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Must HMRC ltd accounts match CoHo's?

Amending accounts

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Accounts were submitted with CoHo & HMRC as normal. Client is saying that these were incorrectly filed containing a debt that should have been written-off as bad. This will obviously affect his CT liability, and is not for an insignificant amount. 

He would like to amend the CT600 and accompanying accounts and re-file with HMRC showing the bad debt, but not amend the accounts with Companies House. I guess in next year's tax comp we'd add back the bad debt so no double relief.

Can we do as he wishes, or would we have to submit amended accounts with CoHo (which he doesn't want to do).

Thanks

Replies (28)

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By Vallery Lee
20th Sep 2019 12:08

May I suggest "all or nothing". The CT600 software I use contains an instruction that the accounts must match that submitted to Companies House.
Why does your client not want to make an amendment to the Companies House accounts?
Warning light!

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Replying to Vallery Lee:
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By atleastisoundknowledgable...
20th Sep 2019 12:11

Vallery Lee wrote:

Why does your client not want to make an amendment to the Companies House accounts?

It would decimate his Balance Sheet.

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Replying to atleastisoundknowledgable...:
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By SXGuy
20th Sep 2019 12:41

cake and eat it are two words that spring to mind.

Either he wants it all amended or he doesn't.

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Replying to atleastisoundknowledgable...:
RLI
By lionofludesch
28th Sep 2019 17:42

atleastisoundknowledgable... wrote:

Vallery Lee wrote:

Why does your client not want to make an amendment to the Companies House accounts?

It would decimate his Balance Sheet.

Tough.

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By Matrix
20th Sep 2019 12:48

Of course. I had a handover recently and the accountants had prepared micro accounts for CH and FRS102 accounts for HMRC!

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Replying to Matrix:
RLI
By lionofludesch
01st Oct 2019 09:36

Matrix wrote:

Of course. I had a handover recently and the accountants had prepared micro accounts for CH and FRS102 accounts for HMRC!

Were the numbers the same ?

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By SWAccountant
20th Sep 2019 14:06

Can't you just amend the CT600 with the appropriate reason for not attaching accounts?

Next year's accounts can then include a prior year-adjustment.

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Replying to SWAccountant:
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By atleastisoundknowledgable...
20th Sep 2019 14:44

SWAccountant wrote:

Can't you just amend the CT600 with the appropriate reason for not attaching accounts?

Next year's accounts can then include a prior year-adjustment.

Am I allowed to?

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By fawltybasil2575
20th Sep 2019 14:18

@ atleast . . .(OP).

With respect of course, your approach is incorrect, albeit it appears possible that such approach has gained some traction from earlier responses.

The very FIRST question to ask the client company is WHY it signed off Accounts which it NOW contends are incorrect.

The fear is that (and I am compelled to say, albeit without knowledge of the full facts, that prima facie this would be a probability, albeit not a certainty) AFTER the Accounts were signed off, the company has ascertained that a Debt (which it had every reason to believe at the date of signing off the Accounts was “good”) has more recently been established to be “bad”. If such be the case, then the Accounts were correct and no amendment is possible – if such be the case, “job done” (and you should notify the client company that no further action is possible).

If, however, the company can put forward a reason, which upon enquiry you find valid, for an ERROR in the Accounts (ie evidence that the debt was “bad” at the signing off date, and a valid reason why this error was overlooked by the company) then you should accede to the request for the Accounts to be amended (ensuring also that the appropriate corrective action is taken in relation to acceptance, by the directors and shareholders, of those corrected Accounts). In that event, you MUST also ensure that the amended Accounts are also submitted to Companies House – if the company refuses to ensure that those amended Accounts are submitted to Companies House, then you should warn your client company that such refusal is entirely improper, and consult your governing body of the next steps to be taken by you.

To acquiesce in the company’s current “have it both ways” stance would render YOU liable to action by your governing body.

Basil.

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Replying to fawltybasil2575:
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By atleastisoundknowledgable...
20th Sep 2019 18:39

Hi Basil,

Thanks for your detailed response as ever.

