My accountant saved me a load of money...

PGM

We've all heard the above many times, mainly from people with little understanding of tax. In most cases I'm sure the work is ligitimate and good reasons for a small tax bill.

But in the case of an inspection, who exactly is liable for a dodgy tax return? Is "the accountant did it" any defence?

clegganator

We as professionals produce accounts and it's up to the client to check them and shout if they aren't accurate. Unless an accountant has blatantly ignored or missed something out I would say it's their fault. It's them who need to submit a correct and comprehensive tax return to HMRC.

coojee

clegganator wrote: »

We as professionals produce accounts and it's up to the client to check them and shout if they aren't accurate. Unless an accountant has blatantly ignored or missed something out I would say it's their fault. It's them who need to submit a correct and comprehensive tax return to HMRC.

I don't agree with that, as a professional, an accountant owes a duty of care to their client so if they make a mistake then it's the accountant who's at fault not the client. This is a mistake that students commonly made in the old professional ethics paper. The question was, you (the accountant) have discovered a mistake that you made on a clients VAT return what should you do about it. 9 times out of 10 the student said do nothing it's not your problem because you didn't sign the report. Tort law says that you owe that client a duty of care, they were paying you to do a job that they couldn't do themselves so they expected you not to make a mistake. So you have breached your duty of care and you need to own up and fix the problem.

Saying that it's up to the client to check what you've done is abdicating your responsibilities as you could send them a complete load of nonsense and get away with it, which clearly you can't.

clegganator

coojee wrote: »

I don't agree with that, as a professional, an accountant owes a duty of care to their client so if they make a mistake then it's the accountant who's at fault not the client. This is a mistake that students commonly made in the old professional ethics paper. The question was, you (the accountant) have discovered a mistake that you made on a clients VAT return what should you do about it. 9 times out of 10 the student said do nothing it's not your problem because you didn't sign the report. Tort law says that you owe that client a duty of care, they were paying you to do a job that they couldn't do themselves so they expected you not to make a mistake. So you have breached your duty of care and you need to own up and fix the problem.

Sorry, I wrote that with the assumption the accountant has prepared correctly and accurately based on the records provided by the client. Obviously if the accountant makes a mistake, doesn't act with due care and dilligence or misses something out even though they had details of it then it's accountant's fault and has some apologising to do!

PGM

clegganator wrote: »

Sorry, I wrote that with the assumption the accountant has prepared correctly and accurately based on the records provided by the client. Obviously if the accountant makes a mistake, doesn't act with due care and dilligence or misses something out even though they had details of it then it's accountant's fault and has some apologising to do!

Apologising would be a start..

If its the accountants fault, who would the HMRC address the fine to?

JodieR

I'm pretty sure that HMRC would issue the fine to the client but the accountant should offer to pay it. HMRC have no 'contract' with the accountant so it would be up to the client to recover the money from the accountant. I'm sure that if it ever got that far, the courts would agree that the accountant should re-imburse the client in that scenario.

Monsoon

If the accountant has acted with due care, and has gotten it right with what they have got, then any errors are the client's responsibility.

If the accountant has not acted with due care, then he has made an error. The error is still the client's responsibility as far as HMRC are concerned, and so the client needs to pay HMRC what he owes, and then chase the accountant for reimbursement. A decent accountant who has made a genuine error would not need chasing and would offer. A crap accountant who didn't give a stuff might be more tricky to extract dosh from...

PGM

Monsoon wrote: »

If the accountant has not acted with due care, then he has made an error. The error is still the client's responsibility as far as HMRC are concerned, and so the client needs to pay HMRC what he owes, and then chase the accountant for reimbursement. A decent accountant who has made a genuine error would not need chasing and would offer. A crap accountant who didn't give a stuff might be more tricky to extract dosh from...

Thats what I thought. Just checking I can say: Its your responsibility if there's an error

Monsoon

PGM wrote: »

Thats what I thought. Just checking I can say: Its your responsibility if there's an error

"Accounts are prepared from the information and explanations supplied to us. You approve these accounts....."

PGM

Monsoon wrote: »

"Accounts are prepared from the information and explanations supplied to us. You approve these accounts....."

Very true.

I was really just getting fed up of hearing people say their accountant had saved them loads of money. The statement in itself is rubbish! Either they haven't had much taxable income, or the accountant has done some dodgy stuff.

clegganator

PGM wrote: »

Very true.

I was really just getting fed up of hearing people say their accountant had saved them loads of money. The statement in itself is rubbish! Either they haven't had much taxable income, or the accountant has done some dodgy stuff.

An accountant can help someone to operate as tax efficently as possible without doing something dodgy. If in year one the client did his own account and then accountant prepared year two's. Also accountant could 'save loads of money' by advising to have low salary and high dividends, not to have company cars, to operate as a limited company rather than a sole trader, claiming mileage rather than motor expenses, capitalising something and claiming AIA when a client wouldn't, all without doing something dodgy.

Appreciate that some people do expect accountants to work wonders. One even said to me "I'd like a tax bill of £xxx."

PGM

clegganator wrote: »

Appreciate that some people do expect accountants to work wonders. One even said to me "I'd like a tax bill of £xxx."

Its these kinds of comments that I mean. And usually said by people with fairly basic business setups and little scope for the accountant to really "save" tax.

Its probably more down to people not understanding the tax calculations, and b/f balances of losses and capital allowances than their wondeful accountant.

Recently someone told me they turned over £50k and paid £300 tax. They claimed their accountant is good, I'm thinking there's not much margin on all those costs!

clegganator

PGM wrote: »

Recently someone told me they turned over £50k and paid £300 tax. They claimed their accountant is good, I'm thinking there's not much margin on all those costs!

So from £50,000 turnover to £7975 net profit, to produce a £300, tax bill. You should of said to him "Wow you're below the poverty line!"