Lambs to the slaughter

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Simon Sweetman looks at the impact of enquiries on unrepresented taxpayers.

I have just had a case brought to my attention by a local accountant ' an accountant who is a lot more aware than most local accountants when it comes to tax matters. The chap who came to see him had just been through an enquiry where the Inspector carried out a cash reconciliation and decided that profits for the year were understated by 15,000. This was on the basis that (as was agreed) all the wages were paid in cash. When this was looked at again, the accountant realised that the P11 figures that the Inspector had used for this in fact included employees' earnings from P45s supplied by previous employers. When analysed properly, the cash reconciliation confirmed the taxpayer's figures. When last heard of...

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18th Jan 2006 16:52

I was told by an FCA some years ago that promotion within the Inland Revenue was based on tax take or qualifications. I presume this cannot still be the case now that taxpayers are 'customers', and that the aggressive collection of tax and bending of the rules is just a political blip.

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17th Jan 2006 16:56

Harsh or no?
Given all the facts, it sounds harsh and I certainly did not mean to offend.

There will always be the client who isn't 'on message' about professional advisors. Usually, they're pretty easy to spot and in my opinion should be dispatched to the bucket shop down the road - withe freebie to soften the blow. When they behave in this way it's easy to defend because no-one in their right mind listens. But it does say something about trust - the only real asset 'we' have.

I did say as regards the Inspector - any other circumstances - absolutely - strongly worded complaint at the very least demanding an official apology that can be pulled out at appropriate times.

The wider issue of client perceptions about what professionals offer remains one of the biggest communications challenges. It is why I advocate a different approach to managing those relationships.

I'd bet good money most professionals struggle to count on the fingers of two hands the number of clients with whom they feel truly comfortable.

I'm convinced (most) professionals don't understand or feel comfortable with this and therefore, despite all the events, newsletters and other classic marketing 'stuff' that gets done, they don't end up making that crucial relationship breakthrough that changes the game.

Classic example - ICAEW: "You can count on a Chartered Accountants" - pathetic.

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16th Jan 2006 14:45

Bad Revenue advice
Even when a taxpayer is represented, the Revenue can mess things up for a taxpayer, or, in this case, the agent.

I was told today of an accountant who dealt with the affairs of a small sub-contractor. Due to profit fluctuations he has a much bigger bill due on 31 Jan than normal (high profit in year to 8 May 2004 with low profit, and hence low CIS deductions in the next year). The accountant submitted the return online last May and had advised the client of his tax bill.

The client, unhappy about a large bill, decides to go to the Revenue direct to check it. The Revenue person decides that the accountant has made a complete hash of it and that the client has not got this large bill to pay.

The Revenue has put this in writing to the client.

Result - client now decides his accountant is [words deleted] useless and is going around telling others (including some of the accountant's other clients). Naturally he believes the Revenue is right and his accountant wrong despite the accountant dealing with his affairs for many years.

Needless to say a strong complaint is being made.

Can compensation be claimed if the accountant loses other clients from this?

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16th Jan 2006 15:14

This scenario underlines the need for taxpayers and/or their advisers generally to consider professional expenses insurance in connection with tax investigations.

The policies and cover are not perfect, but do something to alleviate the stress of any investigation. After all, many smaller businesses are likely to blame the accountant if they are investigated, and recovering fees for dealing with it may be a major issue.

I shall be devoting a forthcoming Newthwire to the whole subject of PEI.

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By Anonymous
17th Jan 2006 12:46

It's not uncommon for the Revenue to get it wrong
Far too often Revenue executives are quite happy to accuse well-established fully qualified accounting professionals of being wrong when the reverse is true. As a professional I would never accuse someone of being wrong until I had re-checked and preferably seen how the other figure arose before accusing anyone of anything. Blurt out what you think without checking and get someone else to do all the work to prove to you they are in the right is all too common an approach.

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16th Jan 2006 18:08

Great Advert
Tax doesn't have to be taxing !!!!!!!!!!!!!

Who's kidding who??????????????

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16th Jan 2006 21:31

No sympathy
To Graham's point: Wrong question by a country mile. What the heck was the accountant doing allowing the client to walk away in a state of dissatisfaction? Even worse, what was the Revenue doing, casting opinion, unless, HMRC had found the firm to be generally lacking in some way? Either way, the last thing the firm should be doing is seeking compensation.

If said accountant had been smart, then he would already be having conversations with clients over sites like this or my own. Anything else doesn’t make sense.

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17th Jan 2006 11:02

Harsh on accountant

I feel you are being harsh on the accountant. He correctly calculated the tax liability and had advised the client with plenty of time before payment is due. He had also explained to the client why there was a large amount due. It is difficult to see how much more he could do. If the client had come back and said there is no way he can pay this tax even with 8 months warning then clearly the accountant could have approached the Revenue to negotiate.

However, the client, for reasons unknown, went straight to the Revenue. You might argue that this in itself indicates a poor client relationship but not necessarily. Certainly the accountant was very surprised.

Although I don't know for certain, I do not believe that the Revenue had any more ammo against the accountant.

In my view it is yet another, particularly extreme, example of unprofessional behaviour by the Revenue, probably by a low level officer not being adequately supervised.

I experienced this myself some years ago when the Revenue made a complete hash of recomputing the tax I owed them following some agreed adjustments. Although the error was in my favour, I felt obliged to point it out to them. Back came a very arrogantly worded letter assuring me they were correct. Needless to say I did not feel an obligation to take the matter further.

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