Flat rate Vat - The Book-keepers Forum (UK)

Georgie · Guru

Flat rate Vat

ClareB4 · Senior Member

I believe it does Georgie. I have a client on FRS who was consistently late with returns and payment (obviously before I took over her bookkeeping LOL) and they threatened to chuck her off the scheme!
I had to do some serious sweet talking to allow her to remain on it so I doubt HMRC would allow anyone who's been late to use it. Still might be worth applying though - you never know.

Georgie · Guru

OK, thank you....My client has been approached by a ACCA and is trying to poach them from me offering to enrol them on this scheme claiming they can save them £££'s obviously though they do not know anything about my client or their circumstances.

Georgie.

Shamus · Forum Moderator & Expert

An ACCA person should not be attempting to poach another accountants clients!

Such approach lacks integrity.

integrity is section 110 of the IFAC code of ethics.

ACCA accountants are bound by the ACCA's even more stringent interpretation of the code.

If a client comes to you and they currently belong to someone else then fine, they're fair game but you don't approach the client unless you know that they do not currently have an accountant.

Are you sure that it isn't your client that approached the ACCA member Georgie?

p.s. if an accountant is in good standing with HMRC and perhaps belongs to a larger practice they may be able to achieve things for clients that accountants less well known to HMRC are not able to achieve so despite the clients standing in this instance it probably isn't an empty promise by the accountants.

Georgie · Guru

My client offers a service and this ACCA is his client. He was complaining about how much vat he has to pay and the ACCA suggested this option to them. Said they would do their accounts as well while they were at it.

Georgie

Shamus · Forum Moderator & Expert

So I was right, your client, even if inadvertantly asked the Accountant for advice.

Thats enough that it was your guy that approached the accountant rather than poaching.

Sorry, the accountants in the clear on this and I beleieve that they probably could get your client on a flat rate scheme because their letters give their clients added credibility.

Your one hope of calling foul here was to play the poaching card but this isn't. It was your client who asked the question making them fair game.

Georgie · Guru

Fair enough, but i would be really surprised if they could do this.... The client has NEVER paid the vat on time, never paid any CT and only about 30% of PAYE owed.....Robs Pete to pay Paul...

Georgie

Shamus · Forum Moderator & Expert

Lol Georgie,

Some miracles even top accountants can't perform.

I would like to think that business like that are rare but I fear that evidence would suggest otherwise.

Admit it, from the sound of how they run their affairs are you really going to miss anything but the money about that client?

Georgie · Guru

They are very likeable...and I think they are my favourite client . All is not lost yet though as just found out the ACCA quoted them double what I charge biggrin

Need some serious advice though as out of my depth with this and maybe that's why the ACCA is double the price...... It was suggested to them to split the business into separate divisions , so in effect have 2 or 3 "companies" offering different (but which compliment each other) at the same premises, which would reduce the sales of one so they would fall under the £150,000 vat threshold for flat rate. Any thoughts or advice Shamus?

Georgie

Georgie · Guru

Right , just read about splitting the business and think in my clients case they would be mad to consider this, considering the services they offer.

It's all very well giving somebody else clients a bit of "free" advice in order to win them over but seriously, that piece of advice was ridiculous.

Georgie

HendyPhilhendy · Guru

Not sure I like the way the person is referred to as 'The ACCA' as if that is a bad thing

If there is a genuine difference in services etc. that could be offered by creating the different entities then it is a possibility; however, as you say would most likely complicate things for both your client and their customers. The extra companies would probably end up costing more than the saving made by being on the flat rate scheme. They would have to be really spot on with their paperwork, which doesn't sound like they are!

HendyPhilhendy · Guru

The poaching point is an interesting one Shamus. I don't think anyone could ever go up to any completely cold lead and say they will save them money. Generally, as you say, you need to be approached and asked a question before even starting a discussion.

I often get asked questions at a networking meeting or even in the pub (hate giving pub advice!) and this will often lead to finding enough about a business to at least have a meeting with them outside of that 'chat'. Nothing is ever done deliberately to poach and in fact quite often I would tell them their adviser is giving them good advice!

Georgie · Guru

Being referred to as the "ACCA" was not meant to infer they were bad . I was referred by the "ACCA" as the bookkeeper, who probably was only "bookkeeping" and not offering any advice regarding tax savings....which I took offence too. They know nothing about my client or their circumstances yet freely gave advice (which I do not agree with) and quoted their fee in a place full of customers....

Georgie

Georgie · Guru

I won't mention what type of business my client has but will give you similar examples.

A very small garage lets say, that does repairs and has a car wash. All trading under the same name, and has been for 3 years. Or how about a very small shop selling cakes and bread. Could you spilt the business in 2 so one company sold cakes and the other bread????

That's the scenario .

Georgie

Georgie · Guru

Let's play devils advocate.

My client takes on board the free advice given to them , and splits the business into 3 in order to come under the threshold for the flate rate vat. They will save approx. £6000 a year ...not a quarter, a year .

Now, how much do you think the accountant is going to charge for 3 sets of annual accounts, 3 annual returns, 3 company tax returns and probably 3 sets of bookkeeping....???????

