Accountants fees for capital gains tax

Hi all


Hope you can help. My husband and his brother (who has lived abroad for the last year) bought a house 4 years ago, rented it for 18 months. It was the brothers’ ppr for the rest of the time. They made a gain of €65k, having sold it for €235k.

They went to an accountant to sort out the capital gains tax and tax on rental income.
They foolishly did not get a quote and his fees are now was 1% of the sale of the house ie €2350 +vat.

When my husband disputed this, the accountant said that had the fee been 1% of the captial gains tax ,he could have made the cgt higher in order to increase his fees.

I rang an accountant to get a quote for the same work and he said €400 max. others were 600€+vat

I also rang the Assocation of Chartered Accountants who said that they could not really comment with the huge discrepancy, as it was a free market but that they should get some other quotes and go back to the original accountant with these quotes.


 Are those fees excessive?

 Is his figure for cgt correct?

 If they ask for their documentation back, he is bound to ask for fees, what do you do in that situation?


Thank you for you help.

Cassie

We cant advise if the figure for CGt is correct as you havent given it to us. Have you received a detailed bill from the accountant- i.e how is the €2350 made up?

Also he didnt just do the CGt, he also seems to have done income tax returns.

"When my husband disputed this, the accountant said that had the fee been 1% of the captial gains tax ,he could have made the cgt higher in order to increase his fees."

Regardless of a dispute over fees, which do seem excessive, this is the issue I'd have the biggest grievance with. I'm an associate of the Institute of Chartered Accountants in Ireland and this body has strict ethical guidelines for its members.

You can return to the accountant and remind him of these ethical guidelines. He is entitled to charge you €10k if he wants, but he should still calculate the cgt as accurately as possible.

Hang on a second, €2,350 is 1% of the sale proceeds of €235k, not 1% of the taxable gain of €65k, or of the (unquantified) CGT liability. Otherwise the bill would have been (at most) €650! Hence there is no basis for alleging a breach of ethics here - at least on the basis of the information given.

It is increasingly commonplace for accountants to set fees for CGT/CAT etc as a % of the sums involved. This is on the basis that CGT and other capital taxes work involve higher risks for the professional (reflected in turn in professional indemnity insurance costs).

Thanks for your replies.

He calculated the cgt at approx €3000 and he is preparing a detailed bill presently. He is calculating rental income bill for 18 months also.

Cassie

ubiquitous said:

Hang on a second, €2,350 is 1% of the sale proceeds of €235k, not 1% of the taxable gain of €65k, or of the (unquantified) CGT liability. Otherwise the bill would have been (at most) €650! Hence there is no basis for alleging a breach of ethics here - at least on the basis of the information given.

It is increasingly commonplace for accountants to set fees for CGT/CAT etc as a % of the sums involved. This is on the basis that CGT and other capital taxes work involve higher risks for the professional (reflected in turn in professional indemnity insurance costs).

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Read what he said again.... "he could have made the cgt higher in order to increase his fees."

That is a breach of ethics. There is no issue with an accountant or adviser setting fees on a % of sums involved. However, they are required to calculate the liability correctly.

It is not at his discretion to increase the CGT - he is presented with the facts and should calculate the capital gain (net sales proceeds less indexed costs) and the resulting liability ((gain less personal exemption) @20%) as accurately as possible.

It's up to him what he charges or bases his fees on - he could base it on a multiple of the number of arguments in the Big Brother house over one week, if he so wishes! However, he is ethically bound to calculate the liability correctly.

Kilkenny Tax- I'd imagine the accountant in question made a throwaway remark- he didnt actually commit a breach of ethics. If you paraphrase what he said as in ' I calculated my fee based on a percentage of the sale price- if I had based my fee on a percentage of the tax involved you might think I would be tempted not to lessen the tax liability as the greater the tax the greater my fee' then it makes sense.