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Dealing with an unhelpful previous accountant

Previous accountant is not sending over requested information and appears to have made errors

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I've taken on a new client who had a dispute with their previous advisor due to the fee they charged being well in excess of the fee quoted at the start of the engagement.

The client is a Ltd company and the business is closely linked to the hospitality industry, they receive commission from hospitality business when they introduce clients to them, and as a result in the year to 31st March 2021, income and number of transactions was massively reduced as a result of the pandemic, so when the client received the bill for the accounts they were shocked and disputed the fee, paying the amount originally agreed and asking for a breakdown of the bill so they can try to understand why this was in excess.

The previous advisor refused to provide this, stating that he has spent enough time on it already and was unwilling to provide the breakdown!!

They therefore approached us to act and we dutifully wrote to the previous advisor requesting copies of the accounts, schedules supporting the figures and the CT600, computations etc.  Obviously they didnt respond and after a few weeks the client paid the balance to the accountant in order to speed up the process as VAT returns were becoming due and there were losses that needed to be carried back to generate a refund of corporation tax to offset amounts owed to HMRC that remained unpaid to keep them happy.

Eventually the previous advisor sent us a trial balance, a CT600 and a set of accounts.  The accounts did indeed show a loss for the year but the CT600 prepared did not show the loss nor any indication as to whether the loss had been carried back to the previous period.  Having looked at the HMRC online services account the previous years liability does not appear to have been adjusted for the carry back (although granted HMRC do not action these in a timely manner in my experience) and the box on the tax return indicating a refund for an earlier period was not ticked.

More worryingly is that a directors loan account of over £65k (overdrawn) appears to have arisen in the year and there was no entry on the return to show a CT600A was being submitted or indeed a provision in the accounts for the S455 tax that would be due on this loan and the client was unaware of the tax implications of the loan and now faces another huge corporation tax liability....

In addition the accounts filed at Companies House do not include a disclosure regarding the directors loan.

During the preparation of the accounts they sent the client an email stating that they had identified some invoices that had been duplicated in the previous year by yet another advisor meaning they had overpaid tax in that year.  I therefore asked the accountant whether they had adjusted for the errors in the 31st March 2021 accounts which is why the loss arose, or if the 31st March 2020 accounts required re-stating and an overpayment relief claim made to HMRC and yet again have received no response,  When questioned whether VAT had been adjusted for on these invoices they responded saying that the previous previous accountant made the VAT error and we should contact them about it!  However as he has been responsible for preparing the VAT returns for the last year you would have expected him to correct any errors discovered!

The client did complain to the previous accountants "body" regarding the fee issue but as they are unregulated and the body in question is the ICPA which isnt a regulatory body as such but more a network of accountants!  

Despite numerous requests for the corporation tax computation and loss schedule we are still no further ahead and I feel the client has been ripped off.

Has anyone else been in this position before and what action did they take to resolve the situation?  

My next step is to contact HMRC to see if they can send a copy of the corporation tax computation that was submitted but in terms of dealing with the issue of duplicated invoices from the previous year the only thing I can think of is to prepare these accounts from scratch again to see what comes out but I'm loathe to charge the client again for work that they've already paid for and I'm not particularly looking forward to picking through it for free!

I appreciate you don't need to be qualified to be an accountant but it sure would make life easier if unregulated persons acting in the industry were accountable!

 

Apologies for the long rant, it's late, I'm tired and emotional and would just appreciate either some helpful pointers as to what actions can be taken next or maybe a bit of sympathy/empathy with dealing with unhelpful individuals!

Peace out!

Replies (12)

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By D V Fields
03rd Dec 2021 23:22

Firstly you are not responsible for any errors of the past of others. All you can do is correct a position to the best of your ability with the information available if required. Also remind your client of their directors’ fiduciary duties and their responsibilities to maintain adequate records (which may or may not open a can of worms with regard to using online accounting portals; but that’s for another day).
If directors have withdrawn £65k and avoided taxes then personally I wouldn’t be too sympathetic about a surprise of a tax bill; but also might want to question their judgement.

Make recommendations as to what you believe should be done and your fee for doing so and then make your decision based on theirs.

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By GHarr497688
04th Dec 2021 00:05

You have acquired a clients from previous Accountants who are responsible for those years accounts although your client is also responsible. Your clients should not really be in business if he had no knowledge of a directors loan account to invoicing . Lots of information is on Gov.uk to explain the basics. Often I tell a client umpteen times about various important matters and often my advise falls on deaf ears.I think you need to leave the past in the past and concentrate on getting things right in the future otherwise you will lose the client again for charging too much. This us a clear case of client education rather than name and blame others. I think this blame culture is getting silly - I repeat the client should have a basic grasp of certain matters and should never approve accounts they don't fully understand. If your client can prove the previous accountants are negligent then they could sue however from what you say this does not sound as if it is the case. It would be reasonable for the client to understand the Directors Loan and Invoicing of their business and they approved the Accounts so they are the negligent party. If you are the third accountant they have used then they need to look in-house to find out why they have needed to change so many times.

