Request to stand as witness

Post divorce, ex wanting more money from letting profits

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Hello all,

I've had a request from a client who has asked if I would be willing to stand as witness for them, and am looking for your opinions.

Client is being perused by the ex a few years post divorce for 50% of rental profits. They previously co-owned a 3 bed semi which was rented out for around £8k per annum. Previous accountant completed P&L's/SA's. Divorce happened, client was liable for rental profits and SA submissions, the then accountant retired. Property sold, CGT completed.

I've completed 1x tax year up to the point property was sold. 

It seems the disgruntled ex and their new partner are seeking to be paid their half of the 'profits' submitted in previous accounts (5-6years), plus interest at the standard base rate, and has submitted this to the small claims court. They have no solicitor.

Client has engaged a solicitor to deal with this, and both have asked if I would be willing to be called as a witness if needed to explain the accounts. 

 

My views are.....I am more than competent to explain accounts, profits, etc and stand by the figures I completed if approached. I am comfortable with court protocol and proceedings, and understand it well. However, I am not a forensic accountant or an auditor, and only completed 1x tax year. 

It is pretty straightforward in my opinion, the ex is clutching at straws to get a bigger payday post settlement.

 

I am due a call with the clients solicitor to understand a little more on their defence, but thought I would request the views of those who tackle these situations more than I have

Thanks

 

Replies (21)

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By K81
09th Apr 2024 11:56

I would not be interested in doing that - as you say explain the accounts but nothing else.

is ex saying that she did not actually get her half share of the rental profits & sale of the property?

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Replying to K81:
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By lordofsums
09th Apr 2024 12:02

It is actually ex husband not wife, but yes claiming no receipt of profits for rental income only, not the sale of property

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By Matrix
09th Apr 2024 12:01

I would check that the tax has been dealt with correctly and leave the solicitor to deal with this as part of the divorce.

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By Roland195
09th Apr 2024 12:14

The chances are it is highly unlikely you will ever have to attend court but you won't be told this until the last minute.

In this case, you may have some useful testimony to give in explaining the difference between rental profits on a tax return and the actual cashflow behind it - you don't need any specialist knowledge but I would expect the fact you only prepared 1 year to have an impact.

Make sure the solicitor understands that we are taking about Self Assessment Tax Returns and the lack of full Financial Statements (I assume anyway) should not be regarded as anything other than entirely usual.

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David Winch
By David Winch
09th Apr 2024 12:17

As you say the request has come from your client (and their solicitor) so presumably client is OK with you disclosing information to the court. Also presumably the client will pay you for your time.
You can explain the figures you prepared, where you got the information from, whether (and how) you checked it (e.g. saw bank statements, or not). You cannot say (unless you know from bank statements etc) whether the income was shared with the ex and you certainly cannot say what ought to have happened or what your client's reasons were for doing this & not doing that.
So stick to the facts (and only the facts known to you). You can explain e.g. how taxes work on rental income and how you prepare tax returns.
Do not speculate on things you do not know and don't make the mistake of thinking you have to reach a conclusion on how the matter should be resolved or who is right & who is wrong. These are the functions of the judge (not you).
In short, your job is to explain accountancy things to a judge who is not an accountant - but do not go beyond that.
Good luck!
David

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Replying to davidwinch:
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By lordofsums
09th Apr 2024 12:29

Amazing thank you David!

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By paul.benny
09th Apr 2024 13:47

Excellent guidance from David.

I would also add
- treat this as an additional engagement to that for the routine work. Issue a letter of engagement specifying scope and update scope if that grows;
- be clear about fees - should be an hourly rate not a fixed fee for the work plus an amount for attendance at court. You might also want to periodically keep client informed about what is on the meter.
- remember this is one-off bespoke work that you cannot delegate to junior staff, so justifies a higher rate.

You don't mention the sums at issue. On the one hand, you are worth paying to keep money in Client's hands; on the other, it may be cost effective for Client to offer a settlement. Too easy focus on the winning rather than the cash.

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Replying to paul.benny:
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By lordofsums
09th Apr 2024 14:26

Brilliant thank you also!

