Health warning: Crunch giving wrong advice as saas provider

by admin on July 10, 2009

in Featured


The other week I wrote about Crunch, a software and services offering operating out of Brighton. I re-posted the piece on IT Counts with some minor variations. Imagine my horror when I found out that Michael Rose (I’m assuming of Crunch) wrote the following comment on the IT Counts site:

Hi Emily Crunch is designed to handle all the paperwork for Ltd companies including VAT returns and year-end. Crunch act as agents for VAT, PAYE and Corporation Tax. The company currently deals with Freelancers, Contractors and Independent Consultants and we advise them to form a Ltd Company (if not already) and business and personal tax are kept separate – most users, therefore, don’t need to file separate personal assessment forms. You can get a guided tour of the system at to see how the online software works.

[My emphasis added.] As Emily Coltman correctly points out:

Wrong I’m afraid – all company directors, unless the company is dormant, MUST file personal tax returns every year.

Do I take it that Crunch don’t offer that service, then?

If you don’t, then you should warn your clients that they need to get it done elsewhere.

It gets curiouser. The person who identified himself as ‘Michael Rose’ also posted a comment to my post here saying:

I loved this piece and, as someone who uses Crunch, I feel happy to be part of something that’ll shake up the industry a little.

As for ‘face time’ Crunch agents are available to me via phone and email which I think I prefer to having to make an appointment with a real live accountant.

If I had huge turnovers and complex arrangements and deals then obviously I’d require detailed, personalised information from time to time but, as a freelancer with typical clients, costs and a simple structure why should I pay through the nose for advice that can be built into an online, automated system?

Hang on. Is it too much of a coincidence that two people with the same name might be singing the praises of a service: one acting as part of the business and another acting as a client? That sounded fishy to me so I did a bit more digging. This person clearly wants to remain anonymous because the email address is bogus. A search on the commenter’s IP address reveals a PO Box in Amsterdam. It’s not as mysterious as it sounds as the IP address is an aggregation of those offered by a telco in the UK.

That prompted me to call up Crunch and ask for Michael Rose. He came on the phone, I asked his status – he is both a contractor and someone who freelances for Crunch. I then asked why he was giving misleading information about the tax status of directors. He said he wasn’t really doing so but answering Emily’s question. I then read out to him what he said, asking why he is giving advice when he clearly doesn’t know what he’s talking about. Remember that Mr Rose is someone who can be contacted by clients through Crunch’s listed phone number. Remember also that he’s a contractor – presumably working through a limited company of his own. It begs the question whether he is filing personal assessment forms if, as seems to be the case, he believes he doesn’t have to do so.

It also raises the fundamental question about the quality of governance Crunch is operating when hiring freelancers to act on its behalf. Then there is the question about what kind of advice the firm is giving. On the basis of Mr Rose’s response, Crunch could be putting clients at risk.

The reputational problem is that Crunch is listed as a firm in the ICAEW’s listings. Crunch uses its status to slap ICAEW’s logo on its site. To the uninitiated, this will look like an endorsement by ICAEW or that the firm enjoys a certain status. While ICAEW does not endorse any firm, Crunch is within its rights to apply the logo. Indeed, ICAEW believes that membership confers a differentiated reputational status to members. That’s important both to members and the public.

Given that Crunch is holding itself out as a software AND services provider,you have to ask: how much reliance can you place on firms that are moving in this direction and marketing themselves accordingly?

When I was advising FreeAgent Central I said that it was crucial the company form alliances with independent firms so that there would be a check on the information FreeAgent produces. That’s one of the reasons they have a range of partnerships. Xero does the same. That way, while it might be nice to think of these providers as reliable one-stop shops, their model recognizes the today’s reality. That is, software AND services is not ready for prime time. That was made obvious by the fact that according to Mr Rose, Crunch’s system spits out statutory information related to the company which he doesn’t check.

I’m aware that some of my readers bemoan the fact that firms of all sizes have become sloppy and do not provide best advice. This is exacerbated in the ‘new’ world where the co-mingling of software that is commoditizing the basic number crunching and services mean firms can outsource significant portions of the legwork required for clients to remain in compliance. Given the price pressures that exist in the market, it is only a matter of time before a firm cuts too many corners in the name of cost efficiency. This case points up some of the risks of which clients may be completely unaware.

