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Who's fault?

Who's fault?

Upon prepairing my clients accounts (to April 2017) i realised they had breached the VAT threshold early in the accounting year(May 2016). I had advised them in their interview for the previous year that they were close to the vat threshold, and explaned how the rolling monthly works. The client again contacted me during the 2016/2017 financial year asking about the vat thresholds which i correctly advised them on. 

Unfortunatly i didnt get the books until late 2017 so this issue wasnt spotted until nearly 18months post the registration date. I only act as a tax advisor (not a bookkeeper) so only see them annually.

Is this my fault / responsibility? Could / should i have done more, or should the client have been keeping a closer eye on their business? 

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By mrme89
13th Feb 2018 15:23

You did all you could.

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13th Feb 2018 15:29

Well, you could've done more. Given that they were close to the threshold in April 2016 and you were preparing accounts probably seven or eight months later, with hindsight, it may have been wise to review the turnover between the accounting date and the date of your preparation of the accounts.

It seems to be that they'd already breached the threshold by the time you were giving them advice about breaching the threshold.

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to lionofludesch
13th Feb 2018 16:47

At the time I advised the client to keep an eye on the turnover and explained the rolling monthly, but I didn't do a review at the time. Is that something I really should have done? Or is advising the client on the correct procedure enough?

Ultimately is this my responsibility? or theirs?

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to ronaldcaincain
13th Feb 2018 21:28

Quote:

At the time I advised the client to keep an eye on the turnover and explained the rolling monthly, but I didn't do a review at the time. Is that something I really should have done? Or is advising the client on the correct procedure enough?

Ultimately is this my responsibility? or theirs?

Theirs. Just saying that you could've asked. They were already over the threshold at the time of your chat.

Sure you told them to check it but we all know clients generally don't get this rolling 12 month thing. There was a guy on here last week told us he'd taken £82,000 since 5th April and wondered if he could avoid crossing the threshold. Too late, pal. Already over it.

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By Mr_awol
to lionofludesch
13th Feb 2018 17:56

Quote:

Well, you could've done more. Given that they were close to the threshold in April 2016 and you were preparing accounts probably seven or eight months later, with hindsight, it may have been wise to review the turnover between the accounting date and the date of your preparation of the accounts.

It seems to be that they'd already breached the threshold by the time you were giving them advice about breaching the threshold.

I probably agree - if the client provided enough info for the OP to know. In any case I don't think the OP should kick themselves over it when they clearly feel bad but I often refer to the stereotypical senior partner many of us trained under. I can imagine back in those days drafting a letter for that ogre of a partner in which I sent a client his April 2016 accounts in December 2017 and advised them of a potential threshold breach:
"have we got the records after the year end?"
-um, yes (at this point start to look at floor)
"have we checked whether they've actually gone over?"
- well, no, not exactly (at this point turn red end get ready for the whole office to hear the next bit)
"WELL DONT YOU THINK YOUD BETTER GO BACK AND FUCKING[***] LOOK AT IT PROPERLY?!?!?!?!?!"

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13th Feb 2018 15:38

Absolutely not your fault unless you have been granted Power of Attorney due to your client's incapacity.

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13th Feb 2018 15:43

In all honesty i feel terrible its been missed and somehow feel its my fault. I wanted to know what other advisers would have done in this situation? As the above mentioned, perhaps i could have done more?

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to ronaldcaincain
13th Feb 2018 15:45

Quote:

In all honesty i feel terrible its been missed and somehow feel its my fault. I wanted to know what other advisers would have done in this situation? As the above mentioned, perhaps i could have done more?

What does your engagement letter say about the services you are providing?

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to Accountant A
13th Feb 2018 15:51

Nothing about preparing vat returns in the LOE

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to ronaldcaincain
13th Feb 2018 16:12

Quote:

Nothing about preparing vat returns in the LOE

I meant more specifically about tax advice and/or tax planning.

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to Accountant A
13th Feb 2018 16:16

I will have a look this evening.

