How much notice is taken of the Accountant

How much notice is taken of the Accountant

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Do the members of this forum have any views on the extent to which HMRC would look at a tax-payer's records and think "no point investigating this one, his accounts are done by XYZ Limited". Would HMRC tend to single out people or companies based on their choice of accountant?

Captain

Replies (29)

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By ShirleyM
09th May 2014 07:57

I'm not sure about that

However, I am fairly sure that the reverse applies, ie. XYZ Limited has done these so it's bound to have dodges/errors.

An accountant fairly local to us, who was 'known' for getting bigger CIS refunds than any other accountant had investigations on most of their clients, and went out of business as a result. This was quite a few years ago though, so things may have changed.

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By Tosie
09th May 2014 09:05

Yes

Some accountants submit rubbish so their clients have investigations. Sometimes it is the client that attracts the interest and there is no doubt that the standard of the accountants workings affects the progress of the enquiry.

 

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By Craigie_Bhoy
09th May 2014 09:22

Dont have an answer on this, but would be very interested to hear the answers/thoughts.

 

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By rjoconnor81
09th May 2014 09:23

HMRC would never admit this, but many years ago I was told that individual tax offices had a "Black List" of agents.  

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David Winch
By David Winch
09th May 2014 09:29

Black list

It was evident during his trial that HMRC had been paying close attention to Mr Pearce over a period of years prior to his arrest.

David

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Stepurhan
By stepurhan
09th May 2014 09:37

Appropriate focus

If a particular accountant is assisting their clients in making spurious claims (as opposed to simply large but justifiable claims) for deduction, isn't it a good thing if HMRC focus on them? They get more tax in from those genuinely trying to defraud the tax system and the rest of us can get on with keeping our clients' tax bills down in legal ways.

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Replying to SoL:
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By rich@home31
09th May 2014 09:57

Black Lists

I was also told that tax offices had Black lists but this was before the introduction of Self Assessment.

Doubt this occurs now. Inspector's don't the same agent contact as before. I remember when the you would submit accounts and if the inspector didn't like something he'd initially give you a informal call and ask you about. More often than not he'd accept your explanation and that would be the end of it.

 

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By Captainblack
09th May 2014 09:56

Agreed Stepurham

I agree Stepurham - in fact, that's why I was asking really. I am hoping that HMRC look at my accountants filings and regard me and the company as a very unlikely target for their investigative efforts. I was just exploring whether this was realistic, sounds like it might be.

Captain

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Replying to lionofludesch:
Stepurhan
By stepurhan
09th May 2014 12:59

Not quite what I meant

Captainblack wrote:
I am hoping that HMRC look at my accountants filings and regard me and the company as a very unlikely target for their investigative efforts.
I was referring to the posited practice of HMRC keeping black lists. An accountant that has been found to make false claims in the past should be put to more scrutiny, at least until they show they have mended their ways.

I don't believe in the concept of "white lists" as you are suggesting as such. As far as HMRC are concerned, they have no way of knowing whether an accountant with a clean record is genuinely clean, or if they just happen to have selected compliant clients of that accountant. Because of this, I think it would be foolish for them to not have enquiries at all related to specific accountants. I just think those should generally be less because the limited investigative resources are more focussed on those known to be good targets for investigation.

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By Ken Howard
09th May 2014 10:19

Probably only largescale problem cases these days

Certainly in the days before centralisation, call centres, etc., the local tax inspectors would know which of their local accountants were a little dodgy or sloppy and look a little deeper.  

My first employer was such an accountant, but I didn't realise until I moved on to a more reputable firm.  I thought it was commonplace for there to be so many enquiries, and for virtually all new businesses to have an enquiry on their first tax return submission!  It was only when I moved to the next firm (clearly more reputable) that I was astonished at the lack of enquiries and how much more "trust" the accountant commanded.  I.e. in firm 1, the inspectors always wanted "proof" of whatever the accountant told them, i.e. copies of prime records/invoices, sight of records, etc., but in firm 2, in the rare enquiry, the inspectors would usually accept copies of the working papers, analyses, etc., and very rarely ask for actual proof/evidence.

Nowadays with tax offices often hundreds of miles away, that local knowledge has been lost forever.  From what I hear, cases are almost randomly handed out to inspectors all over the UK, so it's highly unlikely that a particular inspector would look at many returns submitted by a particular accountant, and even more unlikely that they'd even remember a case from the same accountant looked at weeks/months earlier.  I don't really think the dogsbody inspectors of today have the power or inclination to start their own digging exercises and are probably just doing what they're told by their managers or what the computer selects for them.  They seem more than happy these days just to get the simple/easy cases closed with a modest amount of extra tax and penalties to tick their boxes and not give themselves more work by digging into other years let alone other clients of the same agent.

