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Error on self assessments tax return

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In a nutshell...... 19/20 tax return prepared from clients sales invoice books and expense books. Turns out he had 2 invoice books and the junior preparing the accounts, missed out one book of income, which amounts to around £30k of missing sales. I reviewed the job, reviewed the sales and there was sales invoices every month so sense checked and yes sales were down on previous year but his sales go and up due to his business. 
Client agreed the tax return and accounts and all submitted to HMRC. Now he wasn't able to claim as much SEISS grants due to making a loss in 19/20, which we now know should have  been a profit. 
I am a qualified senior and have never made this mistake before. I'm stressing about work tomorrow as my boss was incredibly short on the phone and let's just say when the client finds out he is going to go crazy. 
Not sure what advice I'm looking for but has this happened to anyone before? And how was it resolved? 
 

Replies (21)

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By Paul Crowley
12th May 2021 18:45

No issue in any other year before SEISS. Just amend the return.
Client really failed to notice?
When prepared? How long did it take client to notice? Did client only 'notice' when the grant was claimed?
Does Boss consider doing accounts without bank statements a good idea?

But responsibility for getting it right is the boss' responsibility. He knew that extra SEISS was on the cards and that the profit for the year would be critical.
Did he challenge the correctness?

4 people involved. 4 people missed it. 4 people, not one.
Did boss talk through the figures with client? How could client not realise £30k of income was missing?

Dumb client. Could have continued 'not to notice' but now paying tax and NI on £30,000
Trivial lost SEISS
£30,000 Divide by 4, Divide by 4 again and then 80%. £1,500

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Replying to Paul Crowley:
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By [email protected]
14th May 2021 16:51

[quote=]

No issue in any other year before SEISS. Just amend the return.

Unfortunately, amendments made after (off the top of my head) 3rd March won't be taken into account by HMRC when calculating SEISS.

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Replying to [email protected]:
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By Paul Crowley
17th May 2021 09:37

Yes I know. That is why I wrote so much more, including identifying the loss to the client

No issue in any other year before SEISS. Just amend the return.
Perhaps
No issue in any other year before SEISS. In any other year just amend the return.

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panda ketteringUK
By ketteringUK
12th May 2021 18:56

Makes you wonder if, with additional 30k to add, is the client eligible for the 4th seiss grant anyway? It must be very close to £50k ceiling...

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Replying to ketteringUK:
By Duggimon
13th May 2021 11:32

I would have thought with a loss being made, the £30K of income couldn't take profits above £29,999, still quite a way from £50,000.

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By fawltybasil2575
12th May 2021 20:36

@ Anonymous (OP).

My comments are somewhat restricted by the likelihood that you will not wish to disrobe your anonymity cloak; and hence you will probably not wish to be more specific as to:-

(i) The nature of a trade in which one can realistically not be aware that a massive £30K of income has been omitted from the Accounts,

(ii) The exceptional reason(s) for preparing Accounts purely from invoices, and

(iii) Establishing eligibility for SEISS 4 (see “Your question” paragraph below).

As Paul says, the SEISS 4 overstatement will have been only £1,500 (probably £1,065 NET, ie after deducting 29% for IT/Class 4NI).

Of more importance than the SEISS 4 (Net) IT/Class 4 NI “underclaim” is surely the IT/Class 4 underpayment at 31 January 2021 (with consequent Interest and Surcharge).

Your question makes no reference to whether, under the SEISS 4 regulations, the business is ELIGIBLE for the SEISS 4 Grant at all. Principally, have you established that, in the claim period 1 February 2021 to 30 April 2021, there has indeed been a reduction in (effectively) Gross Income (arising from Coronavirus) which will have a “significant” adverse effect on the profits for the relevant basis period(s) ? Have you quizzed the client in that respect ?

Basil.

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By Matrix
12th May 2021 21:55

Human errors happen (remember Tesco? or the Covid spreadsheet?).

The firm will have PII. Client would have had to pay the tax anyway.

Maybe work out if they would have been eligible for the grant before you speak to your boss again.

Feel free to PM me if you are feeling anxious.

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Replying to Matrix:
By SteveHa
13th May 2021 13:22

Quote:

Feel free to PM me if you are feeling anxious.

One of the most human and generous offers I have seen on here for a long time.

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Replying to SteveHa:
Bee
By May bee
14th May 2021 10:18

I agree. It is this sort of decency and support we need on this forum more!

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By frankfx
12th May 2021 21:58

You say you did a sense test.

But a critical sense test is to use a secondary source data.

In this case bankings.

If the business is entirely cash based, then more sense tests required.

Best one grill the client.

"Our figures seem unreal , have your day to day finances bombed and the children are on a diet of bread and jam"?

Puzzled.

Were the two invoice books run concurrently?, So that you were fooled by all months having income?

Did partner fully ascertain how client was surviving, with losses.
Credit card maxed and so on

Many partners would touch on sensitive matters, if only to be sure that fees would be settled!

As others have opined, the partner may have questions to ask of himself.

Client too must take some ownership and responsibility.

This could make a good toolbox talk in the office.

You are not alone. Do not be victimised.