As a profession, we have to do better. Unfortunately, ICAEW inspections rarely address this point, concentrating instead on practioiners’ compliance with paperwork standards.I suspect that will have to change.

UPDATE: Following Dave Turner’s comment (see below) I am clarifying what I am saying. One thing readers should understand. I am NOT saying that saas is inherently weak or risky but that when software AND services are mixed in this way then there needs to be clearly understood and documented governance in place to ensure that the right skills are being deployed for the right type of work. I also say that oversight is important but that we don’t have the mechanisms in place to ensure that happens. That should be a matter of public interest.

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David Turner July 10, 2009 at 3:49 pm

Interesting situation, Dennis. However, your title "Crunch gives misleading advice as a SaaS provider" is not really fair – they gave wrong advice as a firm purporting to provide accounting advice. The fact that they are a SaaS provider is not really relevant is it, other than they are clearly providing a very low cost software+services solution (not in the Microsoft sense!) that may be leading them to cut corners.

Just don't want to see SaaS providers unfairly tarred with that brush!

Dennis Howlett July 10, 2009 at 3:53 pm

Disagree David – Crunch uses its own saas solution as the way to deliver s/w AND services which is one of the directions Phil Wainewright sees the industry moving.

I was careful to point out that saas providers should be partnering but that we're not at a point where the whole framework is in place to make what Crunch is doing 'safe.' This is fundamentally a governance issue so people should not be afraid of using saas. But as we know – people mess things up in all sorts of ways.

Phil Richards July 10, 2009 at 4:24 pm

Wow, thanks Dennis, Interesting stuff.
For me I am happy using a chosen SAAS provider so clients are free to choose us as accountants with that system, but can go to another accountant if they wish. I dont think that trying to tie clients down works today.
But I am confused as to where Crunch position themselves. One minute they appear to be a SAAS and you dont need an accountant, next minute they are an accountant saying you need their SAAS. Here is a link to Enterprise Nation where Crunch tell you how to find a good accountant, and then you follow the link to the "Freelance Adviser" site ( which you would like to think is a unbiased freelance advice site, woops no its Crunch again ) the link actually goes to ICAEW.…
Confusing for me, I am just happy that we are accountants, and have a specialist team for contractors that use FreeAgent as an SAAS provider.
An Directors have to file Tax Returns according to HMRC:-

Michael Rose (again) July 10, 2009 at 5:58 pm

Apologies all, I didn't mean to mislead.

I am currently working for Crunch and helping with websites, email and PDF marketing materials and (as is clear) I'm not qualified to give accountancy advice – to date I've given none to our customers and never will.

My apologies for the confusion, I was intending to be helpful and answer Emily's question as a user, not an employee, and I'm sorry that this didn't come across very well.

If Dennis had called to ask for advice I was have passed him to the relevant department (unless he wanted advice on HTML, CSS and InDesign templates).

Stuart Jones July 10, 2009 at 6:37 pm

Really Michael. Perhaps you'd pass this one to the "relevant department"?:

Your website states "There is nothing that put ( sic ) a bigger smile on a freelancers face than paying less tax. If you are still a sole trader and earning over £25k, it's time to move to Crunch! ……….Typically tax savings of £3-4k per annum".
To achieve these savings it's virtually certain the business owner must be paying 40% tax. Why does the website not mention personal tax return completion? It only says "Crunch will do all the returns and paperwork connected with a Ltd co". If the client doesn't submit his own tax return he will see a fall in his tax liabilities but only because he isn't paying the correct amount of tax!!

Phil Richards July 10, 2009 at 7:24 pm

Hi Michael,
I note you say you answered Emily's question "not as an employee" – well naturally of course, you are a contractor engaged possibly through your own Limited Company to Crunch so from an IR35 point of view you wouldnt be wanting to answer questions as an employee would you :-)

Stuart Jones July 10, 2009 at 7:52 pm

Very clever Phil, but possibly wasted on the masses.