Draft accounts were prepared, including the debtor as ‘good’. It then became know it should be ‘bad’ and taken out. The director basically signed & submitted the wrong set of accounts. We amended our software accounts back to those submitted (good debt) and filed the ct on that basis.

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Replying to atleastisoundknowledgable...:
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By fawltybasil2575
21st Sep 2019 14:10

Hi atleast.....

If I understand you correctly, it was established that the Accounts required correcting, to write off a Bad Debt (both your client company
and yourself being then fully aware of the correction required to the Draft Accounts).

You then PERSONALLY took the decision (notwithstanding the fact that no doubt the client company approved the CT Return which was based on the previous, as had by then been established, incorrect Draft Accounts) to submit that INCORRECT CT600. I must confess that this scenario troubles me greatly, and I hope that I have NOT understood you correctly, because quite simply it indicates that you submitted a CT600 which you KNEW to be incorrect ! Your comments on that disturbing scenario would be appreciated.

Assuming again that I have indeed understood you correctly (in your last post) you HAVE established that the Accounts submitted to Companies House were incorrect. It thus follows, as “night follows day”, that the company MUST NOW send amended Accounts to Companies House, the fact that such corrected Accounts “decimate” the Balance Sheet being totally irrelevant. The whole purpose of the requirement for all companies to submit Accounts to Companies House is to enable interested parties to assess the financial position of each company (a fact which your client company is fully aware of). If hypothetically the company were to founder, unable to pay off a large creditor, that creditor having extended credit to your client company on the strength of Accounts which your client company knew to be incorrect, there could be serious consequences for the director(s) who (i) submitted those false Accounts and then (ii) failed to rectify those Accounts.

You PERSONALLY must not associate yourself with Accounts which you know to be incorrect: it follows that, upon ascertaining that incorrect Accounts have been submitted, whether to Companies House, HMRC, the directors/shareholders or any third parties, then you must take a PROACTIVE line, in ENSURING that the corrected Accounts are in the hands of Companies House, HMRC and any other interested parties (just leaving the matter in the hands of the company is not an option).

The above advice is for the protection of:

(i) The company, and its directors, AND
(ii) YOU personally.

Basil.

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By clairebear
27th Sep 2019 13:31

Yes of course they should match. No ifs, no buts there.

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By Andrew3018
28th Sep 2019 10:54

atleastisoundknowledgable... wrote:

Accounts were submitted with CoHo & HMRC as normal. Client is saying that these were incorrectly filed containing a debt that should have been written-off as bad. This will obviously affect his CT liability, and is not for an insignificant amount. 

He would like to amend the CT600 and accompanying accounts and re-file with HMRC showing the bad debt, but not amend the accounts with Companies House. I guess in next year's tax comp we'd add back the bad debt so no double relief.

Can we do as he wishes, or would we have to submit amended accounts with CoHo (which he doesn't want to do).

Thanks

Was the debtor's account in question already have a provision for bad debts on the submitted balance sheet? If yes, then writing it off would only affect your tax calculation and reduce your tax liability. This change is within "change in estimate" and therefore should be treated prospectively and not retroactively, meaning there is no need for prior period adjustments. If however the account had no provision yet and it was categorically identified as uncollectible and not just an 'estimate' then your asset and net profit is overstated minus its tax effect. And if not it is not an estimate, then you need to treat it retroactively and amend the accounts in the CH. But and this is big a but, consider its 'materiality' before you do prior priod adjustment. If the debt is only an estimated bad debt meaning there is still a chance of collection, then no need make any change at all as provisions for bad debts are not tax deductible anyway and no need to make prior period adjustment too.

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Replying to Andrew3018:
Psycho
By Wilson Philips
28th Sep 2019 11:28

Andrew3018 wrote:

provisions for bad debts are not tax deductible anyway


Yes they are - provided that they are specific.
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Replying to Wilson Philips:
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By Andrew3018
28th Sep 2019 15:29

I agree provided you have a strong document to back it up upon hmrc examination, such as debtor's insolvency or bankruptcy. But specific provision by itself based on estimate would be just like any general provisions.

