Last summer we carried out a mystery survey of High Street Accountants (HSA’s) in the north-east that claim to be experts in contractor accounting. You can find the results here. The results were shocking, but not surprising. We released it with the title High Street Accountants Can Seriously Damage Your Wealth.
So 12 months on it was time to carry out an update. And guess what, the results this year are even worse! We found a total disregard for IR35, the KEY piece of legislation that dominates the contractor world. And we found a worrying lack of knowledge of the Managed Service Company (MSC) legislation.
These accountants are putting their contractor clients’ livelihoods at risk! In almost every case the HSA was acting as an MSC Provider, and was involved in their clients business, meaning that ALL of their clients are MSC’s and therefore open to attack from HMRC. And that attack would be catastrophic. All of their income (the invoiced amount) would be liable to tax & nic as if it were salary. And HMRC can go back seven years. Not only that, the contractor would also be added to the new tax avoiders blacklist. Try getting a job or mortgage once you’re on there.
Why would you do this to your client? Because you just don’t know, don’t have the skills, experience, or knowledge to serve this sector. But you saw it as an opportunity, so like the barrow-boys you really are off you went to the market, offering a cheap and “personal” service (which you can do because you’ve got no clients!).
But you do this by eschewing compliance, and ultimately at the expense of your clients. And it de-bases the market so no-one wins. It’s a real issue for professional online accountants like ourselves, Brooksons and Paystream. We’ve all spent thousands of pounds on compliance, working with industry experts, such as KPMG and McGrigors in our case. That’s not to mention the costs of the compliance accreditations that we all carry so that contractors and recruiters alike can know that we do things properly.
We’ve also all spent thousands on the technology that underpins the accounting services we provide that make our clients lives as easy as possible. It’s a sophisticated business, make no mistake. And yet these HSA’s continue to plague us. Just last week yet another one opened up in Aberdeen. One man in a van, with the support of some accountants in Dundee, with no history or experience in this sector. But they’re cheap! And they’ll win some business. And more clients livelihoods will be put at risk.
I’m all for competition, I welcome it and believe that it’s healthy and necessary. However, it’s got to be on a level playing field, where the clients’ interests are put first. This sector now needs regulation to protect our clients and stop these cowboys.
If you’re interested in learning more about our accounting services for contractors, or any of our other services, please get in touch.
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