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blue sheep
By Nigel Henshaw
13th May 2021 07:49

Its a shame you cannot answer here to give more details, my main question to you would be how has this come to light now? I am also wondering why there would be two invoice books running concurrently.
But its a good lesson to learn that anything that occurs outside the normal pattern of business needs to be questioned and triple checked (my 1st check would be with the junior and the records, 2nd check would then be with the client "did you really make a loss, were your sales really this low etc" 3rd check back to the records, perhaps ask for more records).
If you had made check 2 you would have a record of communicating your concerns with the client and now you could go back to that to show that he was aware of it, maybe you did?

That said we all make mistakes, honesty is the best policy, look at your procedures to see how this could have been prevented, then move on dont let it stress you out life is too short.

Few years ago a (much smaller) mistake was made in our office, client was not happy so we said, obviously we cannot pay the extra tax but as a gesture of goodwill we will waive our fee, client said thats really great thanks - and then never came back

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Ivor Windybottom
By Ivor Windybottom
13th May 2021 09:06

We all stand with you on this - we are all human and all make mistakes.

If necessary, consider using the benefit of working for a firm and let your boss explain your error (you can draft that) and offer the client an offer to move the job to someone else in the firm.

It happens. We'll still support you.

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By meadowsaw227
13th May 2021 10:13

Did the banking's match the sales invoices ? .

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By ourpetsheadsarefallingoff
14th May 2021 09:58

Client knew he was getting away with a low tax bill and kept his mouth shut, now he's suffering the consequences! No help to you of course - all I'll say is don't be hard on yourself, we've all made a mistake like this and I've seen much worse. All that usually happens is your boss gets p'd off, then you hand in a couple of good jobs next week, stay til 6 for a few nights and all's forgiven.

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David Ross
By davidross
14th May 2021 10:16

When I first read this I thought you were talking about 2018/19, which would have affected the first SEISS grants. Happily it is 2020 and as others have said, the client themselves would have been aware of the potential impact on SEISS at that time. So the embarrassment is limited.

Remember Dale Carnegie's advice - be your own worst critic. Harshly criticise yourself and others will come to your defence. I have found in my 36 years in practice that being honest about mistakes shows integrity that is appreciated - no-one likes a shifty creep who tries to cover up.

Further through the process, as others have said, the errors by others in this process will reveal themselves, and you will merge into the background.

Do let us know how you get on - rooting for you.

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By coleprice
14th May 2021 10:20

More than 30 years ago (in the days of manual extended TB's) I prepared accounts for a company part-owned by the partner of the accountancy firm in which I was training. The results shown by the accounts would determine whether the company went for an AIM listing that year or not.
On the TB I entered £30k of prepaid income as a credit thus overstating the assets by £60k. The company went ahead with the listing on the basis of incorrect accounts.
Not long afterwards, the partner entering up the manual nominal ledger, spotted the difference. He called me a four-letter word beginning with C and said it was entirely his fault as he should have spotted the error.
I hope your boss shows similar qualities of responsibility and big-heartedness.
To quote another admired partner in an insolvency company for which I did some work: "It's not the end of the world. It's only money."

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By John Wheeley
14th May 2021 10:23

I cannot understand how you can prepare accounts without seeing the bank statements. Checking the bank account is a basic step that I have done on every set of accounts for the last 35 years.

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Replying to John Wheeley:
blue sheep
By Nigel Henshaw
14th May 2021 14:43

Quote:

I cannot understand how you can prepare accounts without seeing the bank statements. Checking the bank account is a basic step that I have done on every set of accounts for the last 35 years.

There is no absolute requirement to have sight of bank statements, it is quite possible to prepare accurate accounts from a ledger - what would you do if you had a cash only trader with no business bank account, there are plenty out there.

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Bee
By May bee
14th May 2021 10:30

Try not to lose sleep over this. Things like this happen, even with the best of intentions. I am assuming you are not the one responsible for the budget for the job, the procedures of your firm in general checking or the client training inherently in place re them getting involved in the returns/reviewing. Completely agree on the joint responsibility of the partner; if they want the right to criticise then they need to tool you sufficiently to do your part (adequate budget perhaps, insisting of verification against the bank, company policy to discuss unusual results with client). The amount of money here is not significant enough to warrant lost sleep. Use this as a positive event to make a personal commitment to how you will check returns in future to avoid such mistakes slipping through again, to appraise how your partner values you or as a reminder to add to your own or the company processes to verify results with the client maybe. This event has the opportunity to make you (and your practice) better; don't waste that opportunity by lingering on the short term and small mistake that many of this forum will have made to in some form.

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By David Gordon FCCA
14th May 2021 14:30

Yes it happened to me,
I immediately filed a correcting return, and corresponded with the claims persons.
fortunately all concerned were reasonable about this.

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Morph
By kevinringer
14th May 2021 17:29

OP, take care when replying on AWeb because your cover will be blown.

We're all human. We're always under pressure to reduce time. That is all of us from the partner down to the junior. Ultimately the partner is responsible and should have checked how the accounts were prepared and if not happy said so at the time. We prepare accounts from information and explanations supplied. If it is incomplete records and no bank statements then increases the chance of things being missed off. It's everyone's fault. It's no one's fault. I've made these sort of mistakes; mistakes that seem so obvious afterwards. Mistakes that you give yourself a lot of grief over. But you learn best from these mistakes.

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