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Sole practitioner punished over unpaid fees clash

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A sole practitioner has been severely reprimanded after blocking a departing client from filing a confirmation statement with Companies House because of their outstanding fees.

7th Sep 2023
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Michael Pinner, a chartered accountant from London, was rapped by the Institute of Chartered Accountants in England and Wales (ICAEW) and handed a financial penalty of £4,200 alongside costs of £7,800 following a dispute with a client over unpaid fees after they appointed a new accountant. 

The altercation escalated to the point where the accountant refused to release information to the client so they could file a confirmation statement.  

Dispute started over unpaid fees

The disciplinary case (as reported in September’s batch of ICAEW judgments) dated back to Ms C, the client at the centre of the dispute, ending their professional relationship with the chartered accountant, citing that they required a greater level of assistance. 

The relationship ended somewhat cordially, with the client breaking the news to the accountant with a bottle of wine and a handwritten note.  

Pinner delivered the final bill to the client of £2,517 plus VAT. The client was on a fixed rate each year and the bill was £1,000 more than they expected. 

However, Pinner said he calculated the fee based on the number of hours of assistance provided to the client during the 2020/21 financial year and the first four months of 2021/22, which included additional support with furlough payments and other work associated with the pandemic.  

He claimed to the disciplinary tribunal that he had previously absorbed a proportion of the costs charged to Ms C’s firm, and the higher-than-expected final bill took into account the subsidised fees he had effectively given to the client. 

Client refuses to pay

The client argued that Pinner inflated the bill out of spite for her terminating the relationship, but the accountant retorted that he could no longer absorb the costs as he had done while she was a client, but he would have reviewed the fees if she remained a client. 

The tension between the two continued to boil when the client requested professional clearance, which the accountant granted, although he withheld the handover information and documentation until the outstanding fees were paid. 

The conflict came to a head in September 2021 when the client was required to file a confirmation statement, but the chartered accountant refused to hand over authentication code in order to file the Confirmation Statement.

Attempting to back the client into a corner and forcing them to file online, Pinner entered the client into the PROOF (Protected Online Filing) scheme at Companies House without their knowledge or consent, which prevented the firm from submitting paper forms. 

It was at this point the client escalated the matter to ICAEW. The client tried to circumvent the Companies House filing blockage by attempting to file by post, but this was blocked due to the firm being held in the PROOF scheme.  

The client made a payment of £1,700 – the sum they considered payable. The ICAEW intervened in October 2021 and at that point the accountant released the documentation to the new accountants and wrote off the remaining balance. 

Disciplinary proceedings

The investigation committee saw the chartered accountant’s use of the PROOF scheme to force the client into paying the outstanding invoice as a “failure to be straightforward and honest” and a deliberate act that would bring discredit to the institute and profession. It said a more appropriate action would have been to commence legal proceedings.

Pinner shared his regret with the disciplinary tribunal, blaming the stress of the pandemic and admitted that he was not suited to dealing with the demands of a practice single-handedly, where he did not have peers as a sounding board or offer a different perspective on issues. 

The sole practitioner had worked solo since the retirement of his former business partner in 2014. But he had hoped to address that issue by investigating the possibility of merging with another practice. 

He admitted that he didn’t deal well with the client terminating the relationship and apologised for his “abhorrent” actions and accepted that he deserved to be disciplined. 

Showing that he’s learned from this experience, Pinner said that several other clients have since left his firm owing money and rather than going the route as before, he had checked the rules and sought advice from a helpline.  

Pinner’s representation described the incident as out of line with his normal “client-focused behaviour” and said the actions at the time were “utterly stupid”. But noted that the chartered accountant has demonstrated contrition towards his former client, who was reported as being “humbled by the apology. 

Tribunal decision

In sentencing the chartered accountant, the tribunal acknowledged that Pinner’s actions were not driven by financial gain, but out of revenge and to recover the disputed fees. 

The incident was resolved after a short period once ICAEW’s professional conduct department got involved and pointed the accountant’s attention to their rights in exercising liens against former clients, and soon after Pinner relinquished the handover information. 

The tribunal concluded that the chartered accountant had recognised the “inappropriateness of his behaviour” and had addressed the factors that underpinned his conduct. The disciplinary report also referred to glowing testimonials that spoke highly of his professionalism, character and integrity. 

