Met someone last night who had issues with her former accountant, and was looking for someone to submit sole trader tax return. One of the issues involved was because accountant had failed to inform her that she would have a 100% loading on her tax.
(say 1200 - 1800 payable 31st Jan 600 31st July and she simply paid the £1200 due 31st Jan and has now been hit with a demand for the other 1200) His tax computation figures just showed the £1200 due.
She believes the accountant deliberately told HMRC to set her tax to zero on the 2012-13 tax return (submitted Jan 14 despite him doing figures in June 13) which was picked up when 2013-14 tax return was submitted June this year, which had a similar liability.
A couple of questions. What is this setting tax to zero? It's something I hadn't heard of until last night. Would the lady have a possible claim under PI insurance? I was doubtful on the latter as the laibility was always there despite the accountant not advising her, although I suggested she look into it. She hadn't planned for the extra £1200 and it's seriously going to affect her financially form what she told me.
I think the "setting tax to zero" is referring to "Reducing Payments on Account" - you can not do this unless you belive that profits in the subsequent year are going to be seriously lower than current, you are ceasing self employment or you are incorporating. search2.hmrc.gov.uk/kb5/hmrc/forms/view.page
As for claim on PI insurance, think it might be a non-starter but could have a look - speak to a legal person; certainly the previous accountant should have mentioned payments on account, explained what they were and when they are due for payment. As for your clients' current position, I would speak to HMRC and see if she can do a payment plan - explain the situation and see if they had a soft spot.
Thanks, this was certainly not the case, as the business is ongoing. I've already suggested she speak to HMRC and come to some arrangement if she can. I had a feeling the PI would be a non starter, but suggested she pursue it anyway.
How can you prove that the client was not told about payments on account?
Half the time my impression is that clients only hear what they want to hear.
This would just end up as an he said / she said and would be a complete waste of yours and your clients time.
Have you actually spoken with the accountant about the client? (assuming that the client has given the accountant permission to talk to you).
You do realise that by advising the client to pursue compensation you have opened yourself up to be counter sued by the accountant for any time lost on this as your professional advice is basically that they have done something wrong and there is a case worth pursuing.
You have to be really careful to only advise that sort of thing where there is definite fault and I do not think that any can be proven here.
As David states, an ongoing company with reduced profits can reduce their payments on account where such is definitely the case but a claim to reduce that proves incorrect will result in penalties. (I never said the tax system was fair).
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.
Please note this is not my client, I was recommended to her and actually talked myself out of taking the lady on my books vecause I wouldn't have been able to save her the Tax the Accountant was able to (see my other thread). Apologies if that wasn't clear in my post. Thanks for the heads up re advice.
The lady had received the Accountants report and it said tax due 1200. No mention of having to make a payment on account.
