Do i have to cease trading.

Accountant wants me to cease trading because he has misreported one of my vehicle wrongly

Didn't find your answer?

My Accountant (A large firm in my Area) has misreported my 9 seater vehicle minibus as Plant and machinery (higher tax break and grey area with HMRC) and should have been reported as a car (9 seater minibus a car?) and now potentially owe HMRC £3786.51 for past years misreporting, to avoid paying this he suggested I cease trading at tax year end 2020 to get this money back, (Not sure how and I have an unsecured loan against two vehicles and the finance company would want the vehicles back if I ceased trading (we are a niche company with small manageable debt (vehicle finance and never used our expensive overdraft!). I feel we are being punished for a mistake we have never made!

He told me we are a 'couple of blokes with a couple of cars' (we have 5 at present) and marginally profitable to deal with (despite I apparently over report and am too thorough (we use Sage as instructed and also use our prefered QuickFile System) our turnover skips under the Vat threshold every year and his advice is 'to go on holiday' Ive identified a vat scheme that may suit us but he has no advice to give.

He has told me the price will go up to £1600.00 plus vat if I dont embrace Sage fully (it dropped my bank feed 4 times last year!!) I pay £1100 per annum and a further £180 a quarter for Paye payroll at the moment. he always sends me the final accounts and his invoice 3 days before the final deadline at my busiest period (1st Jan) with no time to peruse (I found £2.5K of expenses he didnt add and said it would cost more to rectify) was hit with a £4k corporation tax bill 3 days before i should pay it!

Am I been treated fairly? I feel at a loss in pocket and morale!

Replies (29)

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RLI
By lionofludesch
09th Jan 2020 16:44

It's a fairly garbled story but ask your accountant for details of his insurers.

What's the VAT scheme you've identified ?

I'd be looking for another accountant. Preferably one who has moved on from 1980s Sage technology.

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Replying to lionofludesch:
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By Recc
09th Jan 2020 17:42

Hi Thanks for responding,

We have looked at the 10% vat scheme (we charge 20% on invoices and give VAT 10% of all invoices0 as a taxi company our vat supply is complicated as well as we are both operator and supplier, some of what we do is non vat but forms part of the whole cost to the customer (we would have to break down a cost as non vat and vatable) bit of a headache

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Replying to Recc:
RLI
By lionofludesch
09th Jan 2020 17:56

Quote:

Hi Thanks for responding,

We have looked at the 10% vat scheme (we charge 20% on invoices and give VAT 10% of all invoices0 as a taxi company our vat supply is complicated as well as we are both operator and supplier, some of what we do is non vat but forms part of the whole cost to the customer (we would have to break down a cost as non vat and vatable) bit of a headache

So Flat Rate scheme, then.

OK well, remember that 10% is 10% of the 100% you charge your customer + the 20% VAT, so it's really 12%.

Also, what if you have any zero rated sales ? Don't forget you'll need to pay 12% VAT on those - even though you don't collect any VAT from your customer.

Flat Rate needs careful consideration. For instance, there's a huge difference in leasing a minibus (can't claim the input tax) and buying on HP (can claim) . It's not clearcut at all.

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Replying to Recc:
RLI
By lionofludesch
09th Jan 2020 18:28

Quote:

Hi Thanks for responding,

....some of what we do is non vat but forms part of the whole cost to the customer (we would have to break down a cost as non vat and vatable) bit of a headache

Bit more of a headache when you find that the Flat Rate charges 12% on the whole shebang - VAT and non-VAT.

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By ireallyshouldknowthisbut
09th Jan 2020 16:50

Whilst in general I would shop around for someone a bit smaller and friendlier and younger myself.

SAGE is a bag of bobbins to use. Most accountants charge extra for clients who still use the antiquated pile of poo*p vs a modern cloud system. I bet the owners are close to retirement.

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Replying to ireallyshouldknowthisbut:
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By Recc
09th Jan 2020 17:44

Agree with sage system, we use Quickfile, very intuitive, built to be easily understood and has never failed. its reporting as as good as you want it to be.

thank you for responding

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RLI
By lionofludesch
09th Jan 2020 16:55

Tell us more about this minibus.

Why do you think it's a minibus ?

What make and model is it ?

