I am in the process of winding up a company which has no remaining assets. Out of the blue my accountant informed me that he has not previously issued any bills for his services going back to 2010/11 and sent me his invoices for the period from then to now. He made a point of reminding me that, as a Director, I am persoanlly liable under the terms of the engagement letter. I am not disputing the work he has done and accept my share of the blame for not realising that the work was unbilled, but surely he must accept some blame as well. Is it reasonable to expect a signifcant reduction to his fees as it was his failing in not issuing the invoices sooner? Any advice welcome. Thank you.
Related resources
Replies (45)
Please login or register to join the discussion.
Has the cost of your accountant been included in your company expenses for the last 9 years, and were they taken into account when your company tax was paid? If not, the accountant has not done his job properly and I would not pay him. If so, then there should be an entry in the accounts for the accrued amounts so there should be no surprise that it is due. If there is no accrued entry then again he has not done his job properly so blow him off.
blow him off.
We normally prefer our fees to be settled in monetary terms, but whatever floats your boat.
Hi Tim,
Thanks for your response. Yes, accountant's fees were included in the accounts under the heading "Administrative Expenses". I guess I would like to know 1) Why wouldn't an accountant issue his invoices for multiples years? Is it an oversight or is this common practice? and 2) At what point does it become unacceptable, even if the fees were in the accounts? What if we had not closed the company for another 10 years? Would it be OK to issue 18 years' of unbilled invoices? Thanks
Sounds like a nice competent firm to not bill for 9 years.
That is quite frankly bizarre.
Astonishing that the accountant has not billed for so long. It's incompetent and unprofessional.
A director is not normally liable for unpaid debts of a company. Do you have a copy of the engagement letter where you apparently agreed the personal liability? The accountant may be trying it on when claiming you are liable.
I'm a curious about the fees being included in the accounts. If it was recorded as an expense, and remained unpaid, there should also be a liability, starting with the 210/11 accounts. With each year's fees being unpaid, the liability should have grown each year. The latest accounts should show the amount owing to the accountant for all 7-8 years. If it doesn't, then the fees have been paid or there is an error somewhere.
Hi Paul,
Thanks.
The engagement letter was signed back in 2004 when the company was set up and I can no longer find it. However, I have requested a copy from the accountant.
As far as I can see the fees for the relevant year only were listed in the accounts each year as an expense. There was no other reference to them. Liabilities were shown but they were not itemised in the accounts. So, to my untrained eye, not obvious.
Ask to see a copy of the terms of engagement. A properly authorised / assented to (by you) and delivered copy; not just a generic copy of his latest T&Cs.
It's fairly standard in such terms to make a director personally liable for his company's financial obligations. But the Devil may well be in the detail.
You may wish to check your engagement letter/letters. If the alleged guarantee is part of the limited company's engagement letter it's likely an invalid term simply because the contract is between the company and the accountant. As an accountant it's very difficult to get these guarantees right legally.
There has to be more to this than you have so far stated - does the accountant represent you for other business interests for instance?, Are we talking about a largely dormant/non-trading company?
Unless you happen to have a portfolio of compromising pictures, why has he worked for free for 9 years? Did you never consider at any point in nigh on a decade that you don't appear to have paid?
Well quite.
I wonder if its been billed (ie paying monthly) but never invoiced properly.
I have seen that done. Still cowboy as hell, but possible if the firm is really old school and has poor systems.
Hi Roland,
Thanks for your reply.
Not much more to it. The company was largely dormant but filing accounts every year. It is not my main business and very much a sideline. Invoices that were received were paid by myself or the other Director. Somehow, between us, we didn't notice that our accountant had not issued his own invoices. No idea why he didn't issue invoices for 8 or 9 years but we have a meeting tomorrow so...
Have to say it sounds a bit like the situation outlined by DJKL. The accountant was aware the company lacked the funds to pay so on the strength of the business from whatever your main gig was agreed to let this slide until the company was either in a better position or wound up?
Obviously, his attention to detail in terms of invoices & statements looks suspect meaning that the advice regarding statute of limitations applies as does the fact that it is unlikely he could enforce this via the terms in his engagement letter however if your relationship is otherwise good, I'd suggest a compromise would be fair.
Do you not have anything similar to prescription down south (presuming this is down south)
That would certainly be my starting point- chat with a friendly solicitor.
I recently got paid for nine years work for one particular client which I had allowed to remain outstanding, but I very carefully issued a fee for each year and also each year passed over a statement displaying the built up arrears to ensure the debt did not run out of time. (A property deal that went off the rails and client gave me a lot of other work so agreed soft terms re the fees, not something I usually do or suggest anyone else does)
Do you not have anything similar to prescription down south (presuming this is down south)
Of course we have prescriptions !
I get mine free these days.
DJKL wrote:
Do you not have anything similar to prescription down south (presuming this is down south)
Of course we have prescriptions !
I get mine free these days.
Don’t all Scots get them free? Isn’t that why you’re (generic plural) a net drain on the NHS?
<
Don’t all Scots get them free? Isn’t that why you’re (generic plural) a net drain on the NHS?
Naughty. Slapped hand.
atleastisoundknowledgable... wrote:
<
Don’t all Scots get them free? Isn’t that why you’re (generic plural) a net drain on the NHS?
Naughty. Slapped hand.
Have you caught Tax Dragon disease and started talking to yourself?
Just thinking aloud but is it possible that part of this debt is statute barred? Would certainly reduce the debt if so.
Wait. Your accountant done all this work for 8 years and never once billed you for it until you decided to wind the company up? Really? He worked for free for 8 years? Find it hard to believe. He's either very silly or has other motivations.
