An old client has today advised they have been preparing their VAT returns under the wrong scheme - cash basis rather than accruals (exceeded the threshold). The VAT returns were all prepared and submitted by the bookkeeper who is independently instructed by them (not an employee) and we were not engaged for any VAT advice or services, only the year end accounts. During the course of the first years accounts when they did go over the threshold, we did bring up the scheme basis with the bookkeeper and director and advised that the cash basis threshold was exceeded. The bookkeeper continued to submit the returns under the cash basis. The client has moved onto pastures new, as the company has got bigger but who is responsible for the error of using and submitting under the wrong scheme if the bookkeeper had the responsibility to complete and submit the returns? The company accounts showed the correct VAT balance to the bookkeeping with adjustments to overclaims that we idenfitied.
We no longer act for the client and so wondered how long is everyone keeping their working papers files - this issue was back in 2013 and now we are being asked for information to prove that the client and bookkeeper were advised of the issue.