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VAT Scheme Error

Is bookkeeper or accountant responsible for error?

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.

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By zarar
11th Dec 2018 16:46

We keep ours for at least 6 complete years.

Who is asking for the proof?

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11th Dec 2018 16:54

Quote:

... 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?

Hm! Tough one, that. What did your engagement letter say?

Is the former client bound by the 6 year limit to bring a claim against you for damages? That's only next year, so I would see what they do but obviously you have nothing to gain by destroying papers that demonstrate you acted correctly.

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By DJKL
to Accountant A
11th Dec 2018 17:19

Irrespective of what the papers say destroying them is the worst option.

Whatever they do or do not include, being asked in court if you destroyed papers and having to answer that you did, irrespective of what they included, must surely damage any defence.

See Mrs Clinton- the damage was not the second server it was deleting stuff from it that did the damage to her.

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to DJKL
11th Dec 2018 17:29

Quote:

Irrespective of what the papers say destroying them is the worst option.

It would certainly be odd to destroy before usual and/or accepted deadlines. More so as the OP suggests they contain information demonstrating that they acted correctly.

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11th Dec 2018 17:10

I’m struggling to see how this could possible be your fault, it must be shared between the bookkeeper and the director.

Were you engaged to do the returns? No.
To give advice? No.
Did you do the returns? No.
Did you adjust for it in the accounts? Yes

If you’ve kept that email/letter/file note, surely you’re untouchable!

At a guess, HMRC have investigated & raised penalties, the current accountants have blamed you and told the client to claim against your PII.

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11th Dec 2018 17:15

After you had advised that the wrong scheme was being used did you do the accounts again in following years. Did you tell the Director he was still using the wrong scheme or did they move to a new accountant after you first advised them?

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11th Dec 2018 17:35

"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. "

There is your response. Was your advice verbal or written? If the former you should be able to glean the date time and who was present. If the latter, state the date of the letter and to whom it was addressed. I presume you have a copy but you don't need to offer it just yet. Just letting them know that you know you have it might be sufficient. Trouble is, we really need more info from you.

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11th Dec 2018 18:47

Struggling to see how they can possibly blame you. Did you perhaps tell them that they were okay to use the cash basis at a point when they were under the threshold and they've interpreted that as meaning they're fine forevermore. conveniently forgetting you told them they'd breached the limit?

Also, how big are the penalties likely to be given that it must largely be a timing difference?

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