Accountant Error

Accountant Error

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A junior accountant within my practice declared the incorrect amount of tax paid (from a P60) on a clients tax return.  This resulted in the client receiving a tax refund he was not entitled to. HMRC have written as obviously the figure didn't match their records and require the tax to be paid back + interest.   The client is not a very high earner and has already spent his refund.  Does anyone have any advice on how to communicate this error to the client.  There will be the obvious apology but will the client expect a refund of fees, a contribution of the tax to be paid back as a gesture of goodwill?  I am in the fortunate position that I have not made an error before so would appreciate any advice.  The amount of tax to be paid back is minimal (circa £1000) but a significant sum for my client.  I have PI insurance but would prefer to avoid the client claiming against me.

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By Gem7321
20th Oct 2014 14:05

If he was a junior didn't someone check the work first?

 

Anyway, if you think the tax to be paid back is minimal perhaps you should offer to cover the cost to avoid a claim as well as cancelling your fees.

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By ireallyshouldknowthisbut
20th Oct 2014 14:27

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Well, the client owed the tax, so that is not really your problem legally speaking. 

Your liability extends to the interest & penalties as this is their loss, but not the original sum.

Any more is down to you and how valuable they are to you. £100 as a "goodwill" might do the trick, not sure how much the fee was and how good / bad relationship you have and indeed if you want them or will just let them drop. 

In terms of the cashflow issue, you could agree something along the lines of, if they repay monthly to HMRC over the next 6 months you will arrange the deal with HMRC and pick up the interest cost. 

I woudn't agree to pay it myself and recover from the client as its a huge risk of non-payment. 

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By johngroganjga
20th Oct 2014 14:34

I wouldn't dream of paying the client's tax liability.  He has suffered an unwelcome surprise, but not an excessive tax liability.

As a gesture of goodwill, to back up my apology, I would offer to do next year's return for free.

Don't worry about a claim as he has no grounds for one, as he has suffered no loss.

This isn't about claims it's about keeping the client onside.

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By andy.partridge
20th Oct 2014 14:44

Ditto John

Except I would pay back the interest suffered to date too.

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By johngroganjga
20th Oct 2014 14:58

As a goodwill gesture more generous than mine, that's fine.  But as proper restitution it's dubious, as the client is the one who has enjoyed the benefit of holding HMRC's money, not the accountant.

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Replying to SWAccountant:
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By andy.partridge
20th Oct 2014 16:00

Although

johngroganjga wrote:

As a goodwill gesture more generous than mine, that's fine.  But as proper restitution it's dubious, as the client is the one who has enjoyed the benefit of holding HMRC's money, not the accountant.


The client has been denied the opportunity to consider whether the holding benefit represents good value versus the interest due, hence the gesture.
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