Working with family law colleagues to provide tax advice
Tax Advice » July 26, 2021
Working with other professionals to both serve an end client can be incredibly rewarding. This is especially the case when working with clients who are going through a matrimonial breakdown and need support with the legal and tax implications of dividing up their assets.
In this article Sofia talks through some tips she has learnt from her work with family lawyers as a tax adviser as well as posing questions and answers on the best ways we can try to close this gap and provide high-quality actionable tax advice.
Who is the advice for?
The first step when delivering tax advice for family lawyers is to determine who the advice is for. There are several ways in which tax advice may be sought and several different end clients:
- Single Joint Expert (SJE) report – this is a report that has been ordered by the Family Court. If you are preparing an SJE report, your obligation is to the Court and the requirements of the advice will be set out in a letter of instruction sent by both sets of solicitors;
- Shadow expert report – with this type of instruction you are usually being asked to review and comment on another adviser’s SJE report. Your client is likely to be the instructing family solicitor. Your review and follow up questions will usually enable the family solicitor to advise their client;
- Expert report – this type of report can be for either one or both parties. Your instructions come from the parties via their solicitors. The end client with expert reports are the individual(s) not the courts or the solicitors.
What’s the right language?
Once the end client has been determined, it is important to set the right tone for the advice. As a rule of thumb, writing reports that are clear and brief is always appreciated by the end client. However, an SJE report commissioned by the Court has its own requirements which need to be met. The report will need to contain all the relevant information as there will be limited opportunities to advise outside of the report. You can make use of appendices to add additional information and footnotes to detail the relevant legislative reference.
If the report will be read by solicitors, it can often be quick to get to the point as family solicitors will have a working understanding of tax and will, of course, understand the case so there is, therefore, little need to summarise the entire history for the purposes of the report.
If you have been asked to deliver an expert report which will be shared directly with the clients, the tone and language should be adjusted as such. In most cases, this will be the first time a client has ever read a tax report and, therefore, taking time to go over the basics is needed. If this is likely to clog up the report, consider adding a ‘tax basics’ appendices which cover the basic principles of the taxes covered in the report.
What’s the outcome to be achieved?
As advisers who typically work directly with our clients, there can be challenges when the relationship with the client is held elsewhere. When family law professionals ask for tax support, they usually are the professionals working directly with the client. Therefore, we need to be more cautious with defining the scope of the work.
A family lawyer might ask for your support in working out the tax payable on the transfer or sale of business assets. These requests are often written by the family lawyer and they set out the queries they have. Before accepting the work or providing the quote, it is often necessary to ask a few probing questions such as, what does the client want to understand from this report? What are the client’s biggest concerns at this time? This can sometimes be achieved through a scoping call with the client and family solicitor directly.
By way of example, we are finding that more and more clients who are in highly regulated industries want to move away from tax planning vehicles and strategies. They solely want to know how much tax they will be required to pay, and when they will need to pay it.
Does the client have support with implementation?
Together with understanding the desired outcome, it is important to consider if the client has support in implementing any advice given. Some clients have their own accountants who will be able to support them with the advice given, but others may need further advice. Keeping the end client in mind is, of course, good practice whatever the situation, but it can be harder to do this when you are removed from the end client.
It is always interesting when two disciplines cross over and it can really show our strength as a profession when we can work together to provide clear and actionable advice for the end client. In summary:
- take time to understand who the end client is, and what problem they are trying to solve;
- think about the most appropriate language for the work;
- anticipate any follow on actions that the client may need to take and reference these in the report.
This article was written for LawSkills, and can also be found on their website here.