I have an existing client (personal tax) who was trying to deal with his late brother's intestate estate, which I intially declined to deal with, as I was very busy, and worried it might be too complex. He enlisted the help of a solicitor friend of his, who eventually realised he was not competent to deal, so they mutully agreed to pass the papers over to an ICAEW firm the solicitor knew of. I have seen at least 2 emails from the solicitor to this new estate accountant firm, (I will refer to as EA), both expressing concern that late submission penalties might be pending, and could anything be done in mitigation. The second was accompanying the relevant papers, showing disposals of 2 properties, at which point, there was a month to go before the 31st July deadline. Several years later, in desperation, my client persuaded me to complete the work, which I have now done. We are now at the point where we realise that £6K of late submission penalties have been incurred, which could have been avoided if the EA had acted promptly when they were first approached. (The client had already paid sufficient tax on account to cover the tax liabilities). I feel that it was completely obvious that they were being asked to consider mitigation of penalties, albeit at that time, certain information was missing to make a complete submission. My client has asked me to assist him in making a claim against EA in this respect. I have sent them an email, referring to historic emails, and asked for their response. They have dragged their heels, the responsible partner/manager has since left the firm, and have now sent me a chronology of events from their files, which does not really address the main issue, but seems to infer that since they did not receive the relevant money laundering details until 8th August, they could not be held responsible. I cannot readily find anything to help me ascertain what would be considered to be the responsibilities of EA in these circumstances i.e. new appointment referred by a fellow professional, where urgent action is probably required prior to the formal engagement process having been completed. For my part, I feel very strongly that I would have attempted to ascertain the likely penalty situation, especially as it had been drawn to my attention by the referee solicitor, and made some sort of protective submission to HMRC in the month I had available, despite not having had time to carry out the necessary compliance matters in advance. (The compliance matters were subsequently completed between EA and my client, and CGT computations were prepared by EA, though my client was unable to entirely agree them, so they were never submitted by EA, who sent my client a fee for their work, which he paid.) What do other readers think, and can anyone refer me to a specific passage in the ICAEW code of ethics that might cover such a scenario. Many thanks.
3rd Dec 2021
professional responsibility to new client
urgent action required before formal engagement procedures complete
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