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Any thoughts on this?

Large'ish accounting practice seems to be allowing questionable expenses

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I was wondering if there were any thoughts with regards to this:

I have just taken on a new client working in the medical profession. During our initial meeting, spreadsheets were produced by the new client, outlining the expenses that, to his knowledge, the existing accountant was 'allowing'.

Some of these expenses were as follows:

  • Clothing for work - no logo, simply trousers, shirts and such like (certainly not PPE) 'needed for work'
  • Mileage allowance - 45p per mile etc., but also, motor costs such as insurance, servicing and MOT testing
  • Staff uniforms - None purchased
  • Use of home as an Office - Having seen the claim value, it is evident that the flat scheme was not used, and client has never discussed the 'number of rooms' method. Has his own clinic to work from.
  • There were other 'questionable' expenses - but not listed, as the list would be pretty long!!!

I am told that at no time has the expenses outlined on the spreadsheets ever been discussed, and that he would 'send them off' and then meet to agree the tax liability, sign the accounts and tax return and then simply pay the bill.

Maybe I'm being a little naive, but surely you would expect a sizable accounting practice to offer a better service than outlined. Or is it a case of, 'well you agreed these figures - not our fault that HMRC does not agree with you'.

Please let me know what you think - thanks

Replies (22)

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By Jdopus
29th Jan 2019 15:46

My experience of any of the largeish accounting companies is that they almost universally perform exceptionally poor work and pay little to no attention to small clients like this. This will have been delegated to a junior, glanced over for all of 30 seconds by a senior and then sent on to HMRC. They'll then probably have billed your client at least £3,000 for this complete lack of work.

If this is the limit of the poor work they've done you should probably count yourself lucky. I have encountered much worse in handovers from the large accountancy firms.

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By Duggimon
29th Jan 2019 15:46

I always presume that the bigger the practice the worse the service and the more tendency towards blanket approaches for expenses, rather than actually discussing them with clients.

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By Tim Vane
29th Jan 2019 15:49

Are you certain the expenses were not disallowed by the other accountant?

Either way it’s hardly relevant. Just do it right from herein.

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Replying to Tim Vane:
RLI
By lionofludesch
29th Jan 2019 16:15

Agree. I often get clients telling me about expenses they've incurred. They don't all make the tax return.

I don't think there's anything wrong with them telling you what they've spent. If they don't tell you, you won't be able to decide whether it's allowable.

It only becomes a problem if they insist on claiming something you don't believe is allowable. When that day arrives, disengage. It won't be worth the effort. Just tell them that they lack integrity.

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Replying to Tim Vane:
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By CardiffAccountant
29th Jan 2019 16:16

Thanks for your thoughts.

I checked the 'Detailed Income Statement' attached to the Financial Statements - they seem to be listed!!!

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Replying to CardiffAccountant:
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By Matrix
29th Jan 2019 17:00

Did you check the tax comp?

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By andy.partridge
29th Jan 2019 16:03

How do you know they were included in previous years? There is no evidence. Just as likely that they were excluded by a timid junior too frightened to broach the subject with the client.

You do your thing and don't be swayed by external noise.

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By ireallyshouldknowthisbut
29th Jan 2019 16:18

I would assume its just rubbish feedback.

Lots of accountants seem to not talk to their clients, especially when drilled out by juniors, reviewed by middle people who dont see whats taken out, and then 30 seconds with the partner who says to the client its fine, here's my bill. Its where the micro practice spanks the high street multi-partner firms time after time.

For peace of mind it ought to be fairly simple to look at the output (ie PYR return) and the input (ie his sheets) to demonstrate to the client they had it all disallowed for 17/18, so you wont be putting it in for 18/19 either!

having said that, I pick up quite a lot of work from a 2 partner practice local to me with about 20 juniors beneath who do little more than copy the number onto the tax return from the client's papers and send a big bill. A different firm who is no longer around use to add lots of dubious costs and point out how clever they were to their clients.