And you didn't think to question this not insignificant sum under creditors in a "largely dormant" company set of accounts that you or your co-director signed off?
Hi,
I do accept my share of the blame on this! But I still think the accountant should have explicitly made the directors aware that he was not issuing his bills over such a long period of time.
Thanks
It's hard to form an opinion without more information (and I am kind of playing Devil's Advocate here):
1. Were there any other creditors in the balance sheet that would have "disguised" this £20k or would it have stood out like a sore thumb?
2. Did the company have a negative balance sheet and if so, was the reason for this brought to your attention?
3. Is it possible that the accountant did explain this to you or your co-director or a spouse, manager, etc but you/they didn't realise the significance at the time?
4. In your opinion, would it be reasonable for the accountant to have assumed that you knew exactly what the £20k was, especially bearing in mind that the other entries were in the P&L?
Hi,
Understood.
1) The company has been making a loss for most of the last 15 years.Total liabilities are about £125k. So accountant's fees were not obvious to us.
2) Nothing brought to our attention
3) It is possible, but my co-director (who handled most of day to day running) assures me this is not the case.
4) No. Not in my opinion. Wouldn't an accountant have an obligation to bring it to our attention if they were deliberately not issuing invoices?
I can see no reason why the accountant didn't issue his invoices (other than oversight). If they had been issued at the time we would have paid them.
Thanks
This has turned out to be a whole lot different to the inferences in, and the assumptions I made in relation to the original question.
My advice is to take legal advice - anything posted in here will be based on your incomplete information and will be speculative at best.
£20,000.
This changes matters significantly. How has this figure been arrived at for the filing of dormant accounts? Was he hand delivering them by chartered helicopter?
What exactly were your interactions with him in this period with regard to fees? Surely at some point you must have asked him to quote or at least estimate how much you could expect to pay?
I would get a narrative of this together before you engage with a solicitor because none of this makes any sense. When I said he could just be letting it go on the strength of other business, meant for an amount of less than £1,000.
Thanks.
Basically we have been sent 8 invoices for around £2,500 each. They cover preparing accounts, Director's Report, payroll services and tax return since 2010/11. When we first set up the company in 2004 (the company was more active then) we did get fee estimates which seemed reasonable at the time. More recently (last 9 years) the company have been largely dormant and we have had minimal contact with the accountant. The company is very much a sideline and not my main business (for which I use a different accountant).
Thanks.
Basically we have been sent 8 invoices for around £2,500 each. They cover preparing accounts, Director's Report, payroll services and tax return since 2010/11. When we first set up the company in 2004 (the company was more active then) we did get fee estimates which seemed reasonable at the time. More recently (last 9 years) the company have been largely dormant and we have had minimal contact with the accountant. The company is very much a sideline and not my main business (for which I use a different accountant).
Largely dormant does't really make sense. A company is either dormant or it isn't (although there are distinctions between dormant for Companies House and dormant for corporation tax).
If there were payroll services being provided during the accounting periods in question then I would think the company was not dormant in any way and as such the work require would be greater than if it were dormant.
£2,500 per year may be reasonable, depends on too many factors that we are not aware of. However, not invoicing for 9 years is very poor practice.
As has been suggested - probably best to talk to the accountant and see if an agreement can be reached.
Thanks.
Basically we have been sent 8 invoices for around £2,500 each. They cover preparing accounts, Director's Report, payroll services and tax return since 2010/11. When we first set up the company in 2004 (the company was more active then) we did get fee estimates which seemed reasonable at the time. More recently (last 9 years) the company have been largely dormant and we have had minimal contact with the accountant. The company is very much a sideline and not my main business (for which I use a different accountant).
In which case, I'd like whatever he is smoking. Still struggling a bit with the fact neither party pursued the issue of payment for nearly a decade but can't fathom why he would continue working if he actually believed a debt of this magnitude had accrued.
In which case, I'd like whatever he is smoking. Still struggling a bit with the fact neither party pursued the issue of payment for nearly a decade but can't fathom why he would continue working if he actually believed a debt of this magnitude had accrued.
Me too. I'm also struggling to understand fees of that size for a company which, it is vaguely implied, doesn't have much activity.
I think I might be asking for a detailed breakdown of the fees.
Thanks.
Basically we have been sent 8 invoices for around £2,500 each.
How much was the last invoice that you actually paid?
Ask him if he wants to still be the accountant for your main company or continue to be a prick
£20,000?!?!
Your accountant is a muppet.
EDIT: I don't care how much I know or like a client or friend, they're not getting £20k of credit from me!
Pick up the phone and agree to pay a fee and move on.
The accountant is not in a strong position but you cannot expect to pay nothing.
Maybe also suggest accountant looks at the Go Proposal website on how to bill clients could be the best money they ever spend.
Maybe also suggest accountant looks at the Go Proposal website on how to bill clients could be the best money they ever spend.
Not even GoP would charge £2.5k for dormant accounts. Although line iteming ‘Directors Report’ is something it would probably do.
Accrual is not recognising a specific liability. This could be helpful in arguing that the earlier fees are now statute barred. Definitely seek legal advice from a lawyer with experience in this area.
Presumably the company is not registered for VAT-otherwise, subject to any disclaimer in the LoE, there is a claim against the accountants for failure to accrue recoverable VAT.
What i s the VAT tax point for these invoices. If they are rendered after the work specified in each invoice was completed, then the VAT will now be irrecoverable for invoices more than four years after the date of completion.
Does the accountant think his own accounts were correct over those years=this sounds like a tax deferral/saving scheme by the accountant, which he will not want HMRC to know about. How many other bills have not been rendered for other clients for the sane reason.?FRS5/FRS 102 are in point for his own accounts and thus his own tax liabilities over the years