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Replying to lionofludesch:
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By Recc
09th Jan 2020 17:54

Good evening!

it is an 8 passenger not inc driver ( 9 seater long wheelbase ford tourneo minibus.
TFL treat it as a bus and we get exemption from congestion and ulez, our insurers treat it as a minibus, DVLC treat it as a minibus £280 a year duty (insurance is3 times cost of a car due to extra liability)
HMRC says its a car just like any other car. it IS an official grey area. a recent court case HMRC versus (forget the other party) both lost and won and refuse to update the manual that defines it as a car not a van. we did not define it, our accountant wrongly did that for 4 years and may have to give back exactly £3786.51 to HMRC (4 years worth of allowances)

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Replying to Recc:
RLI
By lionofludesch
09th Jan 2020 18:00

Quote:

Good evening!

it is an 8 passenger not inc driver ( 9 seater long wheelbase ford tourneo minibus.
TFL treat it as a bus and we get exemption from congestion and ulez, our insurers treat it as a minibus, DVLC treat it as a minibus £280 a year duty (insurance is3 times cost of a car due to extra liability)
HMRC says its a car just like any other car. it IS an official grey area. a recent court case HMRC versus (forget the other party) both lost and won and refuse to update the manual that defines it as a car not a van. we did not define it, our accountant wrongly did that for 4 years and may have to give back exactly £3786.51 to HMRC (4 years worth of allowances)

Jeez - why didn't you get a 9 passenger minibus ? All your sales for that bus would have been zero-rated for VAT ....

Well, just because HMRC say things in the manual doesn't mean they're right.

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Replying to lionofludesch:
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By Recc
09th Jan 2020 18:23

Simple really a 9 seater cost £23k new, (with 30% Discount, we can buy them at a huge discount as a taxi company direct from manufacturer)

A ten seater with the spec we need for our corporate clients would have cost nearer £50k to £60k with no discount (not liable to local authority control, a ten seater and above is the same authority as normal buses (psv licences as well)
it normally jumps from 9 seats to 16 seat spec, not many 10 seat vehicles except for basic crew buses.

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By paul.benny
09th Jan 2020 17:10

I would suggest that you approach another firm (or maybe more than one)
a) to get a fee quote for your recurring business.
b) advice and a fee quote for unravelling your mess

Another accountant may well cost you more than your present guy but should do a better job than what you describe.

Telling you that it would cost to deal with an error of their making is shoddy; telling you to cease trading to address an (apparent) error of their making is deeply unprofessional.

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Replying to paul.benny:
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By Recc
09th Jan 2020 18:10

Thank you Paul for your response, I am anon on here as i know his company may contribute, but realise he may well see this and figure it out, its a small town with very few chartered accountants and we thought we were with the best!

I also assumed that when i provided him with year end figures and reporting etc in full by April 1st every year

1. Why leave it all till 3 days before final payment is due for corp tax

2. Why not have a review say 6 weeks before year end to pre advice roughly what corp tax i will be paying (maybe spend more on car repayments etc?)

3. he has put us off expanding due the 'spectre of vat' i am not afraid of vat if any scheme protects our business falling into a negative because OF Vat.

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Replying to Recc:
RLI
By lionofludesch
09th Jan 2020 18:20

Quote:

3. he has put us off expanding due the 'spectre of vat' i am not afraid of vat if any scheme protects our business falling into a negative because OF Vat.

Depends who your customers are and whether they're prepared to pay the VAT in addition to the price they're already paying.

If you stick at £84000, your sales will be £84000. But if your sales rise to, say £86000, that'll be £86000 less the £10000 or so in VAT, pushing you back to £76000.

Who are your customers ? Can they reclaim the VAT you charge them ?

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Replying to lionofludesch:
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By Recc
09th Jan 2020 18:36

Yes all our customers a large/very large companies, international as well and we take less than 2% cash

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Replying to Recc:
RLI
By lionofludesch
09th Jan 2020 19:01

Quote:

Yes all our customers a large/very large companies, international as well and we take less than 2% cash

Doesn't mean that they can reclaim your VAT. Insurance companies and banks can't, for example. But, nevertheless, reassuring news.

Just wondering why your accountant is putting you off registering, then.

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Replying to Recc:
RLI
By lionofludesch
09th Jan 2020 18:23

Quote:

1. Why leave it all till 3 days before final payment is due for corp tax

2. Why not have a review say 6 weeks before year end to pre advice roughly what corp tax i will be paying (maybe spend more on car repayments etc?)

What were you doing in these nine months ?

Why did you wait until December before asking how the accounts were progressing ?

You have to shoulder some of the blame here.

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Replying to lionofludesch:
RLI
By lionofludesch
09th Jan 2020 18:25

" .... maybe spend more on car repayments etc?"

Why ?

How would that help ?

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Replying to lionofludesch:
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By Recc
09th Jan 2020 18:43

i have no idea, i am not an accountant, but assume (wrongly?) if i'd spent more my profit would be less and will pay less corporation tax?

He did miss £2.5k of expenses (specifically my credit debit card costs for the whole year)

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Replying to Recc:
RLI
By lionofludesch
09th Jan 2020 19:04

Quote:

i have no idea....

Yes, I can see that.

Paying off a loan doesn't reduce your tax.