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Replying to Andrew3018:
Psycho
By Wilson Philips
28th Sep 2019 15:33

That is nonsense. You are thinking of the old rules before trade debts fell within LR provisions. Provided that the provision is specific then impairment should be allowed - without need to consider insolvency etc of the debtor.

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Replying to Wilson Philips:
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By Andrew3018
01st Oct 2019 09:22

Indeed provision for impairment is its new name but the underlying principle is the same, proof of actual event that exist at balance sheet date is still necessary before specific provisions are allowable unless you are on a lending trade.

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Psycho
By Wilson Philips
28th Sep 2019 11:23

Revised accounts should probably be filed at CH although I disagree that it is necessarily essential- see below. (Dealing with one response above, I wouldn’t be too concerned if the accounts are prepared under one standard for CH and another for HMRC. The differences should be in disclosure only with the numbers being the same. Bear in mind that what is filed at CH (fileted) will often be different to those filed with HMRC (full).

Assuming that the debt in question is a trade debt then loan relationship provisions apply, meaning that tax should follow the accounts. It would therefore appear that revised accounts should be filed. However, if - in order to comply with GAAP - the accounts should have reflected the impairment then it would be possible to apply a GAAP override for tax. However, if it were me I would still be filing amended GAAP-compliant accounts at CH.

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Replying to Wilson Philips:
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By Matrix
28th Sep 2019 12:45

Why do you think it would be ok to submit one set of accounts to Companies House and a different set to HMRC? The accounts are the accounts and, once signed, only the filleted or abridged accounts can be submitted to CH.

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Replying to Matrix:
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By atleastisoundknowledgable...
28th Sep 2019 13:16

I just told the client we’d have to amend with CH and he accepted it.

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Replying to atleastisoundknowledgable...:
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By Matrix
28th Sep 2019 13:32

Well done. How did the client manage to submit the wrong set themselves in the first place? I mean why did they file them rather than you?

My reply to WP was regarding submitting FRS105 to CH and 102 to HMRC, if that is what he means by it being ok to submit under different standards since I disagree.

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Replying to Matrix:
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By atleastisoundknowledgable...
28th Sep 2019 14:07

Matrix wrote:

Well done. How did the client manage to submit the wrong set themselves in the first place? I mean why did they file them rather than you?


? Who the hell knows?

Matrix wrote:

My reply to WP was regarding submitting FRS105 to CH and 102 to HMRC, if that is what he means by it being ok to submit under different standards since I disagree.


I agree with you (Matrix).
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Replying to Matrix:
Psycho
By Wilson Philips
28th Sep 2019 15:09

Provided that the profit is the same I doubt that HMRC would give a toss.

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Replying to Wilson Philips:
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By Matrix
28th Sep 2019 19:49

Companies House also accept any old rubbish but that does not mean that we should compromise our professional integrity.

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Replying to Matrix:
Psycho
By Wilson Philips
28th Sep 2019 20:20

The fact that the accounts might have been prepared under different standards doesn’t make either set ‘rubbish’. Let me ask you - provided that the stated profits are the same, and that the accounts meet all requirements of the relevant standard - ie GAAP-compliant, what do you think HMRC (or CH) would be concerned about? Bearing in mind that in any event the accounts provided to HMRC are likely to look quite different to the accounts filed at CH - notably a complete lack of P&L in the latter.

I take the point about professional integrity but at some point pragmatism also comes into play.

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Replying to Wilson Philips:
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By Matrix
28th Sep 2019 20:27

I never said that CH or HMRC would be concerned about anything. My concern was that another accountancy firm was taking money from a paying client and didn’t know what they were doing.

So you really think this is ok? DIY - maybe. Professional firm - really? Have standards (pun intended) slipped so low?

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Replying to Matrix:
Psycho
By Wilson Philips
28th Sep 2019 21:06

Your question was

“Why do you think it would be ok to submit one set of accounts to Companies House and a different set to HMRC?”

I’ve answered that.

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RLI
By lionofludesch
29th Sep 2019 10:44

I've always at least tried to play by the rules.

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