Practical invoice query

mark057

Hi there,

I've been working as a bookkeeper in a new job and have been given a purchase invoice for a large amount for work completed on our server.

The work was actually carried out around two months ago but the company accountant has asked the supplier to date the purchase invoice retrospectively, so it can be included in last years FYE and not in this years accounts.

I've been told the purchase invoice was requested retrospectively to reduce our corporation tax liability in the last financial year.

Is it just me or does that sound a bit dodgy?

Any thoughts would be appreciated.

Mark

NikkiJ

Was the work completed in the last financial year? Perhaps the accountant is using the timing of the work to his advantage. Can the company bill retrospectively, won't it affect their FYE? It's does seem a bit off.

mark057

Basically the work was completed in June/July 2011 from what I've been told.

The year end of the company is 30th Sept 2011 but the invoice was dated retrospectively for the end of Sept 2010.

The point is as far as I've been told no agreement was in place to carry this work out in Sept 2010 but rather the invoice has been created out of thin air to suppress profits for the previous financial year to reduce corporation tax liability.

I've also been noticing some purchase invoices being put through the company accounts which are not business expenses but rather the personal expenses of the directors.

The outgoing bookkeeper who has been providing a handover period has warned me about personal invoices going through the accounts.

The company is also not keeping proper records and accounts for bank expenditure and its all rather a mess.

If I'm honest I just don't feel comfortable with some of the things I'm seeing.

Monsoon

It sounds like you have some serious ethical issues here, and I'm really sorry to hear you're in this situation.

Bluntly, you have these options:

1. Tackle the problem head on; or
2. Ignore it.

2 is unethical and if you were considering that, you wouldn't have posted here, so lets look at the possible outcomes of number 1:

a) They say "oh, yes, I see it's wrong, we will do it correct going forwards" (unlikely, imo)
b) They say "shut up and do it our way." In which case you are back to ignoring it or leaving/losing your job.

I would call the AAT Ethics helpline to ask their advice on how to tackle it. Sadly, this stuff happens more than we'd like.

You probably have an obligation to report your suspicions to your MLRO. This is probably the company accountant, so probably won't do anything, but at least you will have discharged your obligations.

Definitely get formal advice from the AAT.

Sorry I can't be more positive, and good luck.

NeilH

Hi

Following on from what has been said, it would be prudent to establish where the "personal" expenses are being accounted, if they are going against a diectors loan account there may be no problem. A few years ago I worked for a Ltd co. that had a rather substantial directors loan from when the partnership had incorporated, it wasn't unusual for personal items to be invoiced to the company and then off set to the directors loan.

However, given what you have said about the server work, it may be that the personal expenses are being brished under the carpet. Also, how much/extensive is the server work? It could be of capital nature and therefore not accounted for as an expense/all written off against corp tax.

Neil

mark057

Thanks for all the advice. It's very helpful to get some advice on this.

As for the server work it looks as if it could be long standing work as payments are being made in several installments during the current FYE and moving into next years FYE.

Even if the server work was being treated as an asset, surely the cost of the asset would be written off against the corporation tax when the FYE ends on the 30th Sept this year and has nothing to do with last financial year?

However, the culture of the company, from what I've seen, indicates best practices are not being followed.

Just an example. £200.00 petty cash was drawn out of the current business account by debit card (not cheque). The director holds onto the petty cash tin, does not produce petty cash vouchers or attach any receipts to the petty cash expenses and the outgoing bookkeeper told me she does not get involved in the petty cash because its a mess.

mark057

Oh and the personal expenses relate to a diet programme, which has nothing to do with the business as it runs educational courses. The expenses are going to a business expense nominal and are not set off against any director loans as far as I'm aware.

NeilH

Hi

I'm assuming this company doesn't require an audit? Can't believe at least some of this would get past the auditors!

mark057 wrote: »

As for the server work it looks as if it could be long standing work as payments are being made in several installments during the current FYE and moving into next years FYE.

Even if the server work was being treated as an asset, surely the cost of the asset would be written off against the corporation tax when the FYE ends on the 30th Sept this year and has nothing to do with last financial year?

The cost of a capital asset is written off against corp. tax using capital allowances, not the cost of the asset. The allowances work whereby a percentage of the asset's value is written off each year, the exception is where some assets qualify for 100% (for example) in the first year. Capital allowances may different form the depreciation charged in the year.

Work on upgrading a server may or may not be capital in nature, loosely put it would depend on how extensive the work is, whether it is maintenance or a full upgrade etc. If it isn't capital then the costs could be written off as and when they occur.

Of course you could make an anonymous call to HMRC who may conduct a "routine" inspection... ;-P

Neil

mark057

Thanks for that Neil.

Need to brush up on Corp tax as it has been a little while since my business tax exam and never get involved in Corp tax in previous employment.

The company is exempt from full audits.

NeilH

mark057 wrote: »

The company is exempt from full audits.

This might explain how they get away with it! In the companies I've worked for, petty cash and directors loans have always been audited.

Neil

NikkiJ

If I were you I would sit down with the accountant and voice your concerns, if he can justify the payments then I wouldn't take it any further. But if you think things are still a bit iffy then I would do as Monsoon says and speak to the Ethics team at the AAT.

mark057

Unfortunately the bookkeeper who is providing the handover has never spoken to the accountant and they do not work on site but in their own practice.

Apparently the accountant has a personal friendship with one of the directors.

I think this is a job I'd be better bailing out of. The system is chaotic and there are other temp jobs about where things are done properly.

Thanks for all your thoughts.