Chris Tanner July 11, 2009 at 2:15 pm

Although it's tempting for us to offer additional financial services around the core software, we are staying clear and building partnerships with selected accountants and consultants so that we can focus on the system itself.

Clients are always asking us for advice, but we're careful not to offer any information that should really be coming from their accountant. Non financial consultancy (CRM, Web design, Logistics workflow etc) is a valuable proportion of our revenue however, and we have considered bringing in our accountants on payroll to bolster the "business in a box" ethos that Pearl has.

The real challenge with outsourcing/offloading to third party accountants is that although they have the accounting knowledge, it's unlikely that they are going to know the software itself as well as the SaaS vendor. Even simple accounting systems have fringe areas where clients may wander and need complex questions answered, which needs either extensive training for the accountant, or a vendor that offers full accounting advice themselves.

Like I said, it's very tempting to offer this advice directly from the vendor team, especially in the early days where a SaaS provider's partner count may be small – and there's often a very grey line between "should I be posting this type of journal" (ie pure accounting advice) and "actually you should really be using the quick credit screen because…" (ie accounting advice given with knowledge of the system that the client is using).

It'll be interesting to see which direction SaaS accounting goes – building up a flotilla of **accredited** service providers and consultants is hard work and expensive but makes for a robust and mature business model.

David Griffiths July 12, 2009 at 1:50 am

It is a common misconception that company directors are legally obliged to file tax returns, and this is not helped by the fact that the Revenue website is misleading.

A person is only legally obliged to file a tax return if HMRC either issue a tax return, or issue a notice requiring that a tax return is made. These days when many people file online, it's frequent practice not to issue a paper return, which will only go in the bin, but a formal notice instead. That notice is issued under Section 8 of the Taxes Mangement Act, and the Act provides for the penalties for non compliance. Returns include the notice on page 1

If a return is not issued, then there is no legal obligation to complete one. The legal obligation placed on the taxpayer is to notify HMRC of circumstances where he/she has untaxed income – usually rent or self employed income – or has not paid all of the tax due for a year – usually higher rate tax on savings. That obligation is imposed by Section 7 of the TMA. There is no obligation to notify that a taxpayer is a company director – just that he or she is liable for tax.

After notification under s7, the normal step is the issue of a return under s8.

It is true that the Revenue will often issue returns to company directors, and at one time it was pretty much a foregone conclusion that all directors would indeed be sent forms. However in recent years they have discontinued that practice, and many directors are no longer issued with the returns.

In conclusion, you only NEED to file a return if one is issued. You only NEED to advise the Revenue if you have not paid the correct amount of tax. Just being a company director does not mean that you need to file a return.

Emily Coltman July 12, 2009 at 10:57 pm

Hi David,

Click the link in Phil Richards' post – it says unequivocally that all company directors must file Tax Returns unless the company is a not-for-profit organisation?

In my experience company directors have also been told they don't have to file Tax Returns when the company was dormant.


David Griffiths July 13, 2009 at 1:37 am

Hi Emily

As I've mentioned in my post, the HMRC is misleading. There is nothing in the legislation that requires company directors to complete tax returns. Yes, company directors are frequently chosen by HMRC for the issue of tax returns, and that seems to be the basis of their website, but these days it is certainly not guaranteed that they will issue a form to all directors.

I stand by my comments. The HMRC website is there for guidance but it is not the law, and in this case it is plain wrong – unless anybody can point me to the requirement in the legislation?


Dennis Howlett July 13, 2009 at 7:42 am

@david – thanks for that though I think that relying on an interpretation of s.7/8 in this narrow manner is taking the kind of aggressive position HMRC would find unwelcome and I would regard as unnecessary. In the case of a new company for instance, it is almost certain that P11D alone will create a situation where notification is mandatory and in the clients' best interests.

I can't think of any occasion upon which that interpretation would constitute best advice without leading to a sense of confusion in the mind of a client. It may be that one year there is nothing to pay, another year a refund and yet another year something to pay. Getting clients into the habit of completing returns for the purpose of ensuring they are in compliance on a year by year basis is surely preferable.

