Anybody heard of this before?

System
System Posts: 100,534 πŸ€– Admin πŸ€–
edited June 18 in AAT member discussion
I have just taken on a CIS client, he told me his previous accountant not only charged him for completion of his tax return but took half of his refund for the last 2 years as well!!!
The poor guy thought this was the norm.

I think this is disgraceful has anyone else come across this before and can my client do anything to recover the money that is rightfully his?

Michelle

Comments

  • System
    System Posts: 100,534 πŸ€– Admin πŸ€–
    Re:Anybody heard of this before?

    I have heard of an accountant who does subbie's returns on a sort of a 'no refund, no fee' type basis where the accountant receives the refund, takes his fees & forwards the rest to the client, but I was under the impression that the accountant was taking an agreed fixed fee rather than a percentage of the refund.

    Was the accountant charging reasonable fees before he took a cut of the refund? Sounds a bit cheeky to me!
  • System
    System Posts: 100,534 πŸ€– Admin πŸ€–
    Re:Anybody heard of this before?

    Did the accountant not take his fee out of the refund? What we usually do is have the refund sent to us, take our fee out of it and then send the balance to the client.

    Regards
    Steve
  • System
    System Posts: 100,534 πŸ€– Admin πŸ€–
    Re:Anybody heard of this before?

    Can I ask what you charge for completing the tax return and getting the refund?

    Tom
  • System
    System Posts: 100,534 πŸ€– Admin πŸ€–
    Re:Anybody heard of this before?

    The accountant was charging £175 to complete and submit the return which was billed and paid for separately, then 50% was being deducted from the refund before my client received his money. So last year my client paid a £175 invoice plus £250 of his refund was deducted.

    No problem if he was just deducting his fee from the refund I have done this myself, but taking a percentage as well - I think that is wrong.

    Michelle
  • System
    System Posts: 100,534 πŸ€– Admin πŸ€–
    Re:Anybody heard of this before?

    If the accountant was qualified (Chartered or Certified) this would almost certainly be a breach of ethical bye-laws if he was taking a "cut" of your client's refund.
  • System
    System Posts: 100,534 πŸ€– Admin πŸ€–
    Re:Anybody heard of this before?

    I only take the agreed fee out of their refunds.

    If they are getting a "cut" how can they be objective at preparing their accounts :?

    Claudia
  • System
    System Posts: 100,534 πŸ€– Admin πŸ€–
    Re:Anybody heard of this before?

    Presumably there is an invoice to support the 50% additional fees?

    If not, then your client should request that the monies are returned.

    £425 isn't an unreasonable figure to pay for a set of accounts and a tax return. Certainly not if it's VAT inclusive. What work is stated on the £175 invoice?

    I believe contingency billing is against ICAEWs practice guidelines and probably that of most other professional bodies.

  • System
    System Posts: 100,534 πŸ€– Admin πŸ€–
    Re:Anybody heard of this before?

    ACCA strictly forbid such practice. It is to be hoped your client was not governed by ACCA because they have been classed as the most strict of all the professional accountancy bodies, publicly flaying all those who disobey their rules as well as imposing huge fines.

    Regardless of whether he is professionally qualified or not, the fact of the matter is he should not be in the profession as he has obviously misled your client and paid himself an unagreed commission on the refund.

    I am probably going to open a can of worms here, but this is simply another reason why the profession should be regulated - to stop "accountants" like him tarnishing the whole profession.

    Ste
  • System
    System Posts: 100,534 πŸ€– Admin πŸ€–
    Re:Anybody heard of this before?

    There wasn't a set of accounts prepared, the invoice is just for completion of tax return and submission.
    I asked for a set of accounts and only got the tax return and told there isn't any accounts - I didn't even get a schedule of how this guy had prepared the return!!

    I am at present trying to find out which professional body this guy belongs to if any and I will report him, as it seems to me this accountant has taken money from my client in a very misleading manner.

    It's no wonder the client moved. At least this year the client is getting a full refund and knows how I have arrived at the figures stated on his return.