With "intelligence-led" enquiry selection, I'd say that specialised inspectors looking for particular trends/patterns would interrogate their systems and if a particular pattern emerged from the same agent in sufficient numbers/values, then that's when an agent will be targetted, but I suspect it will only ever be the big cases, i.e. those with hundreds of a particular client type, or with hundreds showing larger than usual refunds, or hundreds showing larger than usual expense claims etc.  I think it very unlikely that an average small practice, doing a range of client types, but doing it sloppily in small scale, will ever draw attention to themselves, even if they're subjected to the occasional enquiry

Basic small scale incompetency is unlikely to draw attention to yourself, but firms which take it too far, for too many, for too long, are bound to eventually come under scrutiny as they'll eventually be noticed, either by a vigilant normal inspector, or would be identified by the specialists/computer systems actively looking for a particular type of behaviour.

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Replying to DJKL:
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By Michael C Feltham
09th May 2014 12:47

Couldn't Agree More!

 

@Ken Howard

 

In the good old days we all enjoyed excellent relationships with local inspectors and they knew full well which firms they could respect and basically, trust.

Now sadly, as you say, with HMRC's revenue functions having been dismantled and scattered all over the country so telephone and fax numbers on letters and even HMRC's website are fallacious they have erected a self-created anti-communications firewall around themselves: and instead of inspectors handed over the function to hordes of ex-supermarket cashiers replete with a one week training course and thereafter reliant on "Screen Pops" and FAQs (And we all know about vague and misleading nature of FAQs!) rather than brains and hard won expertise, plus massive scale down of HMRC staff, then it has become a Tom Tiddler's ground for tax evading citizens and less than honest professional advisers.

At my local ICAEW chapter CD seminars the presenters and the audience all laugh their socks off as each new wonder initiative is announced to fanfares and pom pom girls by HMRC: on the simple premise they lack sufficient staff!

As just one example, I have fighting hard for mission critical information concerning a large back duty case and HMRC simply seem to ignore or lose letters, faxes and telephone discussion records: this has now been going on for over 18 months.......

Still great evidence and ammunition for what will terminate, I fear, in a Lower Tax Chamber Appeal!

Yet still, Twee Georgie and his gang of idiots and ideologues keep passing rafts of increased regulation into tax statute!

 

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David Winch
By David Winch
09th May 2014 10:25

TAIT

Don't overlook the activities of TAIT (the Tax Agent Initiative Team) within HMRC and particularly their work re CIS subcontractor refunds and MoU (Memorandum of Understanding).

These are mentioned in a blog article of mine HERE.

David

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By Calladine1
09th May 2014 12:31

CIS refunds
I think I read this week that Hmrc are planning to contact agents of clients who have unusually higher than avearge expenses I.e. greater repayments.

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By David Gordon FCCA
09th May 2014 14:26

The system allows this

 According to my information:

 HMRC IT works on an exception basis. Classes of taxpayer may be compared. Any obvious accounting deviations from the norm are flagged up. I know from my practice experience this happens with Vat Returns.

 The system is capable of indicating the agents attached to those taxpayers. So in theory highlighting any clusters is simple..

 The observable fact is that our parliamentary representative have collectively f****d up on the supervision and maintenance of HMRC. Thus leaving HMRC unable to, in many instances, competently fulfill their function of administering the tax system.

 This does not mean that the information to target an agent is not easy to get at. It is just that HMRC have not got round to using the information they have.

 

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Replying to TessaW:
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By Michael C Feltham
09th May 2014 15:38

Wholeheartedly Agree!

David Gordon FCCA wrote:

 According to my information:

 HMRC IT works on an exception basis. Classes of taxpayer may be compared. Any obvious accounting deviations from the norm are flagged up. I know from my practice experience this happens with Vat Returns.

 The system is capable of indicating the agents attached to those taxpayers. So in theory highlighting any clusters is simple..

 The observable fact is that our parliamentary representative have collectively f****d up on the supervision and maintenance of HMRC. Thus leaving HMRC unable to, in many instances, competently fulfill their function of administering the tax system.

 This does not mean that the information to target an agent is not easy to get at. It is just that HMRC have not got round to using the information they have.

 

Last year I was carrying out precedent research on VATA, prior to an appeal on behalf of a new client.

The client had failed to register for VAT, despite his revenue exceeding the compulsory registration thresholds in each and every year from inception: he seemed to believe it was optional..................

Another matter.

What was however abundantly clear was every year an SA100 et al had been filed. Thus for some five tax years, HMRC had access to the facts but did nothing whatsoever with them!

