I am not clear why you should not tell them, and why others replying here think you should not tell them, why you resigned; although it is, of course, true that you would not mention the SAR.
The facts are different, but when I resigned an appointment three years ago, due to the client's questionable actions, I was advised by the ethics department of my professional body to give the reasons for my resignation to the new accountant. This I did, without disclosing anything about any other responsibilities.
I agree with your final paragraph, but absolutely not your first. You cannot work with a day rate that changes month to month. Suppose, for example, that you deduct pay for sick days; if you pay the same salary every month - annual salary dividend by 12 - as most would, you cannot have a different day rate according to the month in which the employee was sick. Well, you could, I suppose, but it would not be very fair.
All payrolls I work with use a day rate based on the annual salary divided by the working days in the year - usually 261.
This is always an issue - how to apportion salary in the month of leaving (or joining). There has to be a method agreed and then stuck to. As far as I know, there is no absolutely correct way - you just have to do something fair and reasonable. Unless the salary is very high it will never make that much difference - especially after tax and NI.
In my view the fairest way is neither of your options; it is to take the monthly salary and apportion it in the ratio that the days worked bears to the total working days in the month. In fact, when I calculate gross pay for a leaver or joiner, I either use that "apportionment" method or I use the number of days worked times the daily rate - whichever is the higher. I must admit that I have never thought of using the method of deducting days not worked from the monthly pay - but I cannot see that it is not just as reasonable.
As you yourself state - it can work against the employee or for the employee, so what exactly is the issue. I think you have to accept it.
I am guessing but from your post this sounds like an unincorporated business. Frankly, I would have sent a disengagement letter when he decided to do his own accounts. For me, that means he is no longer a client.
In your case, however, my view would be that you tell him that you must amend his accounts and submit an amended return. If he agrees then do it, and no SAR. If he refuses you resign and make a SAR.
If the COVID grants are SEISS these should be on the 2021 return. If they are Business Support Grants, these will mostly relate to periods after 2019/2020 so the absence of COVID grants is unlikely to be an issue in 20192/2020 I think, but more information needed to be sure of the position.
After taking advice, I was forced to lose two very long standing (related) clients over this very issue. Deeply annoying, when very simple checks by the bank would have stopped it. Speaking to others, a not uncommon view was that I could have let it go - mainly on the basis that they were going to repay the loans anyway, so what did it matter! Many seem to be of the same mind here. I don't agree with that, but it did give me pause.
Another regulated firm was happy to take them on. A very upsetting episode.
My answers
Such arrogance.
I am not clear why you should not tell them, and why others replying here think you should not tell them, why you resigned; although it is, of course, true that you would not mention the SAR.
The facts are different, but when I resigned an appointment three years ago, due to the client's questionable actions, I was advised by the ethics department of my professional body to give the reasons for my resignation to the new accountant. This I did, without disclosing anything about any other responsibilities.
The new incumbent still took the job!
"Surely the rate for a 'day's' work should be the same wherever you are in the year?"
Of course, that is absolutely correct.
I agree with your final paragraph, but absolutely not your first. You cannot work with a day rate that changes month to month. Suppose, for example, that you deduct pay for sick days; if you pay the same salary every month - annual salary dividend by 12 - as most would, you cannot have a different day rate according to the month in which the employee was sick. Well, you could, I suppose, but it would not be very fair.
All payrolls I work with use a day rate based on the annual salary divided by the working days in the year - usually 261.
Because a "day" rate will be based on the annual salary.
Of course, if you work out a day rate based on the monthly salary the two methods will produce the same result. That's a given!
This is always an issue - how to apportion salary in the month of leaving (or joining). There has to be a method agreed and then stuck to. As far as I know, there is no absolutely correct way - you just have to do something fair and reasonable. Unless the salary is very high it will never make that much difference - especially after tax and NI.
In my view the fairest way is neither of your options; it is to take the monthly salary and apportion it in the ratio that the days worked bears to the total working days in the month. In fact, when I calculate gross pay for a leaver or joiner, I either use that "apportionment" method or I use the number of days worked times the daily rate - whichever is the higher. I must admit that I have never thought of using the method of deducting days not worked from the monthly pay - but I cannot see that it is not just as reasonable.
As you yourself state - it can work against the employee or for the employee, so what exactly is the issue. I think you have to accept it.
Sometimes when looking at these pages I find myself unable to tell whether responders are:
(a) trying to make a joke; or
(b) just being sarcastic; or
(c) being serious.
I am guessing but from your post this sounds like an unincorporated business. Frankly, I would have sent a disengagement letter when he decided to do his own accounts. For me, that means he is no longer a client.
In your case, however, my view would be that you tell him that you must amend his accounts and submit an amended return. If he agrees then do it, and no SAR. If he refuses you resign and make a SAR.
If the COVID grants are SEISS these should be on the 2021 return. If they are Business Support Grants, these will mostly relate to periods after 2019/2020 so the absence of COVID grants is unlikely to be an issue in 20192/2020 I think, but more information needed to be sure of the position.
Who said that it was accidental?
After taking advice, I was forced to lose two very long standing (related) clients over this very issue. Deeply annoying, when very simple checks by the bank would have stopped it. Speaking to others, a not uncommon view was that I could have let it go - mainly on the basis that they were going to repay the loans anyway, so what did it matter! Many seem to be of the same mind here. I don't agree with that, but it did give me pause.
Another regulated firm was happy to take them on. A very upsetting episode.