Taking this into account, the ICAEW disciplinary proceedings found that it was very unlikely that such a lapse would be repeated and excluding him from practice would be disproportionate. Instead, the tribunal severely reprimanded the accountant and applied a fine and costs worth a combined sum of £12,000.

Replies (50)

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By Justin Bryant
07th Sep 2023 11:24

If he'd have been unregulated, the boot would have been on the other foot here presumably and I expect the client only found out what the difference was after the event so to speak.

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By Adam Peterson
07th Sep 2023 12:22

The first rule of having a stress free business/ practice is...

Always agree any extra costs BEFORE they are incurred by yourself.

Fines were justified and I hope the client finds a better accountant.

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By adam.arca
07th Sep 2023 13:18

Absolutely ludricous decision from the Institute there.

The accountant has been unprofessional, yes, but a £12k financial hit for a misjudgment where, as far as I can tell from the report, there were no significant additional costs incurred by the client? Get real.

And as for the comment by Adam Peterson: member since, erm, today. Nuff said.

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Replying to adam.arca:
Stepurhan
By stepurhan
07th Sep 2023 14:27

A bit more than merely unprofessional.

Companies House move very quickly to start an automatic strike-off action for failure to file a confirmation statement these days. Presumably this was resolved before it reached that point, but an accountant that would risk forcing bona vacantia on an ex-client probably should not be in practice.

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Replying to stepurhan:
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By johnjenkins
11th Sep 2023 11:35

Say what you like, his action got the bill paid and saved loads of solicitors fees.
I do agree that he shouldn't have charged the extra in the first place.

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Replying to johnjenkins:
Stepurhan
By stepurhan
11th Sep 2023 14:11

So you think engaging in incredibly unethical actions that could have had severe repercussions for their ex-client is OK because it "got the bill paid"

Good to know.

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Replying to stepurhan:
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By johnjenkins
11th Sep 2023 15:07

Most definitely. However I did say that it shouldn't have got to that stage.
So who is being unethical, someone who doesn't pay their bill or someone who resorts to extreme measures to get paid?

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Replying to johnjenkins:
RLI
By lionofludesch
11th Sep 2023 18:33

Both of them.

I'd've let the debt go before doing what that fella did. Reputation is everything. Did he try the courts? Too conventional?

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Replying to lionofludesch:
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By johnjenkins
12th Sep 2023 11:48

As I said why bother with the courts (time wasted and costly). As for the reputation. Isn't it better that you have a reputation for getting paid (legally) than have one for being a sucker (bit strong , I know).

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Replying to johnjenkins:
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By lionofludesch
12th Sep 2023 16:41

Have you gone mad?

He got paid at a cost of £12000 in fines and costs.

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Replying to lionofludesch:
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By johnjenkins
12th Sep 2023 17:01

After the event. He didn't know he would get ludicrous costs.

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Replying to johnjenkins:
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By lionofludesch
12th Sep 2023 20:18

How much would you think would be worthwhile?

And would you be prepared to gamble that the fines and costs would be less than that?

It's not for me.

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Replying to lionofludesch:
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By johnjenkins
13th Sep 2023 11:47

Like you, I wouldn't get myself in that position. However once he had taken the stance there wasn't a lot he could do. He didn't leave himself with a back door.
I think the problem was that he had a choice of negotiating with someone who he thought had given him a slap in the face or choose a different approach to get paid.
I think the apology and grovelling was to save his membership.

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RLI
By lionofludesch
07th Sep 2023 14:03

Disappointing that the fella needed to consult a helpline to find out the professional way to act.

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By Geoff56
07th Sep 2023 14:45

Yes, this was very unprofessional behaviour but it seems to have been out of character and the guy was genuinely contrite to the extent that his ex-client was "humbled" by his fulsome apology.

That doesn't let him off the hook, but it's the ICAEW 'costs' that never cease to amaze me: £7.8K?! I would be very interested to see how they arrived at that amount.

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Replying to Geoff56:
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By lionofludesch
07th Sep 2023 14:58

Geoff56 wrote:

That doesn't let him off the hook, but it's the ICAEW 'costs' that never cease to amaze me: £7.8K?! I would be very interested to see how they arrived at that amount.

Easy to spend someone else's money, of course.

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Replying to Geoff56:
Mark Lee headshot 2023
By Mark Lee
10th Sep 2023 19:04

Geoff56 wrote:

the ICAEW 'costs' that never cease to amaze me: £7.8K?! I would be very interested to see how they arrived at that amount.