    Thanks for your thoughts.
    Michelle

  • System
    System Posts: 100,534 πŸ€– Admin πŸ€–
    Re:Anybody heard of this before?

    Hi Michelle,

    I'm assuming you are a MIP.

    Just as a word of caution. Before you report him/her to their professional body (if s/he has one) you must contact the AAT first and ask what the procedure is for a MIP to start this ball rolling.

    The reason I say this is because I recently had a case where a firm of (what I thought were) ICAEW accountants completely messed up a new clients accounts. Our firm is regulated by ACCA and we had to take guidance from ACCA as to how we should go about advising the client of their options. It is up to the client to bring the action against the previous accountant, it isn't your responsibility. The terms of engagement were between the client and the previous accountant.

    Be very careful about what you say to the client in terms of your interpretation of the circumstances. Don't forget clients can get very confused as well and it may be just a complete misunderstanding. However, in my experience, what clients tell you is (more often than not) what they want you to hear. There could be an engagement letter which could specifically mention additional fees in respect of filing tax returns. Granted, I agree it does sound like your client has been "conned" but the last thing you want is a defamation of character case being brought against you.

    A fellow professional reporting another to their professional body should be the absolute final course of action. In your case, Michelle, I would advise seeking legal advice as well before you report him/her to their professional body merely due to the repercussions if you were proved to be wrong.

    Regards
    Steve

  • System
    System Posts: 100,534 πŸ€– Admin πŸ€–
    Re:Anybody heard of this before?

    Thanks for the advice Steve.

    I am an MIP and I haven't said too much to the client other than when asked about taking the deduction, it isn't something I do and hadn't heard of before.

    It is the client who wants to take the matter further, they think they have been conned and from what the client tells me it does sound that way (not told client this though).

    I have said if I look over the contract / engagement letter I may spot something he has missed and haven't ruled this out. I know what clients are like at reading the small print and misinterpreting information.

    If the client really wants to persue the matter then that is up to them and all I can do is tell them to take legal advice.

    Michelle

  • System
    System Posts: 100,534 πŸ€– Admin πŸ€–
    Re:Anybody heard of this before?

    The problem here is that the client knows he has been conned - but why did he allow this to happen? The other problem is that the previous accountant may not be qualified, therefore not regulated by a professional body. In which case, legal advice is literally the only other option available.

    I was thinking about this yesterday (sad I know) is it possible that your client had outstanding fees which were being paid off by virtue of the "extra" payments to the accountant?

    Regards
    steve
  • System
    System Posts: 100,534 πŸ€– Admin πŸ€–
    Re:Anybody heard of this before?

    The client didn't question it because he thought it was normal practice. It was only when he spoke to other sub-contractors that he realised it wasn't.

    There is nothing outstanding as far as I could tell from the clients records and as the accountant isn't local he would have had to of sent a cheque or some sort of direct transfer. Also I wouldn't have thought clearance would have been given if there were outstanding fees.

    I did wonder if the accountant was qualified he doesn't refer to a professional body or use any letters after his name on his stationary it just says he is a CIS specialist, but there again I know of another accountant who doesn't like to use their letters and is qualified.

    I think I will see what transpires when I take a look at the paperwork he's got.

    Thanks
    Michelle
  • System
    System Posts: 100,534 πŸ€– Admin πŸ€–
    Re:Anybody heard of this before?

    Hi michelle,

    I don't use my letters when signing correspondence, though our firm who are an ACCA practice must refer to the fact that they are regulated by ACCA.

    Sounds to me like your client's previous adviser was one of these back street dodgy firms with no PI insurance, no regulation and with only one thing in mind and that is to profit from their clients in an unorthodox fashion. Bring in regulation - that's what I say.

    Regards
    steve
  • System
    System Posts: 100,534 πŸ€– Admin πŸ€–
    Re:Anybody heard of this before?

    That's a lot of assumptions Steve!

