Tax practitioners are increasingly turning to advisory work to offer their clients a more rounded service.
Authored by Amir Belal - Lead Marketing Manager, Tolley
Although core compliance work is threatened by increasing digitisation plans from HM Revenue and Customs, the growing complexity around tax and corporate finance is spurring a need for premium advisory services. Accountants, often considered a business’s most trusted advisor, are uniquely placed to take advantage of this situation.
Many firms have already embraced this change. As technology and self-service tools squeeze margins on compliance work, firms are increasingly turning to more lucrative advisory services to boost revenues.
Looking at some statistics, the 2021/2022 Global Advisory Trends Report found that 56% of accounting firms now offer 50/50 advisory and compliance services, while 17% of firms offer mainly advisory services. Only 25% of the respondents said they mainly offer tax and compliance services.
For some top UK firms, such as PwC, KPMG, EY and Deloitte, non-audit work is already their biggest earner.
The Tolley tax thought leadership report spoke to tax professionals to determine what drives this trend towards advisory services.
Future-proofing accountancy firms by meeting client demands
Many firms say they are increasing advisory services to future-proof their practices from changes in demand. In some cases, that has resulted in firms taking on more advisory work than compliance matters.
For example, accountancy firm Grant Thornton UK, has seen its share of compliance and advisory work flip around over the past two decades. Advisory matters now account for around two-thirds of work, where previously compliance made up the bulk of work, says Karen Campbell-Williams, head of tax at Grant Thornton.
Download Tolley’s new report: Advicepower! The tax accountants turning to advisory services
The increasing complexity of compliance work, even if clients can file tax returns themselves, means many businesses still seek compliance-related advice to ensure they don’t make any mistakes.
“The tax world has become more and more complex, and the scale of the legislation is constantly growing and changing all the time,” said Campbell-Williams. “In order to be able to file a corporate tax return, there’s quite a lot of add-on advisory that clients need if they’re going to get that right.”
As the quantity and complexity of tax laws increase, so does the demand for expertise. Clients need to know that they are interpreting things correctly. They want to understand the consequences of what they need to do.
Specialist advisors
Some specialist firms are positioning themselves as advisors first. Take accountancy firm Finerva, which was founded by two PwC London alumni. It focuses on high-growth start-ups such as tech and science-based innovators seeking specialist advice in areas including share schemes and research and development (R&D) tax credits.
While sometimes early-stage businesses may come to Finerva for compliance-based work—for instance, if their first set of annual accounts is due—often they are referred work by venture capital investors and other accountancy firms who have portfolio companies or clients who are seeking more specialist advice, says Adam Brodie, the firm’s co-founder, and CEO.
Increased awareness to comply with the “spirit of the law”
Companies are becoming more concerned about perceptions in the current economic climate, especially if they are aggressively minimising their tax burdens.
“The consistent theme of advice is making sure that clients are within the letter of the tax law but increasingly also the spirit of it,” said Sian Steele, head of tax at Evelyn Partners. “There is certainly a feeling that the population at large, in a period of significant financial hardship, are looking for morality in the way the wealthy deal with their taxes.”
Where does compliance stop and advisory start?
Many accountancy firms have always offered advisory services as part of the broader compliance work but never charged for it separately. Differentiating between compliance and advisory services can be a potential challenge as the firm moves towards offering more advisory services. How will you define advisory services?
“What people have generally struggled with is the definition around advisory,” said Glenn Collins, head of policy, technical and strategic engagement at the Association of Chartered Certified Accountants. “Many accountants undertake advisory work, but they don’t recognise it.”
For tax professionals, that means clarifying where compliance stops and advisory starts.
In theory, any accountancy firm can offer advisory work (indeed, some may already be doing so without realising it). In reality, some firms may be better placed than others to take advantage of this trend. Read the full Tolley tax thought leadership report here to see what tax professionals have to say about offering advisory work.Discover our core products
