Partner ‘out of her depth’ filing a tax return

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A partner at an accountancy firm has been branded “extremely irresponsible” after filing a client’s £5m tax reclaim without the requisite tax legislation knowledge or possessing adequate professional scepticism and skill, according to November’s ICAEW disciplinary orders.

Mandy Brown’s severe reprimand should come as a warning for tax accountants preparing for another self assessment season.

Brown admitted to being “out of her depth” when she filed the client’s tax return. She was stumped by the client’s tax affairs which were very complicated and only became increasingly so.

The disciplinary tribunal heard how the rules for claiming relief for irrecoverable debts as business expenses and carrying losses back to previous years bewildered the defendant.

Brown first incurred HMRC’s investigative wrath after submitting her solicitor and property developer client’s 2010-11 tax return with a £5,042,837 tax reclaim. However, HMRC’s investigation uncovered other errors, including:

  • The £30,859,057 calculation of self employment losses had not been prepared under GAAP
  • The client was not entitled to sole trader relief
  • The compound interest on tax relief had no British legal basis; and
  • The claims for losses for the tax year ended 5 April 2007 were out of time.

Despite HMRC revising the tax calculations, Brown failed to take much of it on board because she filed the same client’s 2013-14 tax return claiming the similar reliefs and a substantial claim for compound interest that HMRC had previously rejected.

In this tax return, Brown had included claims for trading losses of £40.9m. The tribunal flagged the £43m of compound interest based on the rate of 29% over a 16 year period, because she should have realised such a claim should not have been made on a tax return.

Besides, the tribunal noted, a claim for compound interest should not have been made because HMRC calculates interest and simple interest is only ever awarded. The rate of 29% was both unprincipled and egregiously high.

The ICAEW tribunal acknowledged that Brown bore intense emotional pressure during this period when the client was clearly dying. Helping him as much as she could, Brown followed her client’s instructions. She accepts that she didn’t question the client’s advice, mainly because the source of the advice was the client’s tax barrister brother.

Dissatisfied by Brown’s explanations for the huge sums being reclaimed, HMRC complained to the ICAEW.  

The tribunal concluded that the defendant was extremely irresponsible for claiming large sums of money without legal justification.

While HMRC spotted the tax return errors, the tribunal reminded Brown that the tax department shouldn’t have to do that.  “[HMRC] is entitled to trust that professional accountants who represent clients know the tax legislation under which they practice and have the requisite knowledge skill and scepticism required. It does not function to pick up very serious errors in professional work and standards.”

Brown now must pay £9,312 in costs. Her unblemished 33-year ICAEW record and her willingness to co-operate persuaded the tribunal not to impose a fine.

Chris Cope (solicitor specialising in accountancy complaint and disciplinary cases and from the Accountants Complaint Services Limited ​) said:

The outcome could have been worse. Sincere regret, insight, cooperation and an absence of any dishonesty or lack of integrity, clearly assisted when sanction was considered. Aggravating features included the sheer scale of the sums involved and the repeated conduct in 2013/14 which removed any suggestion that this was a one-off offence.

It is significant that the Revenue reported this matter to the ICAEW. That must be almost unprecedented. Generally speaking, the Revenue does not report accountants. Maybe it should report far more than it does. Readers may or may not agree.

The most important feature of this case is that no professional should sail into unfamiliar waters, unless he or she has appropriate navigational skills. In other words “don’t dabble”. This applies just as much to lawyers as to accountants.

You can find out more about Chris Cope and the Accountants National Complaint Service by visiting their website here.

About Richard Hattersley

Richard Hattersley

Richard is AccountingWEB's practice correspondent. If you have any comments or suggestions for us get in touch.

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27th Nov 2018 10:06

Should have posted on Any Answers, she'd have been put right, after being told to hire an accountant, to stop pretending to be an accountant and sworn at in increasingly inventive ways.

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27th Nov 2018 10:11

It is significant that the Revenue reported this matter to the ICAEW. That must be almost unprecedented. Generally speaking, the Revenue does not report accountants. Maybe it should report far more than it does. Readers may or may not agree.

