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Should we disengage with problem client?

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We acted on a client’s verbal instructions to prepare and submit the annual accounts and CT return for his company to Companies House and HMRC in good faith and with the understanding that he will physically sign them subsequently. (I know may be we shoudn't have relied on verbal approval but given that we knew him for 14 years and lockdown, it seemed reasonable at the time.) After the accounts were submitted, the client changed his mind saying the accounts were incorrect and denies giving verbal instructions and approval. The deadline for submitting accounts is 31 March 2021. We immediately offered to prepare and submit the amended accounts and CT return but the client now demands that we provide him services for free over next six years in case there is an enquiry or tax investigation from HMRC. We strongly believe that his demands for providing free of charge services are unreasonable. We also strongly believe that these unreasonable demands also show, his intentions for subsequently denying verbally approving the accounts once submitted, by trying to obtain free services and shift the blame for initiation of a tax investigation/enquiry by HMRC, on us. There is probability of a tax enquiry by HMRC into his company anyway, due to his repeated failure to pay PAYE taxes for more than 3-4 years.

During this time, he has been very abusive verbally and made threats for taking legal action. We have two questions: 

1. Should we disengage or try to help him submit amended accounts and return?

2. Given that the deadline for filing the accounts is close, are there legal consequenses against us that we should be aware of if we were to disengage?

Replies (26)

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By ireallyshouldknowthisbut
12th Mar 2021 13:02

Presumably you have at the very least an email or text to confirm your authority to file?

if so I would resign and leave him to it. No-one likes a bully.

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By Paul Crowley
12th Mar 2021 13:16

As above
DID CLIENT HAVE A COPY OF ACCOUNTS BY EMAIL

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Replying to Paul Crowley:
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By Anonymous
12th Mar 2021 13:18

Quote:

As above
DID CLIENT HAVE A COPY OF ACCOUNTS BY EMAIL

No, but he had reviewed and approved it on screen share during our zoom meeting. We didn't record the meeting though and his approval was verbal

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By Paul Crowley
12th Mar 2021 14:38

He had the chance to see them
Stand your ground
By all means amend and resubmit but he has lost nothing
Your urgency saved a late file and possible double late file for both submissions
Expect your fee

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By Anonymous
12th Mar 2021 13:16

Yes, he sent us the OTP required to log into his HMRC gateway to file the CT return.

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Replying to :
Stepurhan
By stepurhan
12th Mar 2021 13:18

You have blown your anonymity here by the way.

Why are you using the client's login to file anything? That is far more dangerous than simply accepting verbal approval. They could accuse you of doing anything with their account while you were in there.

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Replying to stepurhan:
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By Paul Crowley
12th Mar 2021 14:40

Agree
Agent system is there for agents
Do not deal in client stuff

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Stepurhan
By stepurhan
12th Mar 2021 13:16

You made a mistake accepting verbal approval that you could not later prove, but you clearly know that.

You have made an offer that would rectify the (alleged) error on your part. Given your inability to demonstrate approval of the original filed accounts, doing that would probably be wise to protect yourselves. (but get written confirmation this time) Anything beyond that is an entirely unreasonable demand by your client. Demanding 6 years of free work is just insane.

I'd be curious how much of a difference there is between the two sets of accounts. To preserve your anonymity you may need to ask Sift staff to make an edit outside the normal window to your OP.

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By Roland195
12th Mar 2021 13:26

Confused by what the 31st March 2021 deadline is if the whole problem is you have already filed the accounts - even if they require to be amended, there is no penalty for this.

Has the client always been like during a 14 year engagement?

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By SXGuy
12th Mar 2021 13:54

Verbally agree the 6 years free service, file the amendment then disengage.

That of course isn't my professional advice.

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By Wanderer
12th Mar 2021 14:21

So:-

Client is a liar.
Client demands six years free services.
Client is verbally abusive.
Client threatens legal action.

I wouldn't hesitate to disengage.

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By Truthsayer
12th Mar 2021 14:28

Were any other staff apart from you on the Zoom call? If so, ask them to write down their recollection of what was said. In the unlikely event of it ever going to court, it would be the word of two (or more) against one. Also, does Zoom log calls? If so, preserve the details. The client might be daft enough to deny the call ever happened.

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By lesley.barnes
12th Mar 2021 14:32

As others said you've made mistakes namely not getting at least an email to authorise you to file and also using the clients log in to file. Has the client told you why he now thinks the accounts are incorrect, have you reviewed this and do you agree with his claims? If so have you offered to amend the accounts, is he willing to let you do this and will he sign them off? Do you think he has a motive for changing the accounts window dressing perhaps for a loan or to pay less tax?

His Mr Angry act of being abusive, threating and demanding free accountancy services incase of an enquiry doesn't sit right with me. Its as if he is hiding something from you and is expecting HMRC to catch him. I wouldn't give him free services, would you want to represent him if he has been up to something dodgy? If he wants the accounts resubmitting, will sign them off and you are happy the amended accounts are correct I would do that and then disengage immediatley. If he won't agree then I would disengage and do no further work.

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Replying to lesley.barnes:
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By Paul Crowley
12th Mar 2021 14:45

That had not occurred to me
He knows the storm is on its way
Change the most recent figures and try to get free enquiry work
If you have an enquiry service arrangement, best not let him join or renew

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By AlgernonB
12th Mar 2021 14:35

I think that you should help him to submit the approved accounts, but tell him that you are doing it out of a sense of duty to a valued and long established client. Tell him also that you will continue to offer the same diligent service as you have in the past, for the fees it costs. If he is unhappy with your offer, bid him goodbye.

