’s been a definite decline,” says Butterworth. “There is still fee resistance at the bottom of the market, which I think is brought on by commoditisation and technology, which leads people to say ‘I won’t pay you any more this year, and in fact I’m expecting a reduction’. So there’s that resistance to increasing fees unless you can show you’re adding value.”
Despite those forces, some firms further down the table managed to flourish. Highlights lower down the market include Simmons Gainsford, which saw its tax function grow 27% to £3.16m; ClearSky Accounting, which posted a 50% increase to a £1m service line and; Crunch Accounting, which also saw its tax arm grow 50% to hit £5.14m.
Online tax health warning
Where there is change and complexity, there is likely to be a decent source of clients, and most firms grew their tax functions somewhere in the order of 5%-10%, while 17 firms posted double-digit growth. Just seven firms posted negative growth in their tax service lines.
It is with that positive mindset that 12 firms are approaching the advent of online tax accounts, set to be introduced by the government next year. A further 40 that responded to qualitative questions on the government’s move away from the paper tax return were either worried or simply didn’t know what they expect.
KPMG recognise the opportunity the online account provides, noting: “Notwithstanding improved access to online systems… the complexities of the UK tax system remain, and our specialist compliance teams are well-placed to provide taxpayers with the expert assistance they need to calculate their tax liabilities and meet their obligations.”
In the mid-tier, that message is not lost, with Price Bailey cheerfully observing “change is always good for business”.
But some harbour real concerns that the introduction could herald an exodus of clients as they attempt to manage their own affairs. It’s something ACCA’s head of taxation Chas Roy-Chowdhury thinks could prove an issue for firms later on, as former clients return after struggling to deal with their tax obligations.
“If you’re having your information pre-populated by HMRC, why wouldn’t you believe them?” he says. “So now we come to the health warning that it’s necessary that you still check because you’re still responsible yourself. A lot of taxpayers will perhaps not have realised about that, get fined and they realise it’s more trouble than it’s worth.”
For Crunch, one of the key elements behind its impressive growth has been to protect itself against that potential exodus by automatically linking up with HM Revenue & Customs.
“When we started in 2007, we looked to connect with HMRC and Companies House so that we could drop information to them seamlessly,” explains Crunch co-founder Darren Fell. “We’re working with [HMRC] so the feeds are there.
We have all the technology, and the teams arranged in pods so we can see how to improve things. Whenever these things come out, we have a team there and it leaps us forward in efficiency gains.”
While there are plenty of firms worried about the timeframe and facilitation of the online tax accounts, the overriding feeling is one of relative contentedness. The state of political flux that has characterised the last year is largely over, and firms can now look forward to a more settled environment in which to conduct their business.
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