After much delving it transpired that although HMIR and HM C and E had become one government agency, nothing had been done to facilitate inter-agency data mining until very recently! And this despite Blair et al's posturing nonsense on "Joined up government and etc".

When IR and NIC administration became one, earlier agency IR staff had to have TWO disparate network terminals on desk: one for Revenue data and another for NIC records etc: mainly since the two systems were wholly incompatible and users had to employ a simple data switch to swop between systems.

Such is sadly the norm not the exception.

Clearly, government has been seduced to buy into the old hoary "Magic Black Box" scam, which promotes the fallacious premise ICT allows downsizing of headcount and the box replaces endless manual workers by the use of state-of-the-art technology.

Hence the dire problems.

 

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Man of Kent
By Kent accountant
09th May 2014 14:54

Good timing

I don't want to hijack the thread and it is relevant

Received notification of sole trader's (CIS) tax rebate today - but I didn't do his tax return, looked online and there it is submitted.

Whoever did the return claimed allowable expenses at 42%!! of his turnover. No idea where this will have come from (its nearly all appearing as 'car, van and travel expenses'). 

I only claimed costs equivalent to 15% of his turnover last year - probably why he decided to change.

So I've quickly deleted him from my online agent account and will get a disengagement letter out in the post.

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Replying to Manchester_man:
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By taxgenie
09th May 2014 16:06

Scams

I had a case last week where I received a letter from HMRC saying that my client (company director) no longer needed to complete a tax return. I rang HMRC and asked why the letter had been sent. I was then advised that as the client had already submitted his 2013/14 Tax Return which showed he no longer needed to complete a tax return. Knowing that firstly my client would not have completed his tax return himself and that I had not completed the form, plus he would not be entitled to any sort of tax refund, I looked at the submitted tax return that had been submitted on the HMRC website.

The tax return was completely wrong - showing employment with an unknown company - nominee to receive the tax refund of £2488 - nominee a very exotic sounding name that I believe is Lithuanian. In short my client's online service had been hi-jacked. The first person I spoke to at HMRC did not seem that interested and said in any case the tax refund had been held back in security (good news on this occasion!). I was told to contact the online services, which I did after a lengthy wait on the phone waiting for someone to answer. Advised online services who agreed it was some sort of scam and it would be escalated to a manager!

Imagine my surprise the next day when i received notification of the said refund being repaid to the exotic Lithuanian name. Another phone call to HMRC - this time the officer concerned was more helpful. He advised me that the refund had been repaid by BACS but was in the process of being recalled and he would also escalate the matter to his superiors.

I eventually had a call back from online services because I was concerned that there had been some sort of breach of security at my end but it turns out that the security lapse is from my client's end.

Moral of the story - don't automatically assume that your client is at fault because those scammers are getting cleverer every day.

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By Vaughan Blake1
09th May 2014 16:54

In a perfect world..

When turnover over the VAT limit is shown on a SATR and the trader isn't registered  - bang a letter goes out asking why not.

Similarly when a traders income goes over the class 2 threshold and they are not paying Class 2 NICs - bang out goes an invitation to join the Class 2 club.  At least this will be dealt with via SA in future.

I suspect that there is very little joined up processing.  However, presumably HMRC can get a list of all Dodgy & Co Accountant's clients at the press of a button, so yes I would expect 'black lists' (but not 'white lists') to still exist. 

I think that the 'blacklists' of olden times was more likely long serving Inspectors with local knowledge simply knowing who the good guys and bad guys were. Tax districts seemed to have a small number of investigating inspectors so once your card was marked, that was it.

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By User deleted
14th May 2014 13:46

I still think ...

... higher up the chain inspectors do get to know agents and it is easier to negotiate a favourable settlement if they know you to deal promptly and profesionally with them, but there are fewer and fewer around.

I don't think HMRC as a body have white lists, it is pot luck if you deal with the same inspector on a number of occassions and build some sort of mutual respect (like in the good ole days)

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7om
By Tom 7000
13th May 2014 12:03

welll...if I was a tax inspector...

I would just target all the ones promoting / linked to DOTAS schemes

cos they dont seem to work...

As you can see from sky news recently :)

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By howardwalters
13th May 2014 12:36

DOTAS

Tom 7000, are you suggesting that accountants linked to clients involved in DOTAS schemes are "dodgy"?

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Replying to Wanderer:
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By The Black Knight
13th May 2014 15:50

LOL

howardwalters wrote:

Tom 7000, are you suggesting that accountants linked to clients involved in DOTAS schemes are "dodgy"?

Howard are you suggesting they Aren't?

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Replying to DJKL:
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By howardwalters
14th May 2014 10:24

Dodgy?