P11D, dividends, salary, pensions – all go towards creating a situation where a company director would be foolish to avoid completing a return. That's especially true for small companies where simple errors on the part of directors in understanding transactions that impact P11D are enough to create difficulties. And while I agree that HMRC's site isn't always technically accurate (some might cynically argue rarely but that's for another day) common sense dictates that company directors should always complete a return. That's not really the point.

When I called up the person concerned and challenged their knowledge, it was apparent the person had little or no clue what they were talking about. Plus, let's not forget the one point I chose not to address in any depth: on one site he is holding out to be part of a business providing advice, on another, extolling the virtues of the company as a customer. Doesn't that seem somewhat incongruous to you to say nothing of confusing at best and misleading at worst?

To Emily's point – the creation of a limited company as a tax saving device brings with it a range of complexities of which taxpayers may be blissfully unaware. Decisions and recommendations made in the name of mitigating tax will almost inevitably mean that directors need file a return. I am sure there are exceptions but best advice always trumps legal interpretations – at least in my book.

Crunch is not making clear how it proposes to advise in these circumstances and I for one am unclear whether what they are saying would leave both the company and director/shareholders in compliance. In the minds of the client, they are all one and the same.

David Griffiths July 13, 2009 at 11:32 pm

@Dennis. I guess that we'll have to agree to differ. I certainly don't see this as in any way "aggressive", and completing (and presumably charging for) a tax return for somebody who doesn't need to submit one could equally well be criticised.

If there are untaxed benefits under P11d, then there would be obligation to notify, of course, but if there's a dispensation in place a P11d is often not required. There are plenty of directors of small companies who draw salary under PAYE plus dividends which take them nowhere near the higher rate limit, so it's unlikely that people would be in and out of the need to make returns. We've actually had, in the last 12 months, directors who have received letters from HMRC advising them that they won't be required to make tax returns in future, plus a fair number who have never been sent tax returns

Stuart Jones July 14, 2009 at 11:51 am

This is becoming somewhat tedious David.
You say "there are plenty of directors of small companies who draw salary under PAYE plus dividends which take them nowhere near the higher rate limit" but these aren't the businesses which are looking at the tax savings of £3K to £4K mentioned on your website. A sole trader with profits of £25K would save about £1300.
You appear to be attracting clients with the tax savings attributable to businesses whose directors will have to submit personal tax returns without mentioning the personal obligations of the directors and justifying this by quoting the example of a business which " is nowhere near the higher rate limit".
A very mixed message indeed.
BTW I'm still waiting for the "relevant department" to reply to my earlier question.

David Griffiths July 14, 2009 at 10:33 pm

@Stuart. Humble apologies for boring you. Just one point to clear up. MY website doesn't make any reference whatsoever about tax savings of £3-£4k. You seem to have it confused with somebody else's site. And I can't see what your wait for the "relevant department" to reply to you has to do with me. Why don't you ask somebody connected with Crunch?

And I calculate that somebody on £50,000 a year who transfers to a limited company will save £2,800 overall, and still not be in the higher rates of tax. Hope that's not too tedious.

Ali Choudhury July 19, 2009 at 12:06 am

I'm quite sure you don't have to complete an SA return for a company director unless they've been given a notice to do so by HMRC. A number of clients I've acted for had been appointed as directors to their family businesses but drew no salaries from there and did not require P11Ds to be filled in. Most, if not all, were told they were not required to send in an SA100.

Dennis Howlett July 19, 2009 at 1:29 pm

One of our earlier commenters made a similar point. The problem is the way Crunch positions this NO-ONE has to file. That of course is untrue.

Stuart Jones July 15, 2009 at 11:57 am

I apologise David. Your comments are so supportive of Crunch that I assumed you were part of the company (it doesn't help that I can't "see" who you are from this site).

Mark Davies July 13, 2009 at 8:40 pm

I agree, the provision of both software and services can be problematic, both for governance and also company focus, which is why I wrote about this being a Conflict of interest"e-conomic.

saaslover September 15, 2009 at 7:18 pm

I'm a customer at crunch and had nothing but excellent advice from the team at crunch. I've just found this posting from Duane Jackson and now realised why Dennis tried to make a storm in a tea cup over this….Check this out:…

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