I have receipts for an item of physiotherapy equipment that cost £3000 on the mastercard account, gym membership, physiotherapy, large amounts of entertainment and subsistance
I contacted the accountant who said post the item to repairs and renewals (although the item isn't actually in the office) and all the other things are regularly put through the accounts every month too.
If this was something you were dealing with what would you do? Its very complicated as it is learning what goes where and in what category but this is throwing me off even more as I'm not sure what is allowable and what isn't. If I were self employed and this was happening would I be giving the client some advice to put a stop to this or is it fine to keep putting them through?
-- Edited by Shamus on Wednesday 1st of June 2011 12:13:44 PM
That is really not good advice that you are getting from the accountant.... Bet they didn't give it in writing!
I cannot see that these costs which are purporting to be business related could possibly be anything of the sort in that the expenses were not incurred wholly, exclusively and neccessarily for the purpose of the business.
Seems yet another example of someone using their company as a personal piggy bank. Grrr. Makes my blood boil.
Personally I would put the lot to the directors loan account and the director needs to know that they owe the company that amount of money.
As for the advice from the accountant...
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Personally I would add it to the directors loan account (or drawings if a sole trader) and let the accountant change it.
If you are a worried, write down what you were told to do, by who and when and what you did. Keep this record somewhere safe. So if it all goes wrong, you can at least prove you were due diligent over the matter as far as you could reasonably be.
I do know that members in practice are recommended to go to their professional body and ask them for their recommendation on what to do. As long as it is all recorded, then the professional body will protect their member should something go wrong in the future in relation to the problem. (Due Diligence is only a defence if you go to court, it does not stop the police from making an arrest!)
-- Edited by YLB-HO on Friday 8th of April 2011 05:13:39 PM
Accountant tells you the postings to make then when there's an investigation deny's everything and the bookkeeper ends up as the fall guy.
Dependant upon the size of business the accountant could argue that it was missed as a non material item (even though it had been brought to their attention).
Note that the £3000 chair is being expensed not capitalised. I hardly think that it's an immaterial asset to be used with the period.
We seem to be getting a lot of these postings just recently and it really makes me worry about some of the advice being given.
As a linked thought I was reading the other day about people that take the franchise route into accountancy and with one of the franchise companies they take in people with no knowledge of accountancy and churn out accountants in 5 weeks.... 5 weeks!!!! Jeez, I must be really thick as I've been studying this for seven years and still feel as though I'm only scratching the surface!
For any qualified by experience accountants reading this I don't want this to get into qualifications vs experience debate. It's just a rant about accountants who practice but don't seem to actually have either.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
sorry, wasn't ignoring you. Just got side tracked by a phone call mid posting.
Think that we both agree on the DLA approach.
Just a thought on your point there about writing it down. The problem there is that the accountant can always deny that they said it. Such would surely only be valid defence if the accountant signed the representation letter which I really can't see happening.
kind regards,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
The nice thing about the law, is generally it accepts things if done at the time!
Hence - 2 people have a fight - it is the one he reports it to the police first that they always believe.
The HMRC tells me that people are more honest if they do things straight away - its only later when they think about it may become a lie. I have a client who is a Black Cab driver and I can prove that when he gets home at 2 am, he logs into my online software and adds the cash takings to the accounts. Because he does it straight away and not later - he is less likely to be dishonest about the amount of cash he has, simply because he has not had the opportunity to think about how much he could get away with!
Oddly enough it really does work. But when you write things down, always date it. If the accountant later denies it, it may be possible to prove that you rang them (tel no on the telephone bill) and if you wrote down the conversation and dated it - then ask the Accountant why else did you ring - would you really ring them about something else and then write down lies straight away? No the reality is you would only have written down something which you thought was true. And in court that is believable - especially when proving innocence rather than guilt.
This is not good advice you are getting from the accountant, at all. This makes no sense to be put under costs for business related materials as clearly, this does not contribute to the goal of the business. Appears to me, that they are doing some magic to use the funds for personal gain, which in my opinion is not that rare anymore.
Sounds obvious but why don't you email the queries to the accountant, along with a closing paragraph saying, can you please confirm where you want me to post these? If they don't reply then post them as you feel fit. If they do then you have your evidence of blame. You are taking the advice of the 'senior adviser' in the client relationship.
If you have already discussed the issues on the phone it doesn't matter. Opening paragraph is something like 'further to our recent conversation I want to confirm your thoughts on the following:'
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Phil Hendy, The Accountancy Mentor
Are you thinking of setting up your own practice or have you set up and need some help?
If so a mentor may be the way forward - feel free to get in touch and see how I can assist you.
Also, as Merlion has mentioned you haven't specified the industry. This may give some indication of whether the massage chair is allowable.
I find it amazing how many clients try to put through Physiotherapy and that kind of stuff through as business expenses. I get asked it all the time. There is also the common myth that all of your meals whenever you go out can be put through the business!
__________________
Phil Hendy, The Accountancy Mentor
Are you thinking of setting up your own practice or have you set up and need some help?
If so a mentor may be the way forward - feel free to get in touch and see how I can assist you.
It is a construction company. I never used to claim the tax back on subsistance but I was told by the accountant to claim it back if it is out of the area. It just seems like way too much to be putting through. With me being still being a student and having studied professional ethics I'm worried that this could all come down on me. I'm the bookkeeper, I'm the one putting everything through. If push came to shove, as you say, is accountant going to take some responsibility for advising me to allow it all? I think not.
Don't worry about it, just do as the accountant says. The Accountant is responsible for putting the accounts together and checking that everything is being claimed as it should be. All you are doing is processing paperwork and transactions. They will make any adjustments they see fit to correct your work to ensure they are allowing business expenses only.
It is fairly normal practice for the accountant to suggest dumping some expenses into certain areas and then deal with them when the accounts are done by either moving them or disallowing them for tax purposes.
The accountant should review Repairs & Renewals and other profit & loss expenses for any questionable or large expenses and query with the client as to the validity of the expenses.
With regards to physiotherapy, yes it "could" be allowable is the injury is work related although this would need to be verified by the accountant in question as its a grey area.
If the accountant claims these costs and the business is investigated and it is wrong, ultimately it lies with the business owner as they sign off the accounts and tax return, but the then the business owner will go after the accountant as they are the experts and have obviously messed up.
Just remember you are only processing info given too you. If you have any doubts about whether the accountant or client is committing fraud then obviously you need to speak to the relevant body to submit your concerns.
