Frustrated with lack of records

Are bank statements enough

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You always get one client who wins the gold prize when it comes to maintaining records no matter how many times you tell them.

This year they have spent a fair amount on assets but not backed up with purchase invoices. The usual answer from the client is that you can trace them to the bank statement and I can take photos to prove the items exist.

Were do you draw the line? I have told them that anything bought without any purchase invoices then there's no way I can verify the actual items bought and in most cases trace them to any description in the reference on the bank statements, which would mean no AIA on a lot of puchases.

Are bank statements, photos and a written letter from the owner enough evidence to claim the amounts or would you disallow them all. Then next year the records may improve or they disengage you which might not be a bad thing.

Replies (7)

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By Ian McTernan CTA
24th Jan 2017 13:50

You need to take a view. It also helps to go and visit the client when you discuss the accounts and then you will see for yourself the items in question.
If you are at all unsure, then ask the client to get a copy invoice from the company he got it from.
If it is a major purchase, then insist on it- or phone the company named on the bank statement and explain that you need a copy of the invoice sent to the client so he can show it to you so he can claim AIA on it.
Explain to your client that it's for his own protection to have these available- if HMRC come calling 3 years down the line it will cost him a lot more in fees sorting it out than it will for him to get the information now.
Don't jump to the 'disallow them all' scenario, you are supposed to act in the interests of your client. Think outside the box instead of just ticking it.

Thanks (5)
By johngroganjga
24th Jan 2017 13:55

You can't have it both ways. If you believe that the client is lying through his teeth and trying to pull a fast one you obviously disengage. If you believe him, you prepare his accounts on the basis of the explanations he gives you, but it would then be illogical not to prepare his tax computations on the same basis.

Yes of course you warn him that without invoices he may have difficulties satisfying HMRC in any enquiry - they will not be as inclined to believe him as you are etc. etc. But that is his problem not yours.

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By petersaxton
24th Jan 2017 14:12

Ask them to explain what the payment is for and who the supplier is. Then ask them to ask for copy invoices. If they start saying it is too much effort I would get rid of them. Explain it wouldn't be too much effort if they ask for an invoice before they pay.

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By I'msorryIhaven'taclue
24th Jan 2017 14:45

What John says, only rather than disengage you could prepare the accounts "on the basis of information and explanations supplied" and file a report to the NCA. (Your suspicions are, after all, aroused).

I expect David Winch would verify / concur (or otherwise). Where are you these days, David?

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By pauljohnston
27th Jan 2017 11:49

You could add that when accountants disengage a client and refuse to act HMRC take note.

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By KUNUSIA
27th Jan 2017 15:45

In every aspect, the accountant need to be skeptical no matter the information is available.
However disengaging from the relationships is detrimental...
My Take: Prepare the accounts with the available info and don't forget the disclaimer paragraph in case you have some professional doubts towards the available records.

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Replying to KUNUSIA:
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By KUNUSIA
27th Jan 2017 15:46

Quote:

In every aspect, the accountant need to be skeptical no matter the information is available.
However disengaging from the relationships is detrimental...
My Take: Prepare the accounts with the available info and don't forget the disclaimer paragraph in case you have some professional doubts towards the available records.

Thanks (0)