Do you turn to your contractor accountant for business advice? If the answer is yes, you are not alone.

Sage, the business management software provider, recently conducted a survey that showed that 38% of SMEs look first to their accountant for business advice. This is an increase of 5% since the previous study was conducted.

Previously, quite a lot of SMEs sought advice from management consultants, lawyers and banks but in the past 2 years those figures have dropped dramatically. For example, 24% of SMEs contacted their bank for business advice in 2008. This figure has now dropped to just 4%.

And contractor accountants aren’t just seeing an increase in requests for business advice. A survey carried out by the Personal Accounts Delivery Authority showed that 67% of small businesses with between 2 and 49 staff members will turn to accountants for advice on pensions ahead of the reforms due to come into force in 2012.

The 2012 workplace pension reforms will be the first time that many small firms have been under an obligation to provide pensions for their employees and make pension contributions.
These results have obviously delighted accountants and 62% of them now expect their business to expand over the coming 3 years.

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An extension of nearly 2 months has been granted on the consultation period for HMRC’s new draft law on “deliberate wrongdoing”. The proposal “Working With Tax Agents: The Next Stage” will now be under discussion until 28th April, the Chartered Institute of Taxation was recently told by the government department.

There have been concerns raised by the CIOT and several contractor accountants over the wording of the law which they feel could be applied to anybody handing out tax advice as opposed to just those who are indulging in illegal activities.

The way the wording in the proposal stands at the moment, somebody having a pint in the pub with his friends could be fined for talking about tax tips.

One of the primary aims of the consultation is to find a way to deal with tax agents who deliberately give their clients dishonest advice, i.e. acting fraudulently, in order to reduce the client’s tax liability. Anyone found guilty of ‘deliberate wrongdoing’ would be fined between £1,500 to £50,000.

A spokesman from HMRC has confirmed that “This legislation only tackles people who are doing something illegal, it will not touch anyone giving out honest advice.”

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Accountants are being advised that there is just under a month left to submit responses to HMRCs ‘Working with Tax Agents’ consultation document. The consultation, which opened in early December last year will close on 3rd March 2010.

Dave Hartnett, who is the Treasury’s secretary for tax said that HMRC will be focusing on a very small minority of tax agents and contractor accountants. The actions of these indiduals are said to be bringng the accountancy profession as a whole into disrepute.

The government is keen to work closely with professional bodies such as ICAEW, ACCA and CIMA who’s members represent a large proportion of tax advisors and agents in the UK. They want greater disclosure with these associations to weed out the ‘bad eggs’ and promote a higher overall standard of professional conduct.

In addition, the government is determined to beef up it’s ability to tackle “deliberate wrongdoing” by tax agents through the use of financial penalties.

It is believed that HMRC will now target high volume accountants who generate large number of claims that have little or no value. Full information on the consultation, including details of how to respond, can be found on the HMRC website.

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