I am in the process of taking on a new client who runs a small bussiness solely earning property income.
This client has mentioned that his last accountant charged by taking "10% of the rebate earned on the tax return" which I am not familiar with in relation to a property business. I've come across this arrangement with clients who work as contractors under the CIS scheme but I'm not sure what this client is referring to as I've only ever charged flat fees.
Sounds like previous accountant was charging based on whatever refund he was able to get for the client.
Would understand that arrangement under CIS as you would always get a repayment but unusual to get a repayment in a business earning solely property income.
In order to get paid then the business must be getting run at a loss. But if so what tax is the loss being offset against? There must be other income that is being taxed.
Wouldn't this sort of no win no fee method of charging for services contovene Sections 120 and 240 of the IFAC code of Ethics in that how can one be objective if your fees are dependant upon an outcome?
If advertised in that manner it would also contevene S250 on marketing professional services.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Thanks for the reply guys...I'm just going to stick with my flat fee then. I was just checking I hadn't missed a type of rebate available within the property business as this is my first client within that field.
I would have thought with renting out properties there should be a profit at the end of the year, even with mortgages on them, surely thats why people buy properties to rent out to make money. Maybe he has re-invested his profit back into another house? Just a thought.
The only thing I can think of is that losses from holiday rentals used to be offsettable against other income, so you could get a rebate that way. That was stopped after 10/11 off the top of my head.
Apart from that, the only other way I could think of is if the accountant was incorrectly offsetting general rental losses against other income.
__________________
Jenny
Responses are my opinion based on the information provided. All information should be thoroughly checked before being relied on.
The other possibility not mentioned so far, I can think of is the client had tax of 25% of the gross rental income deducted by rental management company under the Non-resident Landlord scheme.