I would wish that HMRC would do this more often in extreme cases, it reminds us all not to step out of our knowledge zone and gives integrity to the process that our institutes do police their members.

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By May bee
27th Nov 2018 10:14

Sole trader relief?

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to May bee
27th Nov 2018 12:57

Ditto. Even Google hasn't heard of it.

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27th Nov 2018 10:20

How can this person be a Chartered Accountant ?

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27th Nov 2018 10:30

Extract above
Brown first incurred HMRC’s investigative wrath after submitting her solicitor and property developer client’s 2010-11 tax return with a £5,042,837 tax reclaim.

Did she really think HMRC were going to issue a £5M + refund without poking their noses in, good news for the rest of us, any minor errors will probably go through un-checked, keep it up Brown and similar accountants, tie the HMRC up.

To be fair we all get dragged out of our comfort zones, we all must cover our self's with a letter / email advises of the approach we have taken and consequences of HMRC challenging the tax return figures. Could it be a pushy, greedy client. Luckily HMRC did not pay out the refund, double trouble. Maybe Brown sent it in and hoped for the best, and hopefully communicated this to the client.

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27th Nov 2018 10:26

I am surprised there was no fine. Although I always think the costs are very high on these things, which is almost a fine itself.

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27th Nov 2018 11:21

She relied on a tax barrister......would be interesting to know if she received any of that advice in writing or if it was just 3rd party pub talk via the client. Any repercussions now on him?

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27th Nov 2018 11:50

Considering the biggest refund I made as a tax officer was £650,000, I am utterly staggered at the amount that this "Tax partner" was allowed to submit as a repayment claim without having it scrutinised by the Managing Partner of her firm. Since when does sole trader relief enter any framework? Losses can only be carried back for a certain period? And as for what she did with the other bits of the accounts heaven only knows. Since when did such people become allowed to be Chartered Accountants?

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27th Nov 2018 12:21

"Mandy Brown’s severe reprimand should come as a warning for tax accountants preparing for another self assessment season"

Yes, I'll remember that warning the next time I am claiming £43m of compound interest as a tax deduction! No need to scaremonger. It is clearly a very exceptional case.

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to alltaxedout
27th Nov 2018 14:54

alltaxedout wrote:

"Mandy Brown’s severe reprimand should come as a warning for tax accountants preparing for another self assessment season"

Yes, I'll remember that warning the next time I am claiming £43m of compound interest as a tax deduction! No need to scaremonger. It is clearly a very exceptional case.

I have worked with Landlords who tried the same trick. The judge would just put a line through their calculations and inform them that the rules stated 8% simple interest was the rule.

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to alltaxedout
05th Dec 2018 12:27

"It is clearly a very exceptional case."
"Clearly" is not a nice word. If it were blindingly obvious to everyone else, then it draws attention to the writer eventually being "the last to know".

Leave it out - it still reads OK

says The Good-English Professor

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27th Nov 2018 12:37

Should have imposed a hefty fine on the firm. It appears sole traders regularly get hit with fines and costs, but this partner in a firm gets away with just costs when making an error any tax practitioner would resign over.

Was Ms Brown CTA qualified? Or is this yet another case of accountants thinking they know tax (or thinking they know more than they do).

Beggars belief that no review system was in place within the firm, but ICAEW take no action.

I imagine if a sole trader had done this there would have been a huge fine plus costs and possibly struck off....

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to Ian McTernan CTA
27th Nov 2018 21:24

I wouldn't float that round here. 95% of AWeb aren't qualified at all - unless you count School Leaving Certificates and a BTEC in Dog Walking before they realised that prepping accounts paid more. ;)

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By Dandan
27th Nov 2018 13:29

Incredible double-standards by the disciplinary committee.

Only a reprimand ! for such utter incompetence.

Yet, decent accountants have been struck off or paid hefty fines for minor matters.