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By I'msorryIhaven'taclue
12th Mar 2021 14:50

To avoid unnecessary complications, I'm going to assume:
No audit small company accounts, FRS102 or 105;
Single director (or husband/compliant wife directors);
That the 6 years free work being demanded extends to investigations.

So ordinarily the s414 wet ink B.S. signature doesn't have to be viewed by you; a director's confirmation that accounts have been downloaded and the B.S. duly "signed" and, for that matter, properly approved by the board, should be sufficient for your purposes.

That director's verbal confirmation should be adequate. Except there remains the matter of proof. In the absence of any electronic affirmation- a simple email would have provided sufficient evidence - then ultimately it's down to which of you a court believes. In which respect believe you may hold a couple of trump cards:

firstly, Covid restrictions. Both Companies House and HMRC have temporarily relaxed (for the duration of lock-down) the requirement for wet signatures on documents for which they are normally mandatory. For example, https://www.gov.uk/guidance/pay-stamp-duty "HMRC will accept e-signatures while coronavirus measures are in place." I believe Cos House have similarly relaxed their policy to accept forms and resolutions with e-signatures. Against that backdrop, it seems perfectly reasonable that you might similarly relax your own authorisation process to accept verbal approval of accounts (together with its implicit assurance that the accounts you emailed have been printed off and signed at the director's end);

secondly, the director's actions in divulging the company's log-in details to you are consistent with his having approved the accounts and indicative of his wanting you to file them.

Rather than resign, I should continue to email your client and weave the above matters into a summary of events as you see them, in order to draw him over such matters (or at least to obtain his acquiescence). Refer to (and refuse) the six years' free services he has demanded, as that is tantamount to blackmail (he can either refute that "charge" or acquiesce - either way his position is seriously undermined). And repeat your offer to put matters right by preparing revised accounts at his earliest convenience, and at no extra charge.

So much for lining up defensive ducks. I have a separate idea forming for an offensive.

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By Paul Crowley
12th Mar 2021 14:56

A good point made by a regular on my recent thread was
Do not disengage. If he runs off to find a new agent, new agent will only get his side of story and you end up arguing with 2 people, not just one.

Former clients change their loyalty in a thrice

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By JD
12th Mar 2021 14:57

Is the client saying six years for free for everything that you might do in the future or is the request limited to these accounts alone (with which rightly or wrongly they seem to have concerns).

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By I'msorryIhaven'taclue
12th Mar 2021 15:25

Offensive ploy:

s414 Approval and signing of accounts

(1) A company's annual accounts must be approved by the board of directors and signed on behalf of the board by a director of the company.
(2) The signature must be on the company's balance sheet.

Ok so far; an approval by the director (whether e-signature, email, or verbal) could belt-and-braces carry a specific assurance that the accounts had been printed off and duly signed by the director; although in its absence one must rely upon an implied assurance to that effect.

(4) If annual accounts are approved that do not comply with the requirements of this Act (and, where applicable, of Article 4 of the IAS Regulation), every director of the company who—
(a) knew that they did not comply, or was reckless as to whether they complied, and
(b) failed to take reasonable steps to secure compliance with those requirements or, as the case may be, to prevent the accounts from being approved, commits an offence.

So how might s4, above, apply to your director's conduct? Let's commute it down to the relevant parts:

If annual accounts are approved that do not comply with the requirements of this Act every director of the company who:
(a) was reckless as to whether they complied; and
(b) failed to take reasonable steps to secure compliance with those requirements;
commits an offence.

Does the cap fit? Well I've cherry-picked the legislation, I know, but if it is your side's
contention that verbally and by his actions (in providing you with his HMRC log-in) he approved the accounts but (given the subsequent discovery that they were incorrect) was evidently found wanting on (a); then his current actions and obstructiveness in correcting the matter must sure put him in breach of (b).

Given which, s5 then goes on to inform your director of the penalties to which he may be personally liable.

That would be my offensive email. I think I'd weave into it that he's a few years behind with his PAYE, just in case any eventual arbitrator is still unable to work out which of the parties is the villain.

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A Putey FACA
By Arthur Putey
12th Mar 2021 18:38

Quote:

There is probability of a tax enquiry by HMRC into his company anyway, due to his repeated failure to pay PAYE taxes for more than 3-4 years.

During this time, he has been very abusive verbally and made threats for taking legal action./p>

And you continued to act for the client knowing that they have failed to pay taxes?

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By DaveyJonesLocker
12th Mar 2021 20:45

You've blown it by using the client's HMRC login details. That's posing as them to log in and submit. Good luck with that.
Why on earth don't you have an Agents account for submitting?

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Replying to DaveyJonesLocker:
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By Paul Crowley
13th Mar 2021 17:22

My thought as well on using client credentials as opposed to being a delegate.
I delete very few client emails
But I do delete those with clients log in ID and passwords

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By AS44NG
12th Mar 2021 22:54

"1. Should we disengage or try to help him submit amended accounts and return?

2. Given that the deadline for filing the accounts is close, are there legal consequenses against us that we should be aware of if we were to disengage?"

neither, try

3. Resign

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By Calculatorboy
13th Mar 2021 01:30

surely from a review before engaging youd pick up the overdue paye?

Its a good lesson in not bypassing engagement procedures and doing a preliminary review with a retainer up front , if the deadline was imminent , tough, thats clients problem not yours

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By Calculatorboy
13th Mar 2021 01:35

also hes threatened legal action you probably need to inform pi insurers ..watch your premium sky rocket next year

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By bernard michael
13th Mar 2021 09:34

Surely you can't file any amended accounts if he hasn't approved them. If you do you have compounded the initial problem.
Don't disengage but stand and fight. I hope you've got his threats and all other exchanges in writing particularly the 6 years free advice/ fighting HMRC

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