The tribunal report states:

Mr Oldham made an application on behalf of the Institute for costs in the sum of £7,800. The Tribunal was provided with a schedule and a summary of the Investigation Committee’s [IC] costs.

On behalf of the IC, Mr Oldham indicated that the bulk of the costs related to the investigation stage, with some additional fixed post investigation costs. He submitted that some of the costs had been written off or reduced, and that the costs were properly incurred, fair, reasonable and proportionate. He noted that no issue had been taken by the Respondent in respect of costs.

On behalf of the Respondent, Mr Newman did not provide any representations in respect of the items of expenditure set out in the costs schedule. He indicated that the respondent is not impecunious and is in a position to pay the IC’s costs.

The Tribunal had regard to the costs summary and schedule provided. It considered that the costs were reasonably, properly and necessarily incurred, and were proportionate.

The Tribunal also had regard to the Guidance on Sanctions, which reminds tribunals that its power to require a respondent to pay some or all of the Institute’s costs of investigating and presenting complaints is “based on the principle that the majority of … members should not have to subsidise the costs caused by the minority who, through their failings, find themselves within the disciplinary process”.

Given the seriousness of the misconduct in this case, the tribunal considered that it was important for the Institute to recover its investigation costs, in full.

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Replying to bookmarklee:
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By Geoff56
11th Sep 2023 09:40

Thank you for providing this extract from the report, Mark.

It still seems like an enormous bill of costs to me. I suspect that the practitioner, who was "in a position to pay the IC's costs", having been through the traumatic experience of being hauled over the coals by the ICAEW, and having recognised his own wrongdoing, just wanted to pay up and put the whole thing behind him ASAP.

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Replying to bookmarklee:
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By johnjenkins
11th Sep 2023 15:10

Whitewash.

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By ireallyshouldknowthisbut
08th Sep 2023 08:51

Aside from the really childish stuff around the confirmation statement and handover, at the core of it is a very good lesson in how not to disengage there. Spiking fees on exit just makes no sense to me, its bad enough getting paid regular ones on exit, its not worth the inevitable grief of going for some more, even without a complaint.

As ever staggered by the level of the fine and costs. It just seems to be a punitive profit centre. Big firms might be able to swallow these sums but for a sole practitioner that is some very serious amounts of cash for a what amounts to poor judgement clouded no doubt in some emotion when the client quit, presumably from the accountants side out of the blue. I have been genuinely upset when what I considered a good client I had been helping on the cheap for a number of years until they made their business work (it clearly had potential, and I did a large amount of nurturing) moved firms when his success came. I didn't act badly, but it was emotionally difficult realising what I thought ofa s an "A grade" client I had invested in for years, and i expected to be acting for the rest of their business life didn't think the same amount me.

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By listerramjet
08th Sep 2023 09:46

Poor chap. About time my institute started properly looking after its large small practitioner base.

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Replying to listerramjet:
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By indomitable
08th Sep 2023 13:10

They haven't done enough for ages. Not on their agenda! Waste your subs on things the membership don't want or need. Have a look at a couple of posts I have put on linkedin on the ICAEW group. The ICAEW needs a proper shake out.

Although I think the guy did wrong the penalties are ridiculous

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By Exmoor
08th Sep 2023 09:49

Why not just request a new authentication code from CH? They only take a few days to come. Although perhaps the accountant was also hosting the registered office.

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Replying to Exmoor:
Stepurhan
By stepurhan
08th Sep 2023 12:54

Exactly my thoughts. Both parts unfortunately, which probably made it a non-starter.

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By Michaelr205
08th Sep 2023 09:58

I thought that it was fairly easy to apply for a new confirmation code. Am I missing something here.
Despite this, the client or her new accountant could very easily have emailed Companies House to explain problems in filing the confirmation statement and headed off any strike-off action.

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Replying to Michaelr205:
Stepurhan
By stepurhan
08th Sep 2023 12:56

A company is set up with PROOF, which is intended to prevent fraudsters claiming to act on the company's behalf. If something as simple as an email can get round that, it would be pretty rubbish fraud prevention.

As noted above, if the former accountant is the registered office, requesting a new code isn't going to do you any good.

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Replying to stepurhan:
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By Michaelr205
08th Sep 2023 13:15

Apparently you can request it to be sent to the home of an officer of the company.

