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Client asking more rent £16K for Dorset room?

Client asking more rent £16K for Dorset room?

A few days ago I was doing the bookkeeping and final accounts of a client before I pass them to my supervisor as I am qualified Accountant without practice certificate ACCA. The client is working as limited company offering social work services and she was renting a room away from home during the last financial year for about 37 weeks. The invoices for this rental I have received are under £3,500 but the client told me that the rent was over £16,000 for those 36 weeks and the client paid the rent using her personal account not business bank account. I asked the client to give me all invoices and proof of payment even her personal bank statement showing the payment going through, after a few days the client asked me to stop doing her books as she has found a firm of accountants who have put through all her rent without any questioning and after she told me to stop, a few days later the accounts were filed at Companies house and I still have all the paperwork.I just want to know how experienced Accountants do with such situations and so far I have lost a client? This client referred to me 3 more clients and I am likely to face the same pressure later in the year when I start doing some work for the other clients. I really want to know what should I do if I face such problems again with the existing clients?  

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By Ruddles
06th Mar 2016 08:02

Easy

If you experience such clients again, ditch them. As for the one you've just lost, you might want to consider a MLR report. (Depending on whether you think she was lying about the rental anount - what period(s) did the £3.5k cover?)

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06th Mar 2016 08:22

I would definitely file a MLR report

Ruddles wrote:

If you experience such clients again, ditch them. As for the one you've just lost, you might want to consider a MLR report. (Depending on whether you think she was lying about the rental anount - what period(s) did the £3.5k cover?)


and find out which accountant has allowed this expenditure and report them to their institute and get in touch with HMRC fraud department.
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By FRAS
06th Mar 2016 16:24

I will find out. Thanks

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By FRAS
06th Mar 2016 10:31

£3,500 cover 12 months.
The £3,500 was for the whole year and I told the client this was the highest rental I can allow because of the invoice she provided to support. Thanks

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By Ruddles
06th Mar 2016 10:46

So if the invoice was for £3.5k I'd be interested to hear the explanation for £16k charge. But it's not your problem - except for the MLR considerations.

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06th Mar 2016 13:24

a number of points
There may be a good reason for not having invoices and secondly it is possible that £16k is reasonable, your argument that you can only allow what there are invoices for doesn't hold water. Complying with MLR doesn't mean you have to suspend judgement

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By FRAS
06th Mar 2016 16:33

£16k with no invoices
There is no evidence to support the £16k rental and the invoices I received from the client were only for £3500 and No further evidence or written email to support her claim for £16k worth of rent. what will be the best judgement then if am to ask for opinion carnmores?

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07th Mar 2016 09:34

Once business people know that

you don't prepare false accounts they will want to use your services. There are still a lot of honest business people out there.

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07th Mar 2016 09:23

Not only argument

carnmores wrote:
There may be a good reason for not having invoices and secondly it is possible that £16k is reasonable, your argument that you can only allow what there are invoices for doesn't hold water. Complying with MLR doesn't mean you have to suspend judgement
That isn't their only argument. The client said that they had made the payments from a personal account. The OP asked for some proof of those payments to proceed. The client did not provide it. A client that is unwilling to provide any evidence to back up such an expense is rightly to be considered suspicious.

 

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By cbp99
06th Mar 2016 13:37

.

I assume "No", but do the filed accounts disclose the name of the firm that filed?

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By FRAS
07th Mar 2016 10:46

No it does not display the name of the firm

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07th Mar 2016 12:41

Can you deduce it from the registered office address?

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06th Mar 2016 14:25

A contract might indicate the rent payable.

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By Ruddles
06th Mar 2016 15:10

Agreed, Carnmores
But we've been told that invoice was £3.5k for a full year yet client claims that cost was £16k for 36 weeks. OP is quite entitled to ask for an explanation. In absence of said explanation, and fact that the client would apparently rather change accountant than provide evidence, would be more than enough for me. Others may have a more relaxed attitude.

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06th Mar 2016 16:36

MLR

As I understand it, the OP is saying that he has seen invoices which show the rent to be £3,500 but he now believes accounts have been completed showing rental costs of £16,000.  He also suspects that those accounts have been or will be submitted to HMRC with a CT return based on allowable rental costs of £16,000.  He also suspects that those accounts were prepared without reference to relevant supporting documents (which he still holds).

The suggestion is that the director has approved accounts dishonestly which overstate the true rental costs.  The implication is that either (i) profits subject to corporation tax have been deliberately & dishonestly understated leading to a tax 'saving' for the company, or (ii) the director is dishonestly reclaiming from the company 'rent incurred' enabling him to receive 'reimbursement' from the company to which he is not entitled, or (iii) both.

There is also a concern that a new accountant may have prepared accounts for the company (knowingly or negligently) which do not reflect the true position.

We do not know whether this has yet resulted in a CT liability being underpaid (because we do not know whether the due date for CT to be paid for that accounting period has passed, nor do we know whether, on the true facts, any actual CT liability would have arisen for that accounting period).

Similarly we do not know whether the director has yet drawn from the company any 'reimbursement' to which he is not entitled.

The OP may know the answer to both these points.

My view, for what it is worth, is that I would NOT contact HMRC about this (because that would be a breach of the duty of confidentiality which is still owed to the ex-client).

I would NOT contact the regulatory body of the new accountant (because, whilst he has arguably been at least negligent we do not know what information & documents were provided to him by the director).

If the due date for payment of CT has passed & if the OP suspects that an actual CT liability for the period would have arisen on the true facts, then I would be making a Suspicious Activity Report under MLR 2007 / s330 PoCA 2002 to the NCA.  That report would concern the company & its director (not the new accountant).

Turning to the question asked by the OP, there are in my view some clients you are better off without - and this is one of them.  Stick to your principles & if you lose some clients as a result then wave them a cheery farewell.

David

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06th Mar 2016 22:30

£500/week for a room in Dorset?

Looking at Dorset property prices I think an investment is in order if you can get that kind of rental income...

Or maybe the claim is risible.

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By paddy55
06th Mar 2016 23:15

False information

Nail your colours to the mast! Do not try to be all things to all people.

Say it loud and clear and make it known far and wide that you do not prepare false accounts.

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By FRAS
07th Mar 2016 10:49

Thanks everyone for your comments I do appreciate your help.

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07th Mar 2016 20:49

Professional clearance letter
Was one sent by the new accountant? I can't see this mentioned by the OP. If they are members of a professional body one should have been sent. If one wasn't make a complaint to the body concerned. This happened to me once by KPMG!

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08th Mar 2016 08:57

This doesn't happen all the time

essex accountant wrote:
Was one sent by the new accountant? I can't see this mentioned by the OP. If they are members of a professional body one should have been sent. If one wasn't make a complaint to the body concerned. This happened to me once by KPMG!

any more. Being courteous is something that has gone out of the window. 
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