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to ronaldcaincain
13th Feb 2018 18:12

Quote:

I will have a look this evening.

If it says "advice" then you have given advice. It seems unlikely that your letter of engagement could require more but you need to read what it says and, as objectively as you can, judge whether any more was reasonably required of you.

Also was your advice given in writing? Was anything you said reasonably capable of giving an impression that you now think might cause you a problem?

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to ronaldcaincain
13th Feb 2018 15:50

You drew it to your client's attention. Your client did nothing. We can always think we could have done more, but who is the more responsible for your client's business? It is your client, of course, who must accept personal responsibility for not acting when you alerted them to take action.

You feel bad because you care. You feel worse because this may impair your relationship with your client. I'm afraid that is just an occupational hazard. We have all been there. The best you can do is advise how to get your client out of the mess they have got themselves into.

If your client kicks back they are not being reasonable. Be confident of that. If you weaken, an unreasonable client will smell it and go for you.

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to andy.partridge
13th Feb 2018 15:53

Quote:

You drew it to your client's attention. Your client did nothing. We can always think we could have done more, but who is the more responsible for your client's business? It is your client, of course, who must accept personal responsibility for not acting when you alerted them to take action.

You feel bad because you care. You feel worse because this may impair your relationship with your client. I'm afraid that is just an occupational hazard. We have all been there. The best you can do is advise how to get your client out of the mess they have got themselves into.

If your client kicks back they are not being reasonable. Be confident of that. If you weaken, an unreasonable client will smell it and go for you.

This.

Sure you could have asked to review his sales but, ultimately, the client had the information at his fingertips and didn't do it.

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13th Feb 2018 16:00

Yes i do feel they were very slap dash about how serious registering at the right time was. In the future i will make sure i try and pester clients more if i feel this could happen again.

Yes i do care about doing the right thing, and hearing that perhaps its not my fault will help me sleep a bit better!!

I will do everything i can to assist the client catch up. I hope hes not fined to heavily!!

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to ronaldcaincain
13th Feb 2018 16:11

Good for you.

Lesson learned.

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13th Feb 2018 16:18

“Who’s fault?”

Not sure, never heard of a person called that name before....

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to SpreadsheetUser
13th Feb 2018 16:25

You have now :D

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to SpreadsheetUser
13th Feb 2018 16:34

Quote:

“Who’s fault?”

Not sure, never heard of a person called that name before....

There's a great Abbott and Costello routine based on precisely that.

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By rhino83
13th Feb 2018 16:21

When we've had similar cases in the passed we have offered to monitor the clients sales figures for them.

Some have taken us up on this, some didn't want the extra costs.

I bet you can guess which are the ones which blame us for not telling them they breached the threshold.

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13th Feb 2018 17:08

As everyone else has said not your fault - you advised them not once but twice about VAT thresholds. If they are doing their own book keeping unless you have a crystal ball you couldn't have known they had ignored your advice. The cynic in me thinks that they chose to ignore you because it wasn't what they wanted to hear.

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13th Feb 2018 17:09

If they are getting close to hitting the threshold, I suggest (tell!) them to monitor their sales on a monthly basis, and if they are consistently making £7K a month, then they need to tell me. With one, I got them to phone me every month with their total sales, and I updated their rolling turnover.

I wouldn't beat yourself up over it, but I would also think about being more proactive in the future, so that the situation doesn't recur.

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13th Feb 2018 17:50

I’m being blamed for this at the moment.

Ltd co #1 trades at a cafe, badly only just breaking even), for 6 months t/o £45k. External local factor changes, potentially cutting punters by 2/3, so they up sticks & leave.
Landlord knew it was happening, so no break in trade, but totally unrelated ltd co #2 moves in. T/o £3k pcm, so well below limit, even including the prior trading entity. We do mgmts after 3 months, showing breakeven and c£3k pcm t/o. Cuts costs, raises prices & gets more footfall. 17 months later, we do the YE, client has £90k t/o in the first 11 months of trade.