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Replying to stepurhan:
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By Roland195
08th Sep 2023 13:25

I think the point was that explaining the issues to Companies House would stop them from automatically moving to strike the company & at least buy time to resolve.

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Replying to Roland195:
Stepurhan
By stepurhan
08th Sep 2023 16:55

Roland195 wrote:

I think the point was that explaining the issues to Companies House would stop them from automatically moving to strike the company & at least buy time to resolve.

If C0mpanies House accept that it is a director contacting them. The code going to a director's address could solve the issue, but is this still possible if PROOF is in place?

My point is that some people are treating this as a doddle for the director to resolve. That is assuming they are even aware how serious the issue could be (though hopefully new adviser would alert them to that). The fact remains that the old accountant put their ex-client in a position that could have seriously harmed their business. Those downplaying his actions as easy to fix should remember that.

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Replying to stepurhan:
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By stevenckay
09th Sep 2023 21:04

You can manually file a paper form with CH to withdraw from PROOF (I've personally had to do this). The client could then have submitted a paper Change of Reg Office and then requested an online CH code to file the CS01. Would all have been done within the anticipated '60' day Strike Off Action by CH.

She could then have taken up the issue with ICAEW before settling the fee note.

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Replying to stevenckay:
Stepurhan
By stepurhan
11th Sep 2023 08:36

stevenckay wrote:

You can manually file a paper form with CH to withdraw from PROOF (I've personally had to do this).


I'm intrigued. What proof do you have to provide to get out of PROOF?
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Replying to stepurhan:
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By stevenckay
12th Sep 2023 13:33

Effectively none.

I contacted Companies House and they directed me to the 'opt-out application form' for removal from PROOF.

As I recall it just needed the director's signature.

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By Nebs
08th Sep 2023 10:11

£7,800? They should have heard the case in Wetherspoons.

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By Geoff56
08th Sep 2023 10:26

A friend of mine fell foul of the ICAEW a few years ago. It was a relatively minor regulatory matter and there was no dispute as to the facts, but the ICAEW employed a barrister completely unnecessarily. The result (prior to appeal) was a fine of £1K, plus costs of £5K.

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Replying to Geoff56:
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By Nick Baldwyn
08th Sep 2023 14:00

The usual sledge hammer to crack a nut?

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By Self-Employed and Happy
08th Sep 2023 10:29

Presumably the new accountant couldn't have helped, seeking a higher level of assurance was her reason for leaving yet the new accountant clearly didn't know about the below.

You can request an Authentication Code to be sent to an active officers home address rather than the registered address which would get around the issue if the registered office was also that of the accountants.

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By 2TunTed
08th Sep 2023 12:41

The disciplined member was in the wrong and managed the exit very badly. If you are going, best go quickly! Not complicated stuff is it.
As for the costs, completely bonkers and disproportionate. If the big 4 were penalised on the same scale relative to the size of practise, the fines and penalties imposed on them combined would be hundreds of millions.
Do the Institute take the view that fining the larger firms on the same scale as small firms would bring the profession into disrepute?

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RLI
By lionofludesch
08th Sep 2023 13:20

I always registered the company for PROOF, and myself and at least one director for email reminders. It's a free service - why wouldn't you use it ? I'd send the company the access code and tell them to keep it safe in case I got run over by a bus.

But this doesn't seem to be the case here. The practitioner registered the company for PROOF out of pure spite which, imho, is unforgiveable. But it does raise a couple of cautions. Don't have the company's registered office at an address to which you have no access. And make sure your company is within PROOF and that you know the access code, which will ensure that no rogue accountant can pull the carpet from under your company's feet.

Having said that, one of the weaknesses of PROOF is that its security can lock the directors out of their own company which, ironically, is exactly what PROOF was intended to prevent.

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Replying to lionofludesch:
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By stevenckay
09th Sep 2023 21:06

You can manually file a paper form with CH to withdraw from PROOF (I've personally had to do this). The client could then have submitted a paper Change of Reg Office and then requested an online CH code to file the CS01. Would all have been done within the anticipated '60' day Strike Off Action by CH.

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By Ian McTernan CTA
08th Sep 2023 14:01

The fine is fair enough, but the costs in such a simple case..crazy.

It's clear the ICAEW operate as a Big firm mentality and charge accordingly, without thought to the relative percentage of a practitioners total income these fines and costs come to.

