Incomplete Records Job - But HMRC want to see the accounts

Incomplete Records Job - But HMRC want to see...

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A new client has at last produced what he imagines are his books and records - but it's a total mess - worst I've seen in over 20 years in practice.  You can imagine the sort of thing - no cheque book stubs, no copy sales invoices, purchase invoices that look as though they have been thrown in a river and then left to dry, sundry bits and pieces of cr*p.  The client is fully aware of how bad things are.

The problem is that HMRC are investigating and want to see proper accounts.  I can't imagine how anything meaningful can be compiled from the information provided, so I'm tempted to just send everything to HMRC and let them put something together. 

Is this the best approach, or can someone suggest anything better?

Many thanks. 

Replies (22)

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By neileg
30th Nov 2011 16:43

No

If the client wants you to deal with this, why don't you? He'll have to pay and you'll have to make all sorts of estimates. So long as the client co-operates and your workings are well thought through, you should be able to produce at least an income and expenditure account. Sure HMRC may want to challenge the figures and you have to warn the client abut this but that's incomplete records for you.

This is an income generating opportunity for you, why pass it up?

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By Roland195
30th Nov 2011 16:51

Do you want to help the client?

If you want a decent result for the client, I would not do what you suggest. HMRC will produce an astronomical figure that you will not be able to refute and you will be almost inviting penalties for non-co-operation, failure to keep records etc.

On the other hand, that ship might have sailed. It may be that whatever penalties and excess tax HMRC come out with, it will be less than it would cost for you to sort it out properly.

 

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By ShirleyM
30th Nov 2011 16:48

I have done these & quite enjoyed doing them

Not sure I would want to do one at this time of year, but hey ho ... make sure you get plenty of dosh up front.

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Teignmouth
By Paul Scholes
30th Nov 2011 17:08

Do you want to do it?

I agree that you should not just bundle it all up and send it off to HMRC but do not agree that, as neileg suggests, you have to do anything.

I've had countless cases over the years of new clients who promise to bring in a set of books in the way I've shown them, only to receive a load of rubbish and have got out of the habit of saying OK, it'll cost you £2K + VAT but I'll put something together. Yes it's good money but it's crap work and hardly what I'd call an opportunity especially when, in most cases, they do the same next year.

So if they are not at least prepared to analyse the bank statements and list down any cash ins & outs, so it gives me something to go on (for £1K + VAT), I politely tell them I can't help them.

By the way, if you have ever visited an HMRC office you'll see lots of people sitting there with their bags of papers & bank statements, unable to do any books or afford to pay an accountant, that's always an option for him.

 

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Replying to jon_griffey:
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By neileg
01st Dec 2011 10:17

Not what I said

Paul Scholes wrote:

I agree that you should not just bundle it all up and send it off to HMRC but do not agree that, as neileg suggests, you have to do anything.

I've had countless cases over the years of new clients who promise to bring in a set of books in the way I've shown them, only to receive a load of rubbish and have got out of the habit of saying OK, it'll cost you £2K + VAT but I'll put something together. Yes it's good money but it's crap work and hardly what I'd call an opportunity especially when, in most cases, they do the same next year.

So if they are not at least prepared to analyse the bank statements and list down any cash ins & outs, so it gives me something to go on (for £1K + VAT), I politely tell them I can't help them.

By the way, if you have ever visited an HMRC office you'll see lots of people sitting there with their bags of papers & bank statements, unable to do any books or afford to pay an accountant, that's always an option for him.

I didn't suggest any obligation to act. We can always refuse instructions. All I was saying was that it was a commercial decision. So long as the client is able and willing to pay, why turn down the work?

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By Tosie
30th Nov 2011 20:15

It is not your decision to pass to HMRC

Client has instructed you, you don't want the job simple tell him to go to another accountant.

There are small firms who deal with a lot of these jobs and will welcome him.

Personally I cannot stand them as I suspect this  is your view too.

 

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By mikewhit
01st Dec 2011 09:40

Incremental priorities

It might help the client (and HMRC) if some kind of priority can be determined in terms of which years are most important. [Oops you didn't say how many years this was for, thought it was a long period, but re-reading indicates but may not be !]

For example if the 6 year (?) time limit applies then why not just sort out those last 6 years.

Maybe initially just the last 12 months ... then the client can get an idea of what is required, he might be able to assist you in organising the earlier years, for that would save a great deal of effort if successful. Also the records are going to be available. OK it's paying work but can't imagine well-paid drudgery stimulates the intellect.

HMRC would also see some progress fairly quickly then, and might back off a little, as well as hopefully realising that the budget deficit was not going to be wiped out by this guy's unpaid tax !

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By justsotax
01st Dec 2011 10:53

As shirley, I too enjoy this type of work....

my approach would be to gather as much solid info (records) as possible, build that 'picture'., then quiz the client about income and expenses they generally incur, then if you have other clients in a similar sector perhaps do some comparisons re % of specific expenses vs gross income....do the various adjustments and then look at the net profit - finally does this match with the lifestyle of the client (if he has made a loss and is running around in a Merc and owns a mansion you may want to check where the money has come from....because if you don't the revenue will).  If you are happy with the result then having started on the latest year first you can then just make an appropriate adjustment for previous years....

As long as you have used a sensible basis for any assumptions and estimations then most inspectors will be pragmatic and take what tax is on offer....

 

BUT as previously mentioned if you let the Revenue do this work then they will come up with a very different figure....and not one in the clients favour....

 

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By Frustrated Accountant
02nd Dec 2011 14:08

You can get copy bank statements and credit cards. You can get an idea of his living expenses. You can request supplier statements from various companies he deals with regularly. I can't imagine anyone actually likes doing incomplete record jobs - but there's always things that can be done to ensure that you've got something to base a set of accounts on - even if you have to qualify it all the way along with estimates and reasons for them.

