As self-assessment season fast approaches, there’s always that one client who tells you, “I can’t afford to pay my tax.” So what should accountants do?

It’s not self-assessment season without a client or two moaning about how they will ever be able to pay their tax and expecting their accountant to reduce the liability. 

An AccountingWEB member, Cylhia66 wanted to see how others cope with this kind of client asking, “How do you deal with them? Each time it’s a massive facepalm moment for me.”

They said on Any Answers, “Obviously I remain as courteous as I can be but…! You owe a lot of tax because you earned a lot of money – that’s what I try to explain in polite terms. And we can’t reduce the tax due after the event unfortunately, is the second thing I find I have to explain.”

What does the community do?

The Any Answers community shared various strategies used to handle clients who claim they can’t afford to pay their taxes.

One member, Truthsayer, true to their name, shared that they simply tell clients the truth. They commented, “I just tell them the truth. They owe a lot of tax because they have made a lot of money, and no, there is no way of reducing it – if there were, I would have done it already. Don’t be patient, just be blunt. If they continue, then increase their fee to either make it worthwhile or make them leave.”

Regular commenter, Ireallyshouldknowthisbut similarly tells their clients the same things by saying it in a way that focuses on the positives. “Spin the positive: ‘It’s a great problem to have, it means you have had a really good year’ or ‘I would be much more worried if you didn’t have a tax bill, as it would have meant you had made no profits’. I also tell them I am an accountant, not a magician,” they said.

Both Dougscott and Michael Davies mentioned encouraging clients to plan ahead. Dougscott said, “I suggest they put aside an appropriate percentage of income they receive in a savings account to pay for future tax liabilities.” Michael Davies said, “Tell them to negotiate an instalment arrangement or for a fee, you will do it for them.”

Easing tax surprises 

Sarah Sallis, director of The Accountancy Office Limited, told AccountingWEB that they have had only one client this year who has questioned their tax bill. 

She offered some key pieces of advice for other accountants who may be dealing with clients who are questioning their tax bills.

1. Educate the client

Assuming all tax-saving opportunities have been covered, it’s too late to change things now. It’s a case of educating the client about the importance of up-to-date accounting information, which will help avoid unpleasant tax surprises in the future – if that’s what is important to them. With Making Tax Digital around the corner, this will happen very soon anyway.

Educate the client about the importance of setting aside money each month for their upcoming tax bills.

2. Explain the numbers clearly 

Help them understand those numbers – sometimes the tax bill appears huge but that would also suggest their income/profits have been huge. If they genuinely haven’t got the funds, it would suggest their personal spending is too high.

3. Encourage them to plan ahead 

Encourage the client to complete their tax return as early as possible after the end of the tax year. The sooner the client knows what tax they owe, the longer they have to plan for the payment. 

Our internal deadline for receiving clients’ tax return records is 30 September which helps them and us. We’re on track to complete all tax returns before the Christmas break.

4. Communicate throughout the year

Touch base with the client mid tax year. Ask if there have been any changes to their circumstances or income levels.

Offer the opportunity to help them with a mid-year tax projection calculation if the amount of tax due is a concern for them. We offer all clients a pre-year-end review.

5. Payment plans 

Remind the client they can potentially contact HMRC to arrange a payment plan if they’re unable to pay the tax on time (if they meet the criteria).