Chapter 8 PRPG Charging for Services Flashcards
8.1 Basis of charge
Before doing client work, a member should ensure that the client understands the basis on the fees and how expenses incurred on behalf of the client will be treated. A member should make it clear if the initial meeting has a charge. Possible fee arrangements include:
• Time and expenses – charged on the basis of time spent. An enhanced rate may apply for urgent deadlines, a provision should be included in the engagement letter for charges for extra work.
• Fixed fees – there should be an appropriate clause in the engagement letter to enable additional work to be charged
• Contingent
• Insurance – fees will be covered in whole or part by professional fee insurance, for example in the event of an HMRC enquiry
A member should take steps to avoid fee disputes before issuing fee notices by agreeing fees before issuing fee notes. It is best practice to issue fee notes without undue delay and a member should issue regular fee notes with a client unless alternative arrangements are in place. It is not necessary normally for a fully detailed fee note to be sent to the client unless a prior request has been made. But the members records should be adequate enough to enable a fully detailed fee note. When fees are for different projects or different but connected clients, care should be taken to ensure that the allocation is commercially justifiable and reflects the work done for those clients.
8.2 Contingent fees
These carry increased risks, such as third party questioning the independence and objectivity of the member. A member should be aware of legal or regulatory restrictions to having a contingent fee. Where contingent fees are used the engagement letter should cover the scope of the work and stipulate the actions where events like cancel all or part of the benefits to the client of the contingent fee arrangement. It should be clear if part of the entire fee is to be repaid and whether interest is payable. A member should be aware of the requirements of the disclosure of tax avoidance scheme (DOTAS) and the consequences of contingent fees which may be considered a premium fee under DOTAS.
8.3 Commission
Where a member gives advice which if acted upon gives the member a commission or reward, a member should inform the client no later than at the time the advice is given and inform them the amount of commission. Where the amount of commission is unknown the member should explain how the commission is calculated or how much they get when they receive it. Members should still ensure advice is given in the best interests of the client and professional care and competence is enacted. The member should be able to justify the advice given. When commission is received via a third party, a member should inform the client of their membership with the third party and how much commission they will receive. They should be able to justify the introduction of the client to the third party as being in the best interests of the client. A member must comply with the requirements imposed by their regulatory body. It is recommended the details of the commission be in the engagement letter or otherwise confirmed in writing.
8.4 Retainer Arrangements
This means a member can charge or accept fees from a client simply for the retention by that client of a member’s services, whether or not additional fees will be charged for specific services which may subsequently be rendered. Any arrangement should be set out in writing with a view that the client understands the extent and limitations of the arrangements, the letter of engagement should make clear the point of changes. Before agreeing to a retainer arrangement under which the client can call on a member’s services at any time, a member should consider their ability to fulfil their obligations to other clients. A member is advised to consider carefully all the implications before entering into material retainer arrangements and should include termination arrangements in the letter of engagement.
8.5 payments on account and payments in advance
The terms of payments and any circumstances in which they might become repayable with or without interest, should be incorporated in the letter of engagement before a member starts to act for that client. Any such payments should be reasonable in relation to the likely level of fee. When work is paid in advance and the work is not carried out, the fees must be repaid. Substantial payments in advance should be treated with caution and a member should ensure they have sufficient funds available to refund the client if necessary. A member should account for any VAT that may arise in respect of payments on account or advance payments.
8.6 clients who are slow to pay
If a client does not settle an account with agreed terms, a member should seek to understand why they have not been paid. If there is no satisfactory explanation, a member may wish to consider taking legal action to recover it. Alternatively, a member may inform the client they will cease acting for that client unless payment is received within a reasonable period. A member should not settle fees owned from money held or received by a member on behalf of the client, unless prior approval has been obtained by the client, this arrangement should be in writing. A member should consider the Consumer Credit Act 1974 and the need to apply for a consumer credit licence if they offer clients a payment by instalment facility or time to pay.
8.7 Fee Disputes
If the client becomes dissatisfied an attempt to settle any difference should be made. If they continue to be dissatisfied, a member should consider whether the matter could escalate and result in a claim. The member should then check PII terms and consider the need to report matters to their insurers in order to comply with time limits. Neither ATT or CIOT arbitrate between a member and their client upon the amount of a disputed fee. A member may exercise a lien in appropriate circumstances, which is the legal right to retain possession of property until a financial claim that the holder of the property has against its owner has been met. Before doing this the owner should consider:
• Whether appropriate steps have been taken to remove a sense of grievance on the client’s part
• Whether to take specialist legal advice