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By bernard michael
09th Apr 2024 15:01

What doe the divorce settlement state re the rentals ??

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Replying to bernard michael:
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By lordofsums
09th Apr 2024 15:23

Wife was to have sole ownership of property, and the rental income to be in her name only.
Previous 5 years were 50/50 split profit

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Replying to bernard michael:
By Ruddles
09th Apr 2024 15:39

I don't see why that is of any relevance to the OP. Per DW's excellent advice above, OP's input should be limited to no more than a general discussion on how rental business accounts are prepared. If prompted, can also explain - in general terms - how rental businesses are taxed. And again if prompted to explain the numbers prepared by the OP (but to offer no opinion on those prepared by anyone else). The judge can then decide what action needs to be taken in the context of the divorce settlement.

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By bettybobbymeggie
09th Apr 2024 16:09

Not a chance.

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Replying to bettybobbymeggie:
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By FactChecker
09th Apr 2024 16:47
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By Paul Crowley
09th Apr 2024 16:53

What exactly am I expected to bring to the table?
That is the question you should be asking the solicitor.
You were not involved in how the rent was shared in the past.

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By jwgrogan
09th Apr 2024 18:15

I was asked to do this decades ago when I was employed in a local firm. The ex's line of attack was solely to imply that the accounts profits had been understated, to their disadvantage. This was a trader and I would think there's not so much scope to argue about with rental profits, as long as the expenditure is all kosher.

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By JCresswellTax
10th Apr 2024 09:57

Easy advice - don't do it.

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By lordofsums
10th Apr 2024 10:09

I had a good chat with the solicitor when they eventually returned my call, both agreed there is little point in my involvement.
Thank you all for the help!

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By graeme kempson
12th Apr 2024 10:16

About 35 years ago I was inveigled to go to court as a witness. I was not sure what help I could be, but the client was adamant and they were nice people.

When I was called to the stand the opposition jumped up with an objection.
Was I there as an expert witness or a witness of fact? Couldn't claim the former, so as there were no arguable facts which I could claim knowledge of in respect of the case, I heaved a sigh of relief and stayed where I was.

They ended up losing their case, and my time didn't get paid for!

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Replying to graeme kempson:
David Winch
By David Winch
12th Apr 2024 12:18

Hi Graeme, just for information -
Normally a witness is only supposed/allowed to give evidence about what he or she has seen or heard - hence can be labelled a 'witness of fact'.
An 'expert' witness is however allowed to give his opinions in his evidence. But an expert is required to be an independent and objective provider of opinion evidence - in theory an expert witness would give the same opinion whichever side was instructing (& paying!) him - and there are various rules of court which an expert witness has to comply with.
It gets a bit blurry sometimes - for example when a person employed by HMRC gives 'independent' evidence in a case of alleged tax fraud, or a police employee gives 'independent' evidence about typical drug trafficking behaviour or whether a fingerprint found at the scene of a crime belongs to the defendant.
But hopefully you get the idea.
David

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Replying to davidwinch:
Stepurhan
By stepurhan
12th Apr 2024 13:03

I once prepared a report for a partner who had decided to take on an expert witness case. I prepared the report from the information we had, detailing the figures and stating clearly any assumptions that had been made. (Basically reconstruction of profit and loss figures from incomplete records) As the fully qualified person actually acting as an expert witness, said partner should have at least reviewed this report thoroughly before stepping up.

He did not. He struggled to answer some questions from opposing counsel and asked to consult me in court. The judge rightly refused, as he was the expert witness, not me. Fortunately (for him) a completely separate issue scuppered the case for the side engaging us, so he did not find himself in his own lawsuit.

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By stanbu
12th Apr 2024 11:55

I was a 17 year old articled clerk working at a client who was a solicitor. He wanted me to go to court as an expert witness, which I politely declined! It was a case of theft from a petty cash box where there was only one key which the defendant had. The box was passed along the Jury and one of them looked at the box, took out a key from his pocket and opened it! Collapse of case!

When the solicitor returned jubilant from court, I had to point out to him that I had discovered that his own secretary had been stealing HIS petty cash! It turned out that she was also buying clothes on his wife's account at the local dress shop.

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