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By indomitable
01st Feb 2019 10:53

My experience is MOST larger practices do it right. It's the unqualified unregulated accountants that we find tend to not know what can or can't be claimed

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By Andrew Lee
01st Feb 2019 11:05

I believe there is a section of our profession that thinks it is ok to blindly allow anything a client records as spent on the basis they are not carrying out a formal audit and the client signs for full responsibility, both in the terms of engagement and in the documents submitted to HMRC. Perhaps they feel it is necessary to do this to attract business - how can we forget Christopher Lunn & Co et al. They seem to take no professional pride in their work, or accept any ethical responsibility, despite an increasing movement towards full transparency etc. When I take on a client, I always explain we will claim everything that is possible within the law, but no more, and if they want to sleep at night, then we are the right firm for them. If not, there's the door. Rant over.....

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Replying to Andrew Lee:
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By CardiffAccountant
01st Feb 2019 11:20

I agree with you.

I tell ALL new clients that 'there will be times when I will be telling you things that you do not want to hear'.

I have found that all of them are more than happy with this arrangement.

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By CardiffAccountant
01st Feb 2019 11:09

I'd like to thank all that have passed over their thoughts on this.

I get the feeling that most practices tend to take greater care when they initially gain a new client, but as time passes, the client ceases to be 'flavour of the month', and after some time the attention to detail starts to diminish.

I have sometimes heard something along the lines of, 'when I first used them they were great, but lately I hardly ever hear from them. In fact, I seem to have to chase them to get my accounts sorted'.

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By SteLacca
01st Feb 2019 11:13

I work on the basis that I advise the client, warn them of the risks, and make sure that it's documented. At the end of the day, they instruct.

Provided that I can prove I advised them of the correct position, the onus is on them to do the right thing (subject, of course, to not being illegal).

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Replying to SteLacca:
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By atleastisoundknowledgable...
01st Feb 2019 17:49

This is the pragmatic mindset that I have.

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By paddy55
01st Feb 2019 12:14

If an an accountant files a Tax Return he knows beyond a reasonable doubt is materially incorrect, he is complicit in a crime.

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Replying to paddy55:
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By CardiffAccountant
01st Feb 2019 12:29

WOW - Strong stuff, but you are quite correct.

Tax fraud is such an ugly phrase, but as we all know, it happens (all too often).

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By Janski
01st Feb 2019 12:25

I've taken over clients who previously used 'franchised accountancy chains', and found that, no doubt to keep the client happy and in reality unawares, the clearly 'dodgy' expenses had been included in the P&L, but then removed in the tax calc. So all OK in the end, but it was giving the clients the false impression that the questionable items were being deducted from their tax.

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By snickersinatwix
01st Feb 2019 16:36

Two words - Christopher Lunn - spring to mind. He was jailed for putting fictitious costs through clients accounts. We picked up (literally - pretty much off their knees when they came to us) one of his clients. What a mess. I would not allow anything that you can't justify and know to be correct.

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Replying to snickersinatwix:
By Red Leader
01st Feb 2019 19:05

This is exactly what came to my mind.

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By pauljohnston
02nd Feb 2019 06:44

@Janski

In my view this is the correct approach, ie allow all expenses in the accounts and then add back to the profit any items that are not allowed as Tax Deductions. Making sure that the client sees what you have done.

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Replying to pauljohnston:
By coolmanwithbeard
02nd Feb 2019 07:03

I think this depends on the type of business.
With a sole trader then if we use a TV set bought from the business account for home it's either drawings (my choice deal with it first time and forget it) or equipment cost disallowed.
With a company director if its equipment cost disallowed it is still an asset passed on to an employee and would give rise to a taxable benefit; so always straight to DCA for me. It's not simply about the business tax bill.

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By Mr J Andrews
07th Feb 2019 10:18

The key here is '.....TO HIS KNOWLEDGE....' [ of the new client ]. I would suggest that the naivety may be in not establishing what exactly the former accountant may claimed / disallowed ; and what the former accountant did actually discuss.
Anything evident from the handover bumf ?
Anyway, not your problem. Go forward based upon the correct principles.

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