It's high time fines and costs were reflective of the size of a firm so they feel it the same way a sole practitioner would. if anything, fines for larger practices should be even higher as they should ahve even less excuse to get things wrong!

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Replying to Ian McTernan CTA:
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By mumpin
08th Sep 2023 14:22

Assuming that he's a sole trader, would the £12k be tax deductible as wholly and exclusively?

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Replying to mumpin:
7om
By Tom 7000
12th Sep 2023 12:25

You wish....

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Replying to Tom 7000:
RLI
By lionofludesch
12th Sep 2023 16:38

Tom 7000 wrote:

You wish....

[chuckle]

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paddle steamer
By DJKL
08th Sep 2023 14:53

"On 17 September 2021, the Respondent forwarded to Ms ‘C’ a notice from Companies House
(received by him the previous day) reminding Firm ‘A’ of the requirement to file a Confirmation
"Statement by 19 September 2021.

The same day (17 September 2021) Firm ‘B’ asked the Respondent for the authentication code in
order to file the Confirmation Statement. The Respondent replied the same day refusing to release
any information because of the outstanding fees.

Also on 17 September 2021, the Respondent entered Firm ‘A’ into the PROOF (Protected Online
Filing) scheme at Companies House. The PROOF scheme is a free service to protect companies
from fraud. If a company is registered in the scheme, Companies House will not accept paper forms
from the company in question as everything must be filed online using an authentication code."

https://www.icaew.com/-/media/corporate/files/about-icaew/what-we-do/pro...

The above is to me the real issue, the client had said they were leaving, the firm should never have done the above especially as this was effectively a former client.

I suspect the fines and costs reflect the issues unravelling the tale/evidence, I think the deliberate nature of the above steps is pretty damming and the sentence could have been a lot harsher given the above sequence of events.

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DougScott
By Dougscott
08th Sep 2023 22:56

Did the ICAEW investigate whether the accountant's fees were justified in this case? Whatever there's something to be said for being QBE and not regulated by people like the ICAEW who are out of touch with the life of a sole practitioner if you ask me,

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7om
By Tom 7000
12th Sep 2023 09:59

Its not the fine its the legal fees. They are just silly. and should be capped at the fine cost at least.

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By mrshamilton
13th Sep 2023 07:06

Is it just me that feels a bit sorry for the guy? He apologised, he made a mistake, he regretted it and put it right, and £12k later! We read so many times on the disciplinary pages of practitioners that don't care and fight to the end, this guy held his hands up pretty quickly.

Sure some fine was appropriate but, as others have said, those costs are horrendous!

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Replying to mrshamilton:
RLI
By lionofludesch
13th Sep 2023 07:17

mrshamilton wrote:

Is it just me that feels a bit sorry for the guy? He apologised, he made a mistake, he regretted it and put it right, and £12k later! We read so many times on the disciplinary pages of practitioners that don't care and fight to the end, this guy held his hands up pretty quickly.

Sure some fine was appropriate but, as others have said, those costs are horrendous!

I don't think anyone's saying that the fine and costs aren't way over the top - except the fella himself. He almost invited it, judging from his comments at the hearing.

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By AndrewV12
18th Sep 2023 14:55

Surely the new accountant could have filed a confirmation statement without the blessing / input of Mr Pinner.

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SMH
By ShakingMyHead
12th Oct 2023 07:49

My friend changed accountants. The accountant had been overcharging for years and she's not making a profit. He immediately contacted companies house and changed the registered office address from their accountants office, back to one that was there before. He didn't ask her. And that address was from 12 years ago! She's split from her husband so doesn't have access to that address! HMRC post that was sent there wasn't received by her. This can cause untold problems. To me, purely out of spite. He could've checked with her what address she'd like her business to be sent to.

In this case, the accountant was just spiteful. If he wanted his money - take the proper course of action - letter before action - debt collectors. The fine he's been slapped with is really disproportionate and I don't understand why people continue to remain members of institutes if that's how they're going to deal with you?! I find it an incredible sum.

His mistake - charging her (again probably out of spite) for all the "extra work" done that she knew nothing about, and that she hadn't agreed to. None of us would like to receive a bill that we were not aware of. I think he's been overly emotional, the work is getting to him, the clients are getting to him, the stress is getting to him and its time to just sell that business, handover to a manager, take a step back and take time for himself. Do you know what kind of holiday / cruise you could go on with a fine of that level??!!

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