Hi everyone,
I have (or had!) a self employed client who has brought his paperwork to me each year and I've done all the bookkeeping (carrier bag stuff), accounts and a tax return up to and including the 2018/19 tax return.
A couple of weeks ago, HMRC sent me one of those brown envelopes which told me that they'd issued a repayment to my client for £x,xxx. The repayment situation isn't unusual because they are a CIS client, but the size of the repayment is higher than usual.
I rang the client to find out how they'd got a repayment, and apparently someone told them that it's really easy to do your own tax return, and so that's what they'd done.
I'm not quite sure what to do now. I'm happy to lose the client, because I'm trying to downsize anyway, so I'll take this event as a break in the contract, and will disengage. But I know that they won't have taken into account the income I accrued into 18/19 nor any expenses accrued or prepaid - because they didn't ask for any handover information, so their tax return will be wrong.
Any thoughts? Do I just disengage, hit delete on the HMRC client list and forget about it?
Thanks,
adf2410
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Replies (21)
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Disengage, clearly stating the dividing line between your and his responsibilities.
Advise HMRC that you are no longer acting.
SAR? If the refund is clearly out of line compared to previous years you probably have reason to suspect that tax has been underpaid? But deliberately? And you suggest that he may not have taken account of income reported in an earlier period, so it is possible that tax has been overpaid. I would cover myself and file one anyway.
I think we will get a lot of things with clients looking to save some £££.
I would write to them, noting the adjustment that had not taken into account, advising them to amend the return to reflect those entries, and disengage.
Immediate disengagement is the right move. That's what I've always done in such circumstances, followed by a letter to HMRC to say that I no longer act, and had nothing to do with the preparation of the last return. HMRC ought to get the hint, but they probably don't. You have grounds for suspicion that there was income omitted, so do an SAR.
File a SAR. The AML risk to you is probably very small, but I'd want complete peace of mind. Especially given that you don't have the option of helping them correct the error, have no assurance that they will do so after you make them aware, and no longer have the protection of legal privilege as they have essentially disengaged you.
...no longer have the protection of legal privilege as they have essentially disengaged you.
Not that such protection would apply in the circumstance even if there wasn't a disengagement.
Unless the client had deliberately underpaid tax and miraculously fessed up without prompting... admittedly unlikely.
Just to clarify, are you suggesting that the adviser submits an amended Self Assessment return?
]Just to clarify, are you suggesting that the adviser submits an amended Self Assessment return?
No, I think he should disengage in this instance. But under normal circumstances, if an advisor becomes aware of an irregularity in a return, should they not discuss their concerns with the client with a view to ensuring corrective action is taken, as outlined in PCRT?
(Edit: ignore the above, just read your reply)
Tell them that when HMRC come knocking to reclaim the excess refund you will happily assist them in rectifying the situation, for four times your normal fee.
Thank you everyone for your comments.
I am a bit of a softie, so I've drafted (but not yet sent - pending anyone's views on what I'm planning to do) a friendly, bright and cheery 'thanks for your business and best of luck for the future' type letter which details the handover info I would have given to another accountant, and strongly advised him to amend his tax return. I'll give it a week and see if he asks me to help. If I hear nothing, then the SAR goes in.
Does that sound reasonable/ethical/lawful? Or should I be terribly serious and stern in the letter?
adf2410
Seems fine to me.
Be factual whilst remaining friendly.
After that it’s not your concern (other than filing a SAR).
Agreed.
Client is taking the proverbial. When they come back asking for help, say no. You dont need these sort of clients (unless you get paid up front, mind you even then I would turn them away, it will only happen again and he clearly has no respect for your quals)
I don't think that you have the choice whether to submit a SAR or not although I suspect David Winch will put us right.
Harsh as it may seem those in power decide that accountants don't submit enough SARs. So I for one am submitting just in case on every occasion.
Yes disengage, and write to the client regarding income and expenses accrued so he gets the tax correct
Write a SAR report - first and foremost you should talk to your professional body, but I don't think you have enough suspicion and it was probably not deliberate so not sure you should be writing in these instances
Take a deep breath and then be professional about it with your client. Tell them that their Return is not correct and suggest that you correct it before they drop themselves further into the mire. It will bounce back on your reputation should HMRC review his Return, especially when he spreads the gossip that you acted for him - he will never accept the blame and it will always be your fault.
Get one more fee out of him and then disengage.
I would disengage immediately, suggest if they require the overlaping information required to enable them to accurately complete their self assessment they are able to request it in writing(as anyone taking over the a client would do).
You do not actually know they have not prepared the return correctly.
Let HMRC know that you are no longer acting and will supply the ex- client with the relevant information when it is requested. - Should set alarm bells ringing but unlikely.
Re a Suspicious Activity Report - I don't see from the OP's post a basis to suspect the (ex?) client of any criminal conduct. It seems to me that there is a suspicion that he may have unwittingly submitted figures which are incorrect, but that's as far as it goes.
So, as things stand, I would not myself be submitting a SAR here.
David