Just as sticking £1000 in a savings account doesn't either.

It's just moving money around.

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Replying to lionofludesch:
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By Recc
09th Jan 2020 18:39

Agree i should have pushed, but he insists on meeting in his big offices and charges me by the hour as well, ( we are marginally profitable to him as a customer he recently told me)

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Replying to Recc:
RLI
By lionofludesch
09th Jan 2020 18:58

Quote:

Agree i should have pushed, but he insists on meeting in his big offices and charges me by the hour as well, ( we are marginally profitable to him as a customer he recently told me)

You need a meeting in his posh office to ask how his work is progressing ?

Rubbish !!

In the profession, we refer to that as "fobbing off".

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Replying to Wanderer:
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By Recc
09th Jan 2020 19:18

Well! Thank you Mr/Mrs Wanderer, didn't need to outed on this discussion, would've been more helpful if I WAS visible and you could advise me by private message no?

shame, has put a negative spin on a positive conversation (for me)

Nice to know that you know I'm not talking balls i guess...

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RLI
By lionofludesch
09th Jan 2020 17:26

A better idea might be to get a proper minibus so that your sales would be zero rated for VAT. Then there's no need for holidays (a mixed blessing, perhaps) and no glass ceiling on the size of your business.

So many questions that could be asked ....... a nine-seater minibus .... is that nine passengers or nine including the driver ?

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By SXGuy
10th Jan 2020 08:25

wow, not you are not being treated fairly, with limited info on the size of your business, id say, your being over charged, and not receiving the level of service you'd expect.

£180 per quarter for payroll? you said you are 5 guys? my goodness. id easily charge half that.

Annual charge, if that's just to take your figures from sage or QF and prepare accounts, again, id probably charge half.

But by no means am I suggesting that others wouldn't charge this, im a small practice, so I can afford to charge less.

BTW, I see nothing wrong using QuickFile and if it were me, id be delighted you switched to that rather than use Sage if im honest.

No idea why the fee should increase as a result, considering QF affinity account for a client wouldn't cost more than £35-£45 p/y extra.

Would I advise to close the business? probably not, if you have been advised wrongly and the accountant has over stated C/A's and not put through expenses allowable to reduce tax, id consider legal advice to recoup the additional tax charge, im sure they have insurance and if they are members of a governing body, probably complain to them also.

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By tom123
10th Jan 2020 08:37

The cost of converting to from a taxi company (with vehicles up to 8 passengers) and a bus operator (for larger vehicles) should not be underestimated.

Professional qualifications for public transport operation are required, and maintenance and operating centre requirements also increase.

(can you guess from my avatar I have previous knowledge..)

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Replying to tom123:
RLI
By lionofludesch
10th Jan 2020 09:16

Quote:

The cost of converting to from a taxi company (with vehicles up to 8 passengers) and a bus operator (for larger vehicles) should not be underestimated.

Professional qualifications for public transport operation are required, and maintenance and operating centre requirements also increase.

(can you guess from my avatar I have previous knowledge..)

Fair comment. I was just looking at the VAT position - which, given that the OP implies that his customers can, in the main, recover the VAT, wasn't relevant anyway.

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RLI
By lionofludesch
10th Jan 2020 09:34

What seems to be abundantly clear is that the accountants don't value the OP's firm as clients.

What would I do ?

Well, I'd look for another accountant. I'd take some satisfaction in venting my thoughts to the accountant I dealt with. As to the specifics....

1. If the tax was properly due, I'm not sure there's been any loss there. You were just incorrectly told that the tax was less than it was. Penalties are a different matter.

2. The advice to stay under the VAT threshold seems weird. It needs looking into and the rationale evaluated.

3. Not convinced on the Flat Rate. The OP says he has some non-VAT income -what does he mean by that ? All the company's income seems to be standard rated. Certainly there's no such thing under the flat rate. You apply the rate to all your income. Added to that, the loss of recovery of input tax needs to be evaluated in hard numbers.

4. If the extra payments were the accountants' fault, they should have been corrected for free. I reserve judgment on this but it does show the danger of tagging on company payments from a private account. Why weren't they properly accounted for in a loan account by the OP ?

5. And ultinmately, the burden of compliance is on the OP. Taking the books in in April and leaving them for nine months before raising concerns is, I'm afraid, the OP's fault. Take a bit of interest in the work you're asking to have done.

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Replying to lionofludesch:
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By meadowsaw227
10th Jan 2020 11:31

I was with you until point 5, total typical accountant cop out answer .

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Replying to meadowsaw227:
RLI
By lionofludesch
10th Jan 2020 11:37

Quote:

I was with you until point 5, total typical accountant cop out answer .

The truth often hurts.

So few folk have mirrors in their houses.

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