Firmcheck: 5 things to do before you finalise your client's self-assessment tax return

Self-assessment tax return season is one of the busiest times of year for accountants, with documents, deadlines and demands all adding up. But it's also one of the most important opportunities to engage with and reevaluate your client set-up and relationships. Reviewing and revising all the tax data from the year provides a valuable perspective to take a holistic look at how your clients are working and how you can help.

So even if your first instinct when you fill in the last in the tax return is to finalise it and never look at it again, take a pause and consider these five points that could have a major impact on how you work with your client in the year ahead. 

1. Check-in with the big picture 

Your client's self-assessment return should be a reflection of your tax strategy with your client. Their specific goals directly influence how the tax return is prepared. Whether they aim to foreground revenue for fundraising, conserve capital for reinvestment, or restructure finances for an exit, understanding these nuances is vital to ensure that the path you’re setting them on aligns with their needs.

• Confirm objectives: Schedule a quick discussion with your client about their plans for the upcoming year. Are they aiming to expand, downsize, or maintain their current operations/levels of income?

• Align tax strategy with goals: Tailor the tax strategy to support these objectives. For instance, if they're looking to attract investors, focus on maximising reported profits.

• Review financial structures: Consider how different structures, such as trusts or partnerships, can align with the client's goals, such as asset protection or tax minimisation, which could be the foundation of services in the year ahead.

2. Conduct a risk assessment for tax positions

While accountants have a range of techniques at their disposal when it comes to managing tax obligations, the right choices will depend on your client's tolerance for risk and their plans in the year ahead. Before you commit to a submission, it’s essential to understand and manage the risk associated with various tax positions to safeguard your clients against scrutiny and penalties.

• Identify high-risk areas: Pinpoint tax positions that are frequently questioned by authorities, such as large deductions or unique credits and ensure you have the documents to back them up. This is especially important for areas under scrutiny, like R&D tax credits.

• Educate and advise clients: Inform your clients about the risks associated with aggressive tax strategies and the potential for audits, including the costs and disruption they may cause.

• Document justification: Ensure that there is a robust rationale and documentation for each tax position taken, particularly those that may be considered risky or worthy of attention from HMRC.

3. Review and update client information

Self-assessment season can race by in a flurry of last-minute documentation, chasing and long-forgotten paperwork being unearthed. It’s easy for mistakes to creep in, both on the client side and in your practice. So even if going over the numbers again is the last thing you want to do, it pays to check the basics before you commit. 

• Update personal and financial details: Review and update all personal and financial information. It’s especially important to look out for (potentially delicate) changes in income sources, marital status, or dependents, all of which can significantly impact tax obligations.

• Verify deductions and credits: Double-check all deductions and credits for eligibility and accuracy. This includes cross-referencing receipts and financial statements.

• Clarify timing: Verify last-minute invoices and bills in line with your client’s financial year end to ensure that the right payments are counted in the right year.

4. Conduct a fresh AML check

HMRC is focusing on anti-money laundering (AML) compliance, with the department recently detailing the scope of fines levied across hundreds of businesses, totalling £3.2 million. However, many firms lack the tools to effectively check clients’ AML status at scale, relying on manual document review and spot searches.

• Review at each engagement: Conduct an AML check whenever you expand the scope of work or re-engage with a client – risk assessments should be at least updated annually, so the annual tax return is a great time to update your client's record, and reassess AML risk.

• Document findings: Keep a record of all AML checks and findings. This documentation is crucial for compliance and can be valuable in case of any queries from regulatory bodies.

One of the most powerful ways to augment your risk management is by bringing your AML records into one place – an AML management system like Firmcheck enables you to streamline how you manage and update risk assessments, record changes, or update ID documents, making it easier for you to build checks into your standard client workflows.

5. Proactively plan for audit

Robust records and data keeping are your client's first defence against costly and manual audit processes. With HMRC becoming more aggressive in its investigations of tax management schemes, accountants have a key role to play in de-risking their clients' records. Whilst you’re in self-assessment mode anyway this makes it the ideal time to review the last year’s data and make sure it’s fit for purpose. 

• Integrate and organise supporting documents: Digitise and tag all supporting documents for income, deductions, and credits to ensure they’re readily accessible.

• Integrate documentation with returns: Once the return is complete, ensure that all documentation is systematically integrated into your client's records for a seamless audit trail.

De-risking the year ahead

When the pressure is on, it's easy to miss the little things that can make a big difference for your clients. But by taking a moment during this busy period, you can lay the groundwork for a more productive year ahead with your clients, finding opportunities to deepen your relationship, offer new services and grow your value. KYC and the AML process are one of the most crucial but underappreciated aspects of compliance – largely because firms often lack the tools to make it a non-laborious process. But everything you do as part of getting to know your client, and your client due diligence can be useful. It’s not simply about checking and verifying an ID document, it’s more about understanding who your client is, what they do and where their business fits in. Understanding that this information can be a critical part of your AML record-keeping, helps strengthen your AML compliance position. 

At Firmcheck, we believe in bringing together those disorganised components of AML into one system, so that managing client reviews and updating AML isn’t a hassle you could do without.

• Built-in AML functionality: Firmcheck’s platform brings together key elements of AML into one place, including client due diligence, risk assessments, key document storage, plus built in functionally for ID verification, address validation and screening for Politically Exposed Persons (PEPs) and sanctions. With a simple workflow, accountants can keep clients compliant without the pressure of manual searches and checks.

• Connected with Companies House: Leveraging the Companies House database firms can easily pull relevant entity and individual details, speeding up the AML workflow reducing the risk of manual errors and ensuring information is always up to date.

To find out more about how Firmcheck can support you during the busy January self-assessment period and beyond, book a free demo today.

(NB: This article doesn't constitute legal advice and is only intended for general informational purposes. Always consult with a legal expert or compliance consultant for guidance specific to your firm.)