My relative approached an unqualified accountant with a problem about CGT exemption for main residence; she has 3 houses, and is getting divorced. He quoted £300 an hour orally and she accepted this orally and gave him all the necessary information, plus £400 in advance. He then did nothing for 5 months. After numerous reminders, he issued a 20-page draft letter of engagement, and a request to see passport etc. At this stage, my relative decided to engage another accountant. My relative has now asked for the £400 back, but he refuses to give it to her. He says it cost him £900 to prepare the quote and the engagement letter, and he is prepared reluctantly to write £500 off. Is there any way she can recover the £400 without incurring disproportionate costs?
Anon
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prepaid fee
Sadly it sounds as if the only way of getting the money back might be by recourse to the small claims court as the accountant is not a member of any professional body. However you could first try writing to the accountant as it sounds very much as if he is just trying to justify hanging on to the £400. Ask him to justify the £900 by providing a detailed cost breakdown of his time. When you get it go through it with a fine tooth comb and ensure that the charges are justified. I've never heard of anyone, accountant or otherwise, charging for producing a quote; nor have I ever heard of anyone producing a 20 page letter of engagement. What on earth was in it? My own letters of engagement which are based on proformas published by my professional body are normally 5-6 pages long at most. Furthermore most reputable accountants that I know of (qualified or not) would not charge for a letter of engagement if the client then decided not to proceed.
You could also try arguing that the fee was for tax advice which was not received (assuming that this is correct and no that tax work was actually undertaken) not to cover his file set up costs. However if tax advice was given even if only orally then the accountant would be entitled to charge for it.
For more information on the small claims court and making a claim online go to www.hmcourts-service.gov.uk and then follow the links to small claims and money claim online.
As with all small debts however in the end you have to decide if the amount justifies the effort and whether just to write it off to experience is the best thing to do.
Further info
Thank you, JS. In fairness to the accountant, it did probably take him at least 3 hours to prepare the engagement letter. I would also mention that I have frequently come across engagement letters of around 15 pages. They tend to give a lot of info about the UK tax system, payment dates, appeal procedures, etc.
The danger of unqualifieds
OK it's a bit late now but doesnt this highlight the dangers of using an unqualified 'accountant'.
Second do you really want to get involved - their are often 2 sides to every story and it is very easy to be bias. Alot of clients often dont actually realise the time involved in dealing with matters and can make incorrect assumptions.
Sounds ridiculous though
Sounds too high a charge-out rate unless he has considerable experience.
Charging for engagement letters and money laundering checks is not usual (but not unheard of).
Contractually you would be better going to a legal board but the engagement letter cannot form part of the contract if it is issued 5 months down the line. Either those terms aren't part of the original contract as you weren't aware of them at the time you agreed for him to act or there wasn't a contract formed in the first place (as this letter was required).
Probably legal action is not your best course of action though - it will be your word against his, he may insist on the full fee and what profit he would have got had he completed the work and win and you have greater problems on your mind just now. Having been taken to court for refusing to pay a garden landscaper whose work cost more to redo from scratch than if he'd not started I am well aware how time-consuming and hard work these things are even if you are totally in the right, winning is not guaranteed, nor going to be easy.
Bad mouthing him as far and wide as possible may be the best bet of giving you any satisfaction and writing the whole lot off to experience.
I agree with others on this board that this is why some form of regulation is necessary. Some unqualifieds are great and some qualifieds aren't as good - but a system of regulation would weed out the worst accountants and advisers that give us all a bad name.
A horror story
This is terrible. There are lessons to be learnt here:-
- Always get more than quote when considering engaging a client
- Consider whether the Accountant is qualified
Anon - Would you be able to name the original firm and where they are based? Is the new Accounatnt qualified?
£300ph for a non-qualified Accountant and charging for a Letter of Engagement. That really is unscrupulous.
Hang on...
Dont get me wrong I am not taking sides on this one, if someone out their posing as an accountant has acted unprofessionally they should be penalised/brought to account
However we dont know both sides to this argument and as an accountant in practice myself I know it is SO easy to be blamed incorrectly for something by individuals lacking knowledge and not understanding the situation.
So I dont for one minute think this individual should be ''named and shamed''
I actually think the client here should take some responsibility - how many individuals would freely agree to £300 per hour without checking an accountants creditials or experience etc???
Name and shame
And issue a money claim online.
If he has done no work, and she hasn't signed an engagement letter, then he has not been formally engaged.
£300 per hour
As the relative in the OP is getting divorced, she had obviously got confused between an accountant and a divorce lawyer.