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Replying to GHarr497688:
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By Catherine Newman
04th Dec 2021 01:05

Clients don't understand limited companies, . I am going through it now and have told one you don't listen to "my mate down the pub/golf course". They listen to you. How has your client got an overdrawn Directors Loan account of £65K ? Why are you the third accountant? He has listened to my "Mate down the pub". I am equally as fed up as you on mine but I have spelled it out to him tonight.

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By Paul Crowley
04th Dec 2021 01:54

There is usually a reason why a client has three accountants in three years.
Rarely is it a good reason
Both prior accountants useless or is the information provided useless?

Accounting bodies should not and do not get involved in fee disputes.
That is what the courts are for

The ACCA consider a trial balance is all a new accountant is entitled to for free
Yet you castigate an accountancy organisation because you expect something that the bigger organisation does not require of its members
You even have the audacity to consider the prior accountants unregulated despite knowing that they are

You knowingly took on a challenging client that you knew had failed to pay the prior incumbent.

Your client somehow managed to take £65,000 out of the company without knowing that he had done so

Do you think you will not get some of the same and no longer be acting within a year?

Did your client not see or recieve any accounts? Did he give authority to file?
Times 2 at least
Did you check companies house to see how many accountants in the last ten years?

Client not paying his tax as it falls due? That alone is a massive red flag
Client took a BB Loan or a CBILS loan and used it for "dividends"?
Do you think company will survive?

Does he keep the perfect records that he promised the prior accountant that he kept?

I would probably have been reluctant to quote without wanting to know how and why everything seems to go so wrong for this person

Thanks (5)
Replying to Paul Crowley:
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By bernard michael
04th Dec 2021 09:44

Paul Crowley wrote:

There is usually a reason why a client has three accountants in three years.
Rarely is it a good reason
Both prior accountants useless or is the information provided useless?

Accounting bodies should not and do not get involved in fee disputes.
That is what the courts are for

The ACCA consider a trial balance is all a new accountant is entitled to for free
Yet you castigate an accountancy organisation because you expect something that the bigger organisation does not require of its members
You even have the audacity to consider the prior accountants unregulated despite knowing that they are

You knowingly took on a challenging client that you knew had failed to pay the prior incumbent.

Your client somehow managed to take £65,000 out of the company without knowing that he had done so

Do you think you will not get some of the same and no longer be acting within a year?

Did your client not see or recieve any accounts? Did he give authority to file?
Times 2 at least
Did you check companies house to see how many accountants in the last ten years?

Client not paying his tax as it falls due? That alone is a massive red flag
Client took a BB Loan or a CBILS loan and used it for "dividends"?
Do you think company will survive?

Does he keep the perfect records that he promised the prior accountant that he kept?

I would probably have been reluctant to quote without wanting to know how and why everything seems to go so wrong for this person

etc,etc.etc .....I totally agree with the above. I always interrogate prospective new clients as to the reason they are leaving the incumbent accountant. Any who offer rubbish reasons I don't take on

Thanks (7)
Replying to Paul Crowley:
paddle steamer
By DJKL
06th Dec 2021 14:49

One is reminded of Oscar Wilde

"To lose one parent may be regarded as a misfortune; to lose both looks like carelessness."

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Replying to DJKL:
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By Ben Alligin
07th Dec 2021 09:59

Nothing to do with accounts, but my favourite OW quote was his definition of fox hunting -

'The inexcusable chasing after the inedible!'

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Replying to Ben Alligin:
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By Arbitrary
07th Dec 2021 14:26

I think the actual quote is 'The unspeakable in full pursuit of the uneatable'.

Thanks (1)
blue sheep
By Nigel Henshaw
05th Dec 2021 06:24

You did well getting what you did, currently dealing with 2 where the previous accountants refuse to give us anything, one will not reply and the other (acca) told us that they deleted anything they held as soon as the client said they were leaving!

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Replying to NH:
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By Paul Crowley
05th Dec 2021 15:43

Do not understand why any accountant fails to hand over everything needed.
The issue disappears straight away
Being difficult just costs everbody more wasted time

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By JD
06th Dec 2021 13:55

A client that is rubbishing the work of two previous agents, avoiding payment of fees, does not understand that he/she is trading via company with a very large overdrawn DLA (one has to ask if that has been sourced from a BBL) is a client to be very careful of.

Be kind, as in twelve months time and having invested a lot of time to sort this out at less than cost (but more than you quoted), you will be number three and the other side of this.

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By Husbandofstinky
07th Dec 2021 13:49

Disengage. The number of accountants in as many years, a lovely DLA that you will have to deal with resulting in a happy days charge which they will need to pay. I am guessing no money in the bank either. All to end up with a disatisfied client who will not want to either pay the charge let alone your fee.

Life's too short.

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