    Playing devil's advocate for a moment, at the very least there has been a communication problem between Michelle's client and his former adviser.

    I'm not sure how introducing further regulation into our industry will help. There are plenty of regulated firms of accountants who would charge a lot more than £425 per annum for their services, even if the method of collecting those fees is, to the best of our knowledge at this stage, a little ambiguous.

    I tend to think increasing regulation costs those already compliant whilst doing little to deter the non-compliant.
  • System
    System Posts: 100,534 πŸ€– Admin πŸ€–
    Re:Anybody heard of this before?

    That's your opinion Dean to which you are entitled. My view is somewhat different.

  • System
    System Posts: 100,534 πŸ€– Admin πŸ€–
    Re:Anybody heard of this before?

    Thank you Steve.



  • System
    System Posts: 100,534 πŸ€– Admin πŸ€–
    Re:Anybody heard of this before?

    Hmmm - I've just re-read my post and yes, I agree, it is somewhat presumptuous (I think that's how you spell it!) :D

    I agree there has been a huge communciation failure here between Michelle's client and their previous adviser - but I've worked in Practice for a long time, have come across countless situations that I thought would never happen but I have never heard of an accountant charging a fee, getting the client's refund and then charging again! What is going on?

    I agree there is a lot of regulation for those firms (and individuals) who are already regulated, however, something does need to be done about accountants who aren't qualified, regulated or monitored who merely go to rip their clients off (as could be the case in Michelle's client's case).

    Anyway, I think that might happen in an ideal world. Regulation or not, there's still going to be unscrupulous people out there who will rip people off.

    Regards
    Ste
  • System
    System Posts: 100,534 πŸ€– Admin πŸ€–
    Re:Anybody heard of this before?

    Also as Steve has said ACCA definitely don't like charging percentages of refund received (conflicts with integrity) and advise not to do it so I'm sure ICAEW would do the same.

    My guess is that they may not be affiliated to a professional body.

    Annette
  • System
    System Posts: 100,534 πŸ€– Admin πŸ€–
    Re:Anybody heard of this before?

    My point exactly Annette.

    If someone is due a tax refund it is because THEY have overpaid tax not the accountant. As a firm we generally charge for the preparation of the tax return and if it is a refund, take our fee (without commission) and forward the balance on to the client.

    I have never heard of a premium having to be paid on a tax refund. I am very sure that if we, as a firm, were to start charging premiums on tax refunds, ACCA would have a field day with us!
  • System
    System Posts: 100,534 πŸ€– Admin πŸ€–
    Re:Anybody heard of this before?

    I agree entirely that contingency fees, in relation to a tax refund, are unethical and are something I would never consider doing. However, they are not against the AAT's own practice guidelines provided that they are agreed in advance with the client.

    Although we are talking about an accountant who is probably not a member of any professional body, I would be surprised if this was not agreed in advance (even if the client has since forgotten) as otherwise this would be tantamount to theft and not merely a lack of professionalism.

    As far as we are aware, the client is reasonably satisfied with the work of the accountant but just bemused that they have been charged in a manner which, until now, they thought was the industry norm.

    I think it is probably the client who should have done a little more research before engaging the first accountant. After all, they have done nothing illegal as far as I can see.

    A lesson learned perhaps.

    At least they now have a good accountant in Michelle. :wink:
  • System
    System Posts: 100,534 πŸ€– Admin πŸ€–
    Re:Anybody heard of this before?


    on the topic of taking a percentage of tax refunds, have a look at this website -

    http://www.taxbuddies.com/ptsmain.php



  • System
    System Posts: 100,534 πŸ€– Admin πŸ€–
    Re:Anybody heard of this before?

    That's interesting, at least they are up front about it.
    I had a look at my clients previous contract towards the end of last week and there is nothing in it to say a percentage of the refund would be taken.
    I have told the client if they wish to persue the matter they would have to take legal advice as it is not something I could get involved in - definately a lesson learned for the client.

    Michelle

Categories

Privacy Policy