Errors from former practice in VAT
A new small retail client has recently transferred their Accounting to my firm.
The reasons were due to:
1. A lack of support
2. the previous accountancy firm issued a schedule showing variances between Sales data provided by the client and actual sales.
The reasons for the variance was two fold:
1. All sales were not included on client's Revenue schedule
2. A fundamental error by previous accountants resulted in erroneous reporting of Sales, Output VAT and Input VAT
Clearly point 2 is an error of the accountancy firm. Point 1 is also, as they failed to check the Revenue reported by client to the bank statement which were made available in electronic format. If they had done this, they would have been able to advise the client the nature of the problem, rather than give client a schedule asking client to resolve. Also the problem goes back nearly 2 years at least.
My dilemma is the client can not pay the resulting VAT underpaid as the discrepancies cannot simply be absorbed due to the client's cash flow.
Should I raise this with previous accountants and will their indemnity insurance protect the client and stump up for previously unpaid VAT.
Also small loss last year may need to be restated.
Your thoughts would be most appreciated.
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