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Prospective Client - No records

SarahSSarahS Feels At HomeRegistered Posts: 60
Hi Folks

Would really appreciate your thoughts as I'm relatively new to the MiP world!

Been approached by a prospective client who I'm meeting on Friday. He hasn't paid tax since he left his last acountant in 2006!! He is receiving demands from HMRC for £2K relating to those years. He's asked HMRC if he can pay in instalments but apparently they` weren't receptive - different story. Anyway, he's asked if I can get his accounts and tax sorted. Problem is that he hasn't kept any records. He said he didn't think it was worth it because he has only been working a couple of days a week earning about £100 per week with minimal expenses. If only it were that simple eh?!

Anyone dealt with this sort of thing before? Explained HMRC penalties etc and he appreciates all of that. How can I produce accounts without records and only his estimates?? Anyone experience of how HMRC view this type of thing?




  • burgburg Experienced Mentor GloucesterModerator, FMAAT, AAT Licensed Accountant Posts: 1,441
    You will need to assess the risk of the client under-declaring income. Based on this assessment I would decide whether to engage with the client or not.

    Tax Returns need to be filed regardless of the presence of base records.

    Use any documents you can obtain, bank statements maybe? Then it is a question of estimates. Make sure you mark the returns as estimated and ensure when you send the Returns for signing state in your letter that estimates have been used and the associated risks if an investigation is opened.

  • SarahSSarahS Feels At Home Registered Posts: 60
    Thank You

    Thanks for your reply Burg, much appreciated.

    He's very happy to go on the straight and narrow from now on. I've arranged to meet him and asked him to bring along any relevant paperwork that he has and I'll make an assessment from there.

    Thanks again.
  • monkeypuzzle47monkeypuzzle47 Feels At Home MAAT, AAT Licensed Accountant Posts: 134
    I would just go with his explanations i.e 100pw.For a client in this situation i would complete the tax return based on his explanations but not prepare financial statements. I would send in the completed tax return to hmrc with a cover letter ato explain client has not kept records of expenses etc, however I have now advised client accordingly in maintaining records.
    they are signing off their tax return.
  • burgburg Experienced Mentor GloucesterModerator, FMAAT, AAT Licensed Accountant Posts: 1,441
    To a degree I do agree with monkeypuzzle.

    We all have different ways of dealing with clients and HMRC but personally I would not highlight to HMRC that the client has no base records. To me this would be encouraging an investigation. I would simply mark as estimated and let them asses by how much and the associated risk.

  • imeldabyeimeldabye Well-Known Registered Posts: 147
    I am also a relatively new MIP so excuse the ignorance here. Why worry about an investigation if you and the client are being up front about everything? Aside from the hassle involved I mean?
  • burgburg Experienced Mentor GloucesterModerator, FMAAT, AAT Licensed Accountant Posts: 1,441
    Because at the end of the day base records are required as proof of income and expenditure. As much as the client may be telling the truth without any/very little base records this cannot be proved and you are taking their word. HMRC don't really go on somebody's word they like to see evidence.

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