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Enquiry Into Accounts prepared by former agent

Accounts prepared by previous accountant have now been selected for enquiry.

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We took on a new client this year and prepared accounts to 2017 - the accounts to 2016 were prepared by the previous accountant.

HMRC have now opened an enquiry into the 2016 Accounts.

How should this be proceeded with given that we did not prepare the accounts.

Has anybody had this scenario before?

Any pointers/sugestions as to how we proceed given that we have limited access to working papers.

Should the former agent be contacted?

Thanks in advance for any input.



Replies (16)

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By ireallyshouldknowthisbut
02nd Oct 2017 12:31


1. The old agent handles it
2. You handle, it and the old agent supplies full working papers.

Talk to your client and the old accountants, ultimately all you can do is advise your client who is best placed to do it given the specific circumstances of your new client leaving the old accountants.

Thanks (3)
By SteveHa
02nd Oct 2017 13:20

What does your engagement letter say about previous years?

Thanks (1)
Replying to SteveHa:
By Tornado
02nd Oct 2017 13:25

Also, there should have been a dis-engagement letter from the old Accountants which details what happens in these circumstances.

Thanks (1)
By johngroganjga
02nd Oct 2017 13:33

I don't think it really matters what the engagement / disengagement letters say. It's what the client wants and whether the selected accountant is willing and able to take it on.

Thanks (5)
Replying to johngroganjga:
By SteveHa
02nd Oct 2017 13:45

It matters very much if the engagement/disengagement letter specifically excludes work on historical issues.

Thanks (2)
Replying to SteveHa:
By johngroganjga
02nd Oct 2017 14:52

I think it matters very much more whether the accountant approached, in the event, wants to do the work or not.

Thanks (2)
By Vaughan Blake1
02nd Oct 2017 14:45

Had a few of these over the years and they are only a problem if the client's books are a total shambles/non existent.

First check to see if the previous accountant had fee protection insurance that may cover the enquiry. This may determine who does the work.

If it is a full enquiry, send HMRC the client's books and records in the normal way. Then wait and see if there are any queries that you/client cannot answer.

In the meantime it will be worth getting a nominal ledger printout from the previous accountant, if you haven't already got it.

Also, be aware that if this is a full enquiry then it is likely something has provoked it, random enquiries are about as common as hen's teeth. The previous agent may have reported the client for ML related issues and resigned. Ask to see all correspondence from the previous accountant as this may alert you to some issue (eg under declared VAT) that ultimately led to the accountant resigning & dobbing the client in!

Thanks (1)
Replying to Vaughan Blake1:
By Jdopus
02nd Oct 2017 14:45

That seems like quite an extreme assumption.

Unless the enquiry's launched by HMRC's fraud office or money laundering team, it's more likely it's merely a check into something less serious like unusual margins.

Thanks (1)
By Marion Hayes
02nd Oct 2017 16:38

First of all find out if there is any insurance cover. My fee insurance policy only covers clients for whom I am authorised agent at the time the enquiry is opened. Some people are covered through their membership of FSB or other bodies. Once you know there is insurance you follow the rules of the policy.
Failing insurance cover you ask client if they want you to approach prior accountant or not (they may self - insure)
They have to instruct you as to whether they want you to get involved or would rather use a specialist straight away.

Thanks (1)
By andy.partridge
02nd Oct 2017 16:52

I ought to check, but I think our Fee Protection insurance covers only the work that we have been responsible for.

Thanks (0)
Replying to andy.partridge:
By Marion Hayes
02nd Oct 2017 22:19

Mine definitely covers any enquiry opened when I am authorised agent, lets me bring in a second party so would presumably cover prior accountant, and visits too. CCH now Taxwise and includes helplines. Never had any problems with the admin of an enquiry or getting prompt payment.

Thanks (0)
Glenn Martin
By Glenn Martin
03rd Oct 2017 09:07

Did he leave the previous agent on decent terms, or was there issues around final payments etc.

I had an issue where a client did the dirty on me and went to another agent and left large fees outstanding.

He was a right smart [***] and 6 months later he got looked into by HMRC and had to come back eating humble pie for my help.

Thanks (0)
By pauljohnston
04th Oct 2017 10:48

Re fee insurance I believe mine only covers work we have completed and the client is still a client at the time of the enquiry.

Your dont say whether a full or aaaspect enquiry and exactly what HMRC are asking for alledging?

Given the above you may well get more help from this forum

Thanks (1)
By rbusfield
04th Oct 2017 11:25

You could find a specialist tax enquiry/investigation firm to help your client. It may be useful to have someone independent involved and who may have more time to deal with an enquiry in the run up to the tax return deadline. There are lots of tax investigation firms out there with ex HMRC inspectors and you will probably find one local to you. Sorry for the shameful plug but FYI, we are based in London and our website is

Thanks (0)
By Jack the Lad
04th Oct 2017 12:23

Assuming that the client is willing to instruct you, and you are willing to accept (if you are experienced enough to deal with a tax Enquiry), the first thing you should do is send a specific Letter of Engagement to cover this work, and ensure the clients signs and returns a copy.

Secondly, you should inform the clients that this will be open ended in terms of time, so do not quote or estimate a fee, but get an advance payment of at least £1,000, which should cover the initial work enabling you to ascertain what is the specific enquiry of HMRC. The client my well have insurance cover for a tax enquiry, in which case you will need details, and will have to contact the insurance provider.

Thirdly, you should separately contact the previous accountants (in addition to the usual professional enquiry letter) to inform them of the Enquiry and request that they lend you their working papers, or give you a full copy.

At the same time, you should notify HMRC of your appointment and:
a) ask for time to complete appointment etc.
b) request details of their specific enquiry, so you can concentrate on resolving this.

Once you have done the above (I hope I have not missed a step, but no doubt someone here will comment!), you are ready to start the actual work on reviewing the client's records and hopefully resolvng HMRC's specific enquiries.

This is also an opportunity for a full review of the client's business and accounting procedures, and to make appropriate recommendations, giving extra value to your fees, which are not going to be small.

I hope this helps!

Thanks (0)
By pauljohnston
05th Oct 2017 08:00

Re Jackthe Lad's excellent response if you want the work and the new client is pressing for a fixed fee. I find that £5k + VAt upfront normally focuses the clients mind and makes him/her realise the position they are in.

Thanks (0)
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