It’s my fault that he didn’t register.

Go figure.

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13th Feb 2018 19:20

OP, I know it's clutching at straws but was the May 2016 breach temporary? ie is there any scope for an exception?

In any event, there may be room to mitigate this. I've had a late registrant granted full input VAT claims for the late registration period (some years ago, admittedly) and those among his regular customers who were themselves VAT registered didn't object to being back-invoiced for additional VAT.

btw I certainly wouldn't accept any blame - show them s386 of the Companies Act and tell them to pull their socks up! They should take the matter up with their bookkeeper.

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14th Feb 2018 10:19

How difficult is it when preparing the April 2016 accounts and already having warning your client about his nearing the vat registration threshold would it be to ask him for the turnover figures for May/June/July 2016 etc ! ., which presumably he would have.
I have just prepared a set of accounts for the y/e 30-11-2017 which show £71k up a bit from last year and have asked the client for t/o figures up to date, just in case.

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to meadowsaw227
14th Feb 2018 10:36

In hide site this is what i would have done. Instead i told him to keep a close eye on his turnover figures as he was close to the threshold. I (wrongly) presumed he was then doing this.

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to meadowsaw227
14th Feb 2018 23:23

Meadowsaw, doesn't the client have a bookkeeper who might take responsibility for that?

How much will you charge to monitor your client's rolling turnover? (and remember, an accountant who doesn't know enough to charge something for his/her services doesn't know enough to advise his/her clients on how to run their businesses!)

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to I'msorryIhaven'taclue
15th Feb 2018 09:31

Quote:

Meadowsaw, doesn't the client have a bookkeeper who might take responsibility for that?

I'm presuming you work in some sort of fantasy land - possibly the same one as HMRC.

Businesses with a turnover of £71k don't have bookkeepers who can monitor the business's turnover.

Ask the guy to tell you how much he took every month. Sure - charge for the work - but it's not going to be megabucks to add this month's sales to the figure you had last month and take away a month from the beginning. Five minutes work a month - money well spent.

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to lionofludesch
15th Feb 2018 20:59

Quote:

I'm presuming you work in some sort of fantasy land - possibly the same one as HMRC.

Businesses with a turnover of £71k don't have bookkeepers who can monitor the business's turnover.


Well someone must keep the books, even if that's the director's wife, and I'm trying to steer the OP away from believing that the buck stops with him/her.
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to I'msorryIhaven'taclue
15th Feb 2018 22:41

Quote:

Well someone must keep the books, even if that's the director's wife, and I'm trying to steer the OP away from believing that the buck stops with him/her.

That how I took it - I think Lion was being a bit harsh on you.

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to atleastisoundknowledgable...
16th Feb 2018 08:49

Quote:

That how I took it - I think Lion was being a bit harsh on you.

Thanks, he's just got a thorn in his paw again! Lion, any more roaring from you and I shall change my avatar to Tarzan!

There! That'll sort him out. Five minutes a month indeed! An elementary appreciation of Critical Path Analysis would tell you that five minutes may well be the quickest achievable duration, but that the anticipated duration is likely to be many times longer.

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to I'msorryIhaven'taclue
16th Feb 2018 09:38

Whilst accepting what you all say, the OP's saying he did some April 2016 accounts eight months after the year end. He could've asked for the turnover figures for the ensuing eight months and identified in minutes that the Rubicon had been crossed in May. Time costs of a few pounds saving his client - dunno - thousands, perhaps.

The information he needed was already available but he didn't ask for it.

And that's why he feels bad.

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to lionofludesch
16th Feb 2018 11:52

Yeah, I guess so Lion. I think I've forgotten what it's like to deal with a deserving willing-to-pay preventative-medicine type client as January and so far in February all my undeserving Pareto PITA after-the-event fee-quibbing types are having their annual assault on my sensibilities.

So long as it's not the OP's client making him field bad about it all, then that's fine. Maybe I'm the one with thorns in my side. Is the pub open yet, I wonder?

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