Clearance - Professional reason? MLR issue?

Disengaged with client for a number of reasons

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I have had to get rid of client for a numbe of reasons, the main ones being that they wont register for VAT despite the turnover being above the VAT threshold and the second main one is that they have transferred all of the staff and assets to as new company but conitue to invoice out ot the first company.  My question is what to include in the clearance letter to the new accountant if/when it arrives?  There are the usual reasons such as slow payers, bad communcication etc that I wont include in the letter but do the above 2 issues need to be included as a professional reason?  They dont owe me any fees and Im happy to off load them but dont want to fall foul of any rules,  I might give ACCA a call but they were most unhelful last time I rang so any help appreciated thanks.

Also, are there are money laundering considerations now that I have disengaged?  Ive advised them on what they need to do and they refused stating that the business couldnt survive if it was VAT registered.  I suspect they are trying to split the business into 2 hence the 2nd company but Im too worried about that just the turnover, staff and assets issue from the accounts we were preparing.

Replies (10)

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By ohgoodgodno
02nd Oct 2018 11:37

well if you think there is a money laundering issue you'll need to file an SAR

as to handover, I'd provide whats asked for and that's it, any comments about your reasons for getting rid will only come across as sour grapes

I would only provide comment to the other firm if I was genuinely friends with them, even then it would be an informal chat

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Replying to ohgoodgodno:
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By MissAccounting
02nd Oct 2018 11:49

ohgoodgodno wrote:

well if you think there is a money laundering issue you'll need to file an SAR

as to handover, I'd provide whats asked for and that's it, any comments about your reasons for getting rid will only come across as sour grapes

I would only provide comment to the other firm if I was genuinely friends with them, even then it would be an informal chat

Thanks and I certainly dont want to appear as having sour grapes (as I dont) but is refusing to register for VAT not a professoinal reason? If its not then what is a professional reason out of interest?

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By andy.partridge
02nd Oct 2018 12:03

I would advise the new firm of these as outstanding issues which they will need to take up with the client. That way your conscience is satisfied but you are not passing judgement.

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Replying to andy.partridge:
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By Maslins
02nd Oct 2018 12:24

Yup. I think I'd comment along lines of "the client has recently breached the VAT registration threshold, no VAT application has yet been submitted". That's a helpful bit of information, presumably you're happy it's factual, and then the new accountant can take it up with the client.

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By ireallyshouldknowthisbut
02nd Oct 2018 12:33

I don't see why you would ignore these key issues.

I would state things such as you resigned which is a big warning sign, eg "we advised we would cease to act from the XXX ON the XXX, to give time for a handover"

I would certainly include in your working papers a schedule showing the rolling 12 months sales, highlighting the point at which they went over the VAT threshold!

As Maslins says, keep it factual and keep it helpful to ensure the client pays the right amount of tax!

The last thing you want to do is say nothing, and then be accused by the client/new accountant of failing to advise date of VAT registration etc etc when they work it out!

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Euan's picture
By Euan MacLennan
02nd Oct 2018 12:45

A few typos in the question make it a bit difficult to understand, but here goes.

Assuming that they are taxable supplies, the (ex-)client has one month from exceeding the VAT registration threshold to register for VAT. If you know or suspect that he did not do this within the month (and started charging VAT on his sales invoices), you must submit a MLR report as this information of tax evasion came to you in your professional capacity. The fact that you may have subsequently disengaged is irrelevant.

You may never get a professional enquiry letter if your ex-client approaches a new accountant about acting for his new company. If you do receive an enquiry, it depends on whom the incoming accountant believes is his potential client. If he enquires about the original entity, I agree with Andy that you should mention that the client should have registered for VAT in the original entity which is still raising sales invoices. If the new accountant enquires about a new limited company, there is nothing for you to say as you have not acted for the new company.

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By In a Daze
02nd Oct 2018 13:27

I would certainly mention the VAT issue to the new accountant. As the client may try and blame yourself for any VAT issues that arise.

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David Winch
By David Winch
02nd Oct 2018 13:41

If the situation is that the old company has ceased trading, has not registered for VAT, has not charged VAT and ceased to trade before the date on which it should have become VAT registered - then there is no VAT evasion.
If the situation is that the old company is continuing to trade, has not registered for VAT, was required to be registered by now and the company are aware of all this but refuse to register, then there has been VAT evasion.
If there has been VAT evasion you are obliged to file a Suspicious Activity Report with the NCA.
If you get a letter from a new accountant you would not be 'tipping off' by telling the new accountant everything about the advice you have given, the reasons for your advice & the client's response.
I would not, however, inform the new accountant that you have submitted a SAR.
David

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Glenn Martin
By Glenn Martin
02nd Oct 2018 14:56

Miss Accounting any clients I have who I have moved on as not working out or not taking advice, I usually sign off the letter with "Good Luck" instead of Yours faithfully.

It tends to prompt a call from the new accountant.

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Caroline
By accountantccole
03rd Oct 2018 12:52

I had one horrid client, where, to cover my back had a very detailed resignation letter/disengagement letter stating all the areas that were outstanding. I'd be tempted to refer to that letter in the clearance letter so they have the summary

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