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27th Nov 2018 20:29

Why is anyone surprised. You can do the dodgiest audits imaginable - some of which helped to bring down major banks, and helped the whole global finance system to go into meltdown in 2008 - and no-one in ICAEW Disciplinary so much as bats an eyelid.

Compared to that, Mandy Brown is chickenfeed.

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to mr. mischief
28th Nov 2018 06:09

Excellent points

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27th Nov 2018 21:42

This wasn't a technicality - not all of it.

She submitted clearly fraudulent claims, was pulled up on it - then did it again. The second time most certainly was fraud even if the first time wasn't.

I despair, I really do. I kinda believe a lot of "accountants" should simply be banned from practicing - but at the same time, then how would small businesses get all their accounts and returns prepped for £100 a pop?

Also - in my work I come across so many LLB degree-d and qualified solicitors who charge out at £250 or more per hour but can't even proof read their documents to spell company names correctly.

I recently trusted one firm to send off some STF forms they were to prepare with a letter of claim for SD relief (that I had written) only for HMRC to write back saying that the claim was fine in principle but can we send an STF to them to adjudicate with the company name spelt correctly. I mean j-sus f-ing h-ll.

Rant over - and I have no idea what the answer is to these things

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By Dandan
to AnnAccountant
28th Nov 2018 13:15

AnnAccountant wrote:

Also - in my work I come across so many LLB degree-d and qualified solicitors who charge out at £250 or more per hour but can't even proof read their documents to spell company names correctly.

Good point. I would also add that 90% of completion statements that I have come across don't actually add up. There are always errors. It is a trademark for solicitors.

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28th Nov 2018 05:34

Surely this lady had colleagues with knowledge to assist her. Two heads are better than one and when dealing with huge claims it's essential one gets it right.
I have some sympathy for her if she was a little bit out of depth as no one is perfect.
I do think people should be reported for dishonesty but not for failing on a specific knowledge based task.
I wonder was she under pressure to do what the client and brother stipulated.
I am a little bemused as surely loss relief claims are straight forward.

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28th Nov 2018 05:34

Surely this lady had colleagues with knowledge to assist her. Two heads are better than one and when dealing with huge claims it's essential one gets it right.
I have some sympathy for her if she was a little bit out of depth as no one is perfect.
I do think people should be reported for dishonesty but not for failing on a specific knowledge based task.
I wonder was she under pressure to do what the client and brother stipulated.
I am a little bemused as surely loss relief claims are straight forward.

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28th Nov 2018 08:42

Very disappointed with the outcome here, there isn't any excuse because there are a number of steps she could have taken, one being spending 25 pounds to call a tax helpline for a start and checking everything she has doubts about or even her workings on such an important tax return, or admitted to her client she needed more specialist help and gone and sought that out as most clients do respect this as they want it to be done correctly.

I am so frustrated by accountants who are not speaking up when they need help, I can only imagine it's an ego thing but they sleep well while their clients suffer.

Last week a new client admitted her last year's accounts may need another review as there was something the accountant couldn't figure out so they just submitted it, this week I'm having to step in because a new clients accounts are due this Friday and her accountant has just cut all contact for months, absolutely no response so she has had no choice but to look elsewhere and it is just not good enough that accountants think it's ok to treat business owners this way.

If you are not confident that you can not do the work correctly, don't take the work on in the first place!

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28th Nov 2018 10:28

Does anyone agree with me that the word "clearly" is invariably unnecessary?
When used to start as sentence, it is aggressive.
When used to describe events, if it was "clear" then it was blindingly obvious to everyone else, and so illustrates that the user is "the last to know" [apologies to Dell Amitri].
Leave it out - it still reads OK
From The Good-English Professor

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28th Nov 2018 11:45

If you read the case in the link below you will see that having a tax barrister support your totally ridiculous claims for tax relief seems to make all the difference between risking ending up in jail for tax fraud & ending up simply being unlucky with HMRC defeating your tax scheme of one kind or another due to it having no realistic prospect of success.
https://assets.publishing.service.gov.uk/media/5bfd3c9b40f0b65ae8a1d015/...

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