In the wake of the property tax reform, law firms are gearing up for new projects. But as is always the case when a new issue arises within a firm, the question arises: how much should it cost? Paul Liese and fees expert Cordula Schneider (Kanzleioptimisten, Dortmund) discussed the issue of fees. How are fees for new areas of work determined? Will there be a fixed price? Or will billing be based on actual time spent? What needs to be taken into account when setting a fee, and what pitfalls should be avoided at all costs?

Cordula Schneider advises law firms and tax advisers on the subject of fees. In her view and based on her experience, setting fees is a matter of self-confidence and precision. When a tradesperson learns that a new EU standard requires renovation or retrofitting work, they look forward to plenty of new jobs. If the same thing happens in the tax sector, people view the extra work facing the industry with suspicion. In one case, a tax adviser approached Cordula. He was concerned that his clients would complain that, as a tax adviser, he would benefit from changes in the law. It is high time to move on from that mindset, says the expert.

The biggest fear tax advisers have is miscalculating and putting clients off. However, this is part and parcel of the business; sometimes it cannot be avoided. The important thing is to make adjustments and not to set fees in stone for ever. One approach could be to ask yourself at the outset: How big is the problem that I’m solving with my service? In the case of property tax, for example, this might mean asking all clients in general to submit their property tax assessment notices to find out just how much potential there is.

Not every case ends up at the law firm

Simple cases can be set aside. Cordula notes that many clients with straightforward cases will deal with the property tax issue themselves. As for the more complex cases, the firm can assess whether it can actually handle them with its current staff. Tax consultancy firms that the subject of property tax who do not wish to deal with this issue should, in any case, offer their clients an alternative. After all, it is certainly true that property tax has nothing to do with tax advice. However, the term itself does contain the word ‘tax’. Consequently, companies and clients alike will expect the tax practice to be aware of this issue. So now is the time to let clients know: we have the issue of property tax reform on our agenda.

If the firm wishes to cover this area, it should start addressing staffing capacity now. Whether it’s a retired tax clerk returning for three months on a €450 basis, a student temp or a partner – given the lead time firms have, a sensible solution must be possible.

No justifications for fees

Does the fee have to be fair to the client? Cordula Schneider replies: Yes, but with a caveat. Because „fair“ is a matter of interpretation. She says that tax advisers tend to feel the need to justify their prices. However, justifying prices already signals to the client that the tax adviser isn’t 100 % behind the service. It should simply be the case that certain services have specific prices. Charging by the hour – Cordula doesn’t think much of that at all. It would mean that the tax advisers who work most efficiently would actually fare worse. Furthermore, the time invested upfront to be able to provide the service in the first place is often overlooked: research and training, finding the right tools, and so on.

The fee may also depend on the value of the property. However, Cordula points out that with this method, it is never possible to quote a price in advance. As a rule of thumb, the expert suggests that once a tax consultancy has arrived at a fair price, it should add another 20 % on top. That would usually be about right. And if a firm realises that the calculated price is too low, it should increase its fees. „What’s stopping me from learning?“ says Cordula.

The client must play their part

How long it takes to draw up a declaration of findings depends to a large extent on the quality of the data provided by the client. This naturally has an impact on the amount of work the firm has to put in. How does a firm deal with clients who do not cooperate in this regard? Fixed prices could lead to problems here. Cordula suggests offering packages of varying scope. The smallest package, for example, could consist of very basic instructions with a link to a tool. The standard package involves a division of labour, with both the law firm and the client contributing their respective parts.

It is important to agree on the „rules of the game“ in advance in the form of a contract. This sets out not only what the law firm will provide, but also what the client is required to do. After all, many of the services provided by tax advisers cannot be carried out without the client’s cooperation these days. Should things subsequently get out of hand because the client has not fulfilled their part of the agreement, the firms can refer to the agreement.

Accepting a ‘no’ for once – that’s what Cordula recommends. If a law firm makes an offer to a client and the client doesn’t want it, you should accept that and say: ‘Fine, then have a go on your own.’ If this leads to problems, the client will weigh up for themselves whether they want to deal with them or pay the price offered. It’s important to document that, as a tax adviser, you’ve provided information and made an offer. Then law firms don’t need to worry about liability at all.

Cordula recommends that small law firms, which are currently overburdened due to the pandemic, might consider seeking out partner firms. In this way, law firms can support one another, ease the workload and meet deadlines.