What sort of advice do you give? Specialist, Compliance or Dangerous? (part two)

In yesterday’s blog I described what I see as the three categories of advice that best describe the approach of many professional advisers.

The third category I described was ‘dangerous’ and I explained that advisers giving dangerous advice, normally do so as they are what we might term ‘unconscious incompetents’. That is they are unaware how out of date or ill-informed their advice is.

I first encountered such attitudes over twenty years ago when I was a tax manager in a twelve partner general accountancy practice. A couple of audit partners (long since retired) routinely gave their clients tax advice and answered their queries without seeking the input of any of the firm’s tax specialists. When the clients wanted confirmation or clarification it was our job to provide correct advice without undermining the nonsense they had already been told. Not an easy task. But it was better than the other related role we had. That was to deal with enquiries and challenges from (what was then) the Inland Revenue. We were forbidden from ever admitting that the audit partner’s advice had been wrong from the outset. I hear apocryphal stories suggesting that such things continue to this day.

Indeed only very recently I had cause to review a case where the accountant had told his client that he was entitled to tax relief for the rolled-up (accrued) interest on a loan to refinance a close company even though the legislation has long denied relief for such interest until it is paid. The Revenue hadn’t spotted what was going on for 5 years and it was some time later before the accountant admitted that his view was incorrect. Of course this was a simple issue. I suspect that such situations are even more common where the client’s tax problem or situation is not something that the accountant encounters every day.

I am reminded of such experiences whenever I come across that immortal line in the Guide to Professional Conduct for those working in tax. This is a joint publication updated every few years by a working party that includes representatives of all of the major accounting and tax bodies. It forms part of the members’ handbook (or equivalent) of all such bodies too and says:

“Members will from time to time find themselves having to advise on matters which require specialist knowledge. In such circumstances they should be careful not to go beyond their own level of competence and, if necessary, should seek help from a specialist in the field”.

I’d welcome input from others on my suggested categorisation of tax advisers and the related ideas raised in this two part blog.