The Black Knight wrote:

howardwalters wrote:

Tom 7000, are you suggesting that accountants linked to clients involved in DOTAS schemes are "dodgy"?

Howard are you suggesting they Aren't?

Well I suppose if  "dodgy" is defined as taking the time to make your client aware of various means of legally reducing their costs (and tax is just one such cost) whilst educating them on the potential risks and rewards associated with the various options (just like you would with any other business decision) and then leaving it to the client to make that decision having weighed up all the pros and cons, then I suppose yes, they are "dodgy".

But let's remain aware that by definition DOTAS schemes are disclosed to HMRC; it's all out in the open, nothing hidden and nobody is trying to be "dodgy". On the contrary, it's the accountants that hide things and fail to disclose what they should with whom HMRC should be concerned.

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By Marion Hayes
13th May 2014 17:40

re DOTAS schemes etc

I would strongly argue that accountants whose clients were in a DOTAS scheme were probably not dodgy!!!! 

I have seen many schemes over the years and the one common factor was that the advice acted on was not given by the compliance accountant. The client learnt of them through IFA's, mates, advertising, banks etc etc.

Often the first you knew of the investment was completing last years return when you are presented with paperwork giving instructions on how to complete the tax return right down to the wording on the white space which has to be included.

Too late then o warn f the dangers.

At one of the agent strategy meetings Mike Clasper told me that one of the reasons we need to re-enrol in the new system is that their software is incapable of compiling your client list for them to access. The new system will allow them to compare our clients and their profiles. I have to say  I found that odd as every time I log in the system gives me a client list to look at but who knows.

Years ago when you dealt with a particular Inspector they did know about you and the quality of your work - now your work is just compared to statistics and you have to repeat arguments again and again.  

 

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By The Black Knight
14th May 2014 10:39

INTERESTING

Interesting but my view would be that these were flogged by unqualified or inexperienced accountants who didn't understand how they worked or the basic principles of tax law on which they would inevitably fail.

Did they account to their clients for the commission as they should have.

Even the promoters privately acknowledged that they did not work and it was only a cash flow excercise.

Not what I would call best advice or ethical behaviour as the commissions no doubt helped funnel their blind quarry into the net.

I wonder how many clients realise that the commissions should be theirs or if they did get the commissions the fee was advice so they can therefore sue the accountant.

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By Carlos_Fandango
14th May 2014 10:46

If I were a taxman, the first people I would target would be the unrepresented self-employed tax payer, closely followed by the rest of the unrepresented taxpayers.

It's got to be easy pickings for the taxman.

It must surely be more difficult for the taxman to reach a settlement where the taxpayer has an agent so, if they have a target, go for the easy money.

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By The Black Knight
14th May 2014 10:58

If I were Jimmy Carr or Mr Barlow

I would be asking my solicitors whether I WAS ADVISED CORRECTLY and in particular to the potential damage to my future earnings when someone at HMRC leaked this as they do.

I would be asking what commissions were paid to my accountants and was this accounted to me in accordance with the accountants professional rules of independence?

Did the accountants act with independence of mind and spirit?

Unfortunately the promoters of these schemes have done a lot of damage to our profession even though many were not even in it.

They have influenced overkill draconian legislation and HMRC behaviour to be carried out on the law abiding.

Diverted resources that should have been spent on Evasion.

and assisted in bringing this country to it's knees.

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By The Black Knight
14th May 2014 11:23

you would think that

You would think that where HMRC come across a dodgy accountant they would just mine the coal seam and maximise the tax take and penalties.

They seem to have no clue what they are doing either technically or from a tactical and strategic point of view.

you would think that the the computer system would pick up

1: dividends but no active company

2: no accountant but limited company

3: no income in year despite accounts showing income on previous return with straddled period

4: self employment notification but no self employment pages

5: mortgage payments exceed income

6: Continual no or low income

7: address looks fancy for builder with 10K profits. private use of materials or under declared income.

and there's more there's more

if they got this right, it would pay for itself, eliminate the defict, and support the hard working and honest businesses rather than supporting the Dodgy.

But I guess while you have MP's that think Stealing is acceptable behaviour either by doing or not ousting the culprits then this culture of criminality and the acceptance of spreads down from the top.

 

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By Vaughan Blake1
14th May 2014 12:49

I would think that too, but...

It seems to me that HMRC's systems assume that everyone involved knows what to do, how to do it it and when it should be done by and that mistakes don't ever happen.  The IT guys would therefore draw up the software on that basis.  I know from experience that if you go back to IT and for example, want data sorted in a particular way that if it was not set up to do, then forget it.

I am amazed, yet oddly, not surprised (oxymorons R Us) that HMRC  cannot list taxpayers by agent from their side of the gubbins, when I can get a list of my clients from my side.

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