The net profit for 2019/2020 is a very small £7,000 ish, but during the same tax year the client withdrew all of a small personal pension so that he could purchase a new tractor for £17,000. His full personal allowance was used against the pension withdrawal.
No tax has been paid for a number of years, as his earnings have been below the personal allowance threshold.
Is it possible to put this £17,000 spend through his books so that the tax paid on his pension withdrawal can be claimed back, and if so how should I record this in the accounts.
Does your AATQB licence cover you for dealing with the tax aspects of this? I suspect not. But if it does, you should remember your ethics and not involve yourself in things that are beyond your capabilities. This is clearly beyond your capabilities, because you are not even using the correct terminology to begin looking it up. Professional competence and due care is just one that you are in breach of, just to start with. What would AAT do if they knew you were working beyond the bounds of your agreement with them?We all have to start somewhere but this is beyond your remit, no matter which way you look at it. You will be costing this business. The tractor is clearly capex.
This is worrying as it seems to me there are things recorded incorrectly and a lack of understanding of how to help the client.
I don't want to seem mean but I agree with Maat in that this is pretty basic stuff. Beyond professional ethics there is also the very real threat that the wrong advice, especially where that goes beyond the remit of your PII (#1), will put you in a position where your client is able to sue you for advice or bookkeeping that you either gave/completed incorrectly or did not give/complete correctly when you held yourself out to know what you are doing. This could be substantially more than the amount that you charge them.
Shaun.
#1 your PII will have a line that states that you are only covered for work that you are able to evidence that you are competent in. So for example a bookkeeper may or may not be covered for the preparation of any document (accounts, cashflow statements, projections, analysis, VAT returns, Tax returns, etc.) upon which others depend on which to make financial decisions (dependant upon training and experience).
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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.