Georgie

ClareB4 · Senior Member

As Shaun says above, some miracles even many letters after your name can't achieve. I am "only" ICB qualified but have managed to work minor miracles because as an agent I'm in great standing with HMRC, which is probably why I managed to get aforementioned client to remain on FRS. I've also managed to get client penalties reduced or removed entirely but it's pretty hard work over a good few years that has got me to that stage with HMRC.

To be honest Georgie if your client is struggling to get things in and paid on time with one entity, imagine the mess they could create with 2 or 3! HMRC would take a very dim view of splitting the business if the businesses are very similar and it would be classed as tax evasion. As Phil says, if there are 3 entities to manage instead of 1 the paperwork would have to be spot on. Obviously you have some control over that but imagine the penalties for non-payment multiplied by 3 rather than 1.

Is this entity limited or sole trader? If limited then I imagine the additional admin burden of having three sets of everything to do would negate any benefit of splitting in the first place.

Georgie · Guru

My thoughts exactly!!

And they operate as a limited company.

I am just upset that someone has given free advice to my client without knowing the ins and outs and has implied they could do a better job (because of their qualification) and save them lots of money. And it's not going to happen. It would be suicidal. But because my client is desperate, impressionable and naïve they will probably go with the advice given and as I see it the only person who will gain from this is the accountant!

Fed up, ready to give up and well and truly peeved off.

Georgie

ClareB4 · Senior Member

Have you spoken to the client about this? Perhaps showing them some of the comments above might carry some weight!

I know that clients do often rate the advice given by accountants way above that given by a mere bookkeeper and it's a permanent source of frustration. I'm not implying for a second that accountants give bad advice but very often as you say, they don't know the ins and outs of the client and their business at the point that they are giving that advice.

I can completely understand your frustration and hope that you can resolve this asap and to the benefit of yourself and the client

Shamus · Forum Moderator & Expert

I concur with the general sentiment voiced by Phil and Clare above.

The client would split their business taking on the associated costs of such a split.

Without genuine business reasoning for the split (avoiding tax is not a business reason!) HMRC would regard such as a split of convenience and rejoin the business as though branches of the same business disallowing the costs of the split so the client would end up costing themselves a lot of money for zero gain and possible interest, penalties and surcharges on the tax/VAT that they should have paid but didn't.

To me therefore splitting this businessmakes little sense.

Worth mentioning to your client I feel is that when they implement an accountants advice they are saying that they agree with such advice. The fact that they acted on the advice of a professional advisor does not absolve them of the responsibility of their actions.

It has to be emphasised that the following are all the directors respoinsibility :

- Keeping adequate books and records

- Preparing the financial statements

- Determining the correct financial reporting standards upon which to base such financial statements.

They outsource that work to a financial professional who uses their skill and judgement in assisting with the above.

In the event of issue the company director is to blame and they will be the one chased by HMRC. It is then down to them to show incompetence on the part of the financial professional in order to put them back in the position that they would have been in had the issue not occured.

Many clients seem oblivious to this and assume that when they hire us they are actually absolving themselves of responsibility which is simply not the case.

In your example, if your client acts upon the accountants advice they are doing so by choice (even where the accountant performs the work on the owners approval), the accountant has not done this without telling them what is being done. That makes it both difficult and expensive (often irrecoverable) to prove in court that the issue was purely the accountants.

Costs of such action would like as not far outstrip any potential recompense for enacting poor advice.

However, if such advice was given without professional competence and due care (S130 of the IFAC code) then a complaint may be made to the accountants professional body to investigate. That would not bring any financial recompense to your client but would ensure that the matter was properly investigated and if necessary any disciplinary action (which may include a fine or suspension) taken against the accountant concerned.

However, one will find proving lack of professional competence or due care problematic.

All in all I think that your client will in the long run find it better to continue as they are at the moment ignoring the advice about splitting the business.

kind regards

Shaun.

Georgie · Guru

I will send my client an email this weekend setting out why I do not think it's a good idea. It's up to them after that.

Georgie

ClareB4 · Senior Member

That sounds like a good idea Georgie - being proactive will mean you can relax and enjoy your weekend
Have a good one
Clare

Cheshire · Master Book-keeper

Interesting stuff Georgie - let us know how you get on! Ive yet to encounter anything like this (fortunately)

Georgie · Guru

Yes, I will keep you posted. I plan to email them this weekend with the facts & figures, then it's up to them who's advice they take.

Georgie

Georgie · Guru

Ok, as promised here is an update...

My client has informed me that they have decided to take the ACCA's advice and are going to split the business in to 3 . I cannot believe that they will get away with this, not after reading what it states on the HMRC website. The ACCA has told them that I can still do the bookkeeping and payroll but they are now going to take over the preparation and submission of the accounts.......

Guess what I said?.....

Georgie

leshoward · Senior Member

Agreeing fully with Shamus' post about business splitting. You should also note that VAT legislation prevents business splitting in relation to registration, and in relation to the Flat Rate Scheme. Frankly, business splitting is a course of action which should not be recommended by any professional.

Georgie · Guru

Oh I agree and don't understand why this accountant thinks they can do it and more worryingly get away with it. Before I advised my client back in May I spent a good few hours researching it. I then emailed my client and explained my reasons why I didn't think it was good a idea .

I just don't understand why this ACCA would offer to do this for them.

Georgie