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What information to file Tax Return

Client just provided a spreadsheet with totals

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I don't do many CIS Tax Returns so forgive me on this one.

Potential client (Electrician) sent me a spreadsheet just giving monthly figures of income and costs.  I am normally more comfortable seeing a more detailed spreadsheet breakdown or CIS Subcontractor Statement / Receipts plus bank statements.  

Costs seem inflated as he only made a profit of 5K on a turnover of 35K when for a service based profession should actually make much more profit.  I have requested the bank statements.  I doubt he will appoint me as his accountant for this reason which doesn't matter

Though it did make me think -  do other accountants request more detailed information or do they accept the clients workings ?

 

Replies (31)

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RLI
By lionofludesch
24th Feb 2021 23:50

Not me.

I don't do submission only.

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By Wanderer
24th Feb 2021 23:57

I'd want to see the payment advices and cost receipts.

Wouldn't surprise me if the 'Income' is net after CIS deduction. Possibly after the costs as well.

Also £30k costs against £35k income is, as you have alluded to, excessive for a CIS electrician. Probably all sorts in there. Tell him you need the breakdown for inclusion in the relevant boxes on the SE pages.

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By SXGuy
25th Feb 2021 07:42

If he doesn't want to provide bank statements to prove the odd turnover to profit ratio then he may not be worth taking on anyway.

I would at the very least for a cis client want to see bank statements to check whether what he's wrote down is either gross or net of cis.

And I want to confirm 30k of expenses as your right it doesn't sound right.

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By Paul Crowley
25th Feb 2021 07:56

If expenses look stupid to you then they will look stupid to HMRC
If that goes in expect an enquiry

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Replying to Paul Crowley:
By kenny achampong
25th Feb 2021 10:12

Out of interest, when did you last have an enquiry/investigation for CT, PAYE, VAT or SA ? I can't think of any for 5 years maybe, not since the VAT flat rate ones which they all had. With CT, I can't remember any, and I do about 120 pa.

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Replying to kenny achampong:
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By DaveyJonesLocker
25th Feb 2021 10:16

I've had 1 in the last 10 years!

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Replying to DaveyJonesLocker:
RLI
By lionofludesch
25th Feb 2021 11:57

VAT visit last year, PAYE visit in 2014, can't remember when the last IT or CT dispute was - must be more than ten years ago, though.

That's where your tax gap lies - not enough deterrent.

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RLI
By lionofludesch
25th Feb 2021 08:59

Has he deducted his own wages?

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Replying to lionofludesch:
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By sanjay100
25th Feb 2021 14:28

Don't know. There isn't much information on the spreadsheet.

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Replying to sanjay100:
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By lionofludesch
25th Feb 2021 14:40

sanjay100 wrote:

Don't know. There isn't much information on the spreadsheet.

[chuckle]

Ask him, Sanjay.

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Replying to sanjay100:
RLI
By lionofludesch
25th Feb 2021 14:40

sanjay100 wrote:

Don't know. There isn't much information on the spreadsheet.

[chuckle]

Ask him, Sanjay.

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By ireallyshouldknowthisbut
25th Feb 2021 09:02

At what point did you think that was OK?

I have clients who give total figures time and time again. And time and time again I ask for the detail. Invariable its does not agree to the totals.

its just lazy people who don't want to be questioned as they know their figures are poor.

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Scooby
By gainsborough
25th Feb 2021 09:29

Having seen the complete rubbish sent to me on spreadsheets, I always insist on checking figures. Not due to client dishonesty, just a mix of wrong expenses in wrong years, formulas incorrect and using previous year's spreadsheet but forgetting to update all cells. Numbers aren't always their forte. That's my job.

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By frankfx
25th Feb 2021 10:59

MTD income tax. Is looming.

You could start his education now.

But may be a disruptive pupil.

You may want to educate him on the penalty for failing to maintain HMRC compliant records.

Based on what has been presented.

Avoid.

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Replying to frankfx:
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By sanjay100
25th Feb 2021 14:34

I am actually contemplating to refuse to take on an CIS clients in future even if they offered to double the fee. High risk and too much hassle plus some have deviously taken a bounceback. Actually, I forgot to ask him if he has a bounceback loan.

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By Truthsayer
25th Feb 2021 12:05

I never accept clients' totals, and always want to see how they got to their figures. They are usually wrong in many respects.

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By New To Accountancy
25th Feb 2021 13:36

I would say, 'I will need to charge extra for this return because there is a very high chance there may be an investigation - for obvious reasons, your profit was 15% of your turnover, which could be deemed very suspicious. For that reason, I'll need to see all expenses, sales invoices, and bank statements so I CAN DEFEND YOU in the event of an investigation. Bear in mind; you will have fees if there is an investigation, so we might as well get it right the first time around, so it doesn't take as long and inflate such fees.'