If you hand it all over to HMRC they'll estimate ridiculous earnings and disallow expenses. Far better to get them prepared by you. And do get that fee up front. If you really don't want the challenge then your best course of action is not to pass the things to HMRC but recommend he go elsewhere for help. That will put the client in a much better position and it's the right thing to do.

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By Ermintrude
05th Dec 2011 11:23

Laugh in his face

...then show him the door.

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By ryedaleman
05th Dec 2011 11:52

Incomplete Records Job - But HMRC want to see the accounts

Establish that you will get paid

50 % of your fee up front

Do it in February when the ''heat is off''

If you do not want to do it personally

I am sure you must know a bookkeeper who would take it on and add your margin

If the client does not want to pay what you think is the appropriate rate  (not what we think) then he has a choice

Regards
ryedaleman

 

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By uktaxpal
05th Dec 2011 11:58

you wll be a legend to the man in the pub,jusr think of all the free pints.

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Replying to lionofludesch:
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By ryedaleman
05th Dec 2011 12:36

No one is suggesting that you work for peanuts/free pints

but someone will take the job on

I cannot see PROVIDING you get the agreement you want why it should not be you

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By MartinLevin
05th Dec 2011 12:05

Give them the Fishing Rod - not the fish

I am surprised that practitioners "welcome" rubbish work - just for the fees.  HMRC would always ask: "from what records were the Accounts, etc, prepared from?".  If you want to attract "C" class clients, then you will get a reputation as that sort of accountant - and you will never improve the efficiency of your own Practice.  A solution? Give them ABC Accounts Books (available at £8 each from my Website) and encourage the clients to "copy" from their cheque books, paying-in books, invoices, bills, receipts, etc.  That way, the clients know what each payment/receipt is for.  The alterantive is s huge "suspense" query list.  We are not greedy [solicitors/] who want to extend our working hours.  We have a higher standard for our work - and we need client satisfaction, by showing them the way to a quiet life.

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By lh3f9764bg1g
05th Dec 2011 12:17

I'd be very careful

Surely this is worse than just an incomplete records job? If HMRC are investigating then there, surely, must have been submissions made? Are you supposed to prepare accounts retrospectively that support those submissions? It sounds to me that this might develop into something quite a bit more involved than simply doing accounts from incomplete records. I'd be very careful if I were you . . . .

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By ringi
05th Dec 2011 12:22

Teach a man to fish and you feed him for life…

I can’t bet think, that maybe you should offer to sit down with him, in his home/office and spend half a day helping him to do his books, while teaching him how to do them.   Then he may know what you expect to be done.

Charge this at your normal rate, paid up front, making clear you will not do any more work for him, if he does not sort out the rest of his records.

 

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By ShirleyM
05th Dec 2011 12:33

We don't know the full story

There are genuine cases where the client was just too trusting, as a good conman accountant can deceive them for years!

If it is entirely the clients fault you have to make a judgement whether they have learned their lesson, or will constantly be failing in their duties. Sadly, there is no guarantee that we judge correctly.

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Man of Kent
By Kent accountant
05th Dec 2011 13:06

Just done one

I've just completed one of these projects. Three years accounts, four years vat returns.

End result - one very happy client who refers me wherever he goes.

He's also £000's better off (after paying my fees) due to the vat I managed to reclaim.

If you're growing your business take it on, on your terms, there are plenty of positives that can come from it.

 

 

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By Donald2000
05th Dec 2011 14:01

Incomplete records

I cant believe what I am reading on here; if you have bank statements for the whole year what you do is sit down with the client and work out what his incomings and outgoings are. If they are bank statements from a reliable bank, you can gain a good idea of what the incomings and outgoings are.

From there you can expand out into an extended trial balance, alter the amount of deemed drawings by speaking to the client again (or more than once) to pick up his memory of further expenditures and then put together some kind of profit and loss account.

I dont quite see what the problem is? And as for sending the whole package to the HMRC, since when have they become accountants?

 

 

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By weaversmiths
05th Dec 2011 15:01

Not the ideal client but ........

Justsotax is right.  Do whatever you can.  The taxman is usually grateful that the case is going to move forward.  I dont think it is a case of  Class or Grade of case, someone has to deal with these people and provided you are going to get paid.....  Nothing in life (or accounting) is perfect, qualifieds find it difficult to do this type of work so its up to the unqualifieds really.  Personally I find it far better to do the bookkeeping and prepare the accounts for this type of client as I have faith in my own judgment when getting records together and if the client is under Investigation things are fresh in my mind.  Often an investigation comes from an outside source telling HMRC of cash type jobs - of which there will probably be many.

TheancientOne

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By steve2646
06th Dec 2011 12:57

Is he already under enquiry?

If the revenue are asking to see accounts then it seems likely that your client is already under enquiry having probably already submitted dodgy figures.  If not then what grounds do they have for requesting information.  If as may be the case he is under enquiry then this will obviously affect how you treat him and may mean that you have a lot more work to do than preparing accounts.  As a starting point you will also obviously want to find out what rubbish he has put in his return and how he arrived at these figures. 

The Revenue are aware that accountants are busy at this time of year and are usually willing to allow additional time to produce information etc.  I would try speaking to them. 

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By DMGbus
07th Dec 2011 08:50

What records are NOW being kept

Presumably proper accounting records are now being kept.

If NOT, why not?

If proper records ARE now being kept then this is good

Shows that client is co-operating (and worth taking on)Could provide an expectation of activity levels for the past

By proper records I mean not just the record of income and exoenses but also mileage records (for business miles).   From these mileage records previous years figures of revenue (takings) and FPCS mileage claim operating costs could be estimated.

 

 

 

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