After this, you won't see him anyway because he now has to:

1) Pay extra for the return (for using you for his fraud you were meant to have puppy dog eyes and give him a cuddle for coping on £5k)
2) Create non-existant sales invoices from his spreadsheet and try and remember the jobs he did.
3) Find another £15k worth of receipts that he hasn't got
4) Email the CIS contractors and ask for PAD statements - which he can't be bothered doing)
5) Think of what the extra income was for into his bank and wonder if he can say they were 'transfers or gifts from his girlfriend/family'
6) Start asking if it ok to use eBay receipts from 3 years ago when he bought stuff back then because they 'are' allowable compared to the others he's given you.

Good luck.

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Replying to New To Accountancy:
By ireallyshouldknowthisbut
25th Feb 2021 13:58

you have clearly met Sanjay's client!

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Replying to ireallyshouldknowthisbut:
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By New To Accountancy
25th Feb 2021 14:04

(chuckle)
CIS clients are the burden of my life.

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Replying to New To Accountancy:
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By sanjay100
25th Feb 2021 14:31

I agree with you. To be honest to get a CIS Refund most CIS contractors seem to inflate their costs and HMRC will just pay without blinking an eyelid.

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Replying to sanjay100:
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By New To Accountancy
25th Feb 2021 14:49

His subby friend will give him some 'tax back advice' which will be something like:

'just put in a figure in the expenses box, any figure, then press next, next, next to the end bit, if it doesn't say what you want it to say, just press back, back, back, until it does and up the figure. When it does, your return is done. It's dead easy'

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Replying to New To Accountancy:
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By Moo
15th Mar 2021 14:49

Gosh, if you really are new to accountancy I wonder what the previous job was to make you so cynical.

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Replying to Moo:
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By New To Accountancy
15th Mar 2021 15:02

It was intended with humour. But experience of some subbies, - not all, makes this true either way.

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By mbee1
25th Feb 2021 15:04

Many contributors to this thread have mentioned the fact that it opens it up to an enquiry. Like some responders i haven't had an enquiry for years. I think, these days, the chances of an enquiry for even the most dodgy accounts and Tax Return are very remote.
SA used to be a "process now check later" system but it's become a "process now we'll check it if we have the time and resources which we wont have" system.

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Replying to mbee1:
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By Southwestbeancounter
25th Feb 2021 15:22

Agreed but I always prepare accounts with the view that I could defend them IF HMRC were to investigate.

I've been in business for 30+ years and worked for a practice before that and in those days routine investigations were the norm.

The last investigations I had were for VAT and SA for a mother and son running two separate businesses who were reported by a disgruntled employee suffice to say the investigations were fine and that was about 4-5 years ago but nothing before that for some time.

The day I get 'sloppy' in my opinion is the day I put down my calculator as there are plenty of firms that just fling jobs together and put their hand out for the fee - you can guarantee that the day I do that, the client would be investigated so I always instil into them that they need to keep accurate books and be ready for a routine investigation should it occur, we then reconcile every account we can unless we don't have bank statements but that would just be rental income accounts etc normally.

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Replying to Southwestbeancounter:
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By New To Accountancy
25th Feb 2021 15:29

I totally agree. An investigation is my first line of defence against all sorts of arguments. Otherwise, I am just some saddo who wants other peoples tax to be correct and I will have to defend myself for why I even care.

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Replying to mbee1:
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By Moo
15th Mar 2021 14:53

I think that enquiries often take a different form now. I've had several clients receive nudge letters on foreign income presumably prompted by the common reporting standard. And then there's the ones that come as part of the let property campaign traced through from letting agent reports.

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By Swabber
01st Mar 2021 10:23

To answer the question directly, occasionally, based on my assessment of the client's competence and honesty. But more often I have parted company with clients when I won't accept their figures without any evidence.

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By David Gordon FCCA
01st Mar 2021 12:56

It is not an audit
client's information does.
In any event HMRC will compare the ac to income reported by the payers.
But
I always insist on bank statements. This often checks the client's propensity to be creative.

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Replying to David Gordon FCCA:
RLI
By lionofludesch
01st Mar 2021 13:23

David Gordon FCCA wrote:

In any event HMRC will compare the ac to income reported by the payers.

Hard to believe HMRC check anything these days.

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Replying to lionofludesch:
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By Swabber
01st Mar 2021 15:54

Specifically to CIS deductions suffered, if the subcontractor's SA tax return figure does not match HMRC's figures from the contractors they will follow this up. I imagine this is an automated process.

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