Tax From The Trenches: Can You Trust Your Accountant?

Monday 17 August 2020

Written by Neill Staff

Tax From The Trenches: Can You Trust Your Accountant?

Tax From The Trenches: Can You Trust Your Accountant?

I had a meeting with a potential client just before we entered lockdown. He had received a series of tax demands and told me he didn’t think he could trust his accountant anymore. Looking through the various letters he’d brought with him, I could see that there were two different enquiries from HMRC, one which seemed to have stopped back in 2016, and an ongoing case where the Inspector was starting to get more than a little grumpy that no-one was replying to him. 

The client, who we’ll call Peter, said that he had been ringing his accountant to make sure everything was being dealt with. He had been told repeatedly not to worry and that everything was in hand however, as we were to find out later, nothing was further from the truth.  

I think I knew there was going to be a problem when I saw the name of the accountant on a letter. I had dealt with him during my time at HMRC (for those who don’t know, I am a former HMRC Tax Investigator, and now the specialist Tax Partner at Raffingers), and had found him to be quite inept. As soon as Peter had transferred his affairs to Raffingers I set about contacting the agent to try and get copies of all the correspondence although, not unsurprisingly, he didn’t reply. I then contacted HMRC and spoke to the Inspector dealing with the current enquiry. 

To say he seemed relieved is an understatement. He told me he had been asking questions about some basic property transactions for many months without receiving any meaningful replies from the agent. He was at the stage of issuing an information notice but really didn’t want to do it because he was quite sure the queries could be resolved. He provided me with copies of the enquiry correspondence, and we were able to answer his questions and conclude the enquiry within matter of a few months. Neither of us could understand why Peter’s ex accountant hadn’t bothered to reply to HMRC. 

Unfortunately, things were about to get worse when I eventually tracked down the Inspector dealing with the older case. She explained to me that she had raised an enquiry into the 2015 tax return and had asked some questions about Peter’s rental income expenses and the possibility of a capital gain being missed of his tax return. Eventually, after not receiving any replies to her letters, she issued a closure notice disallowing a sizeable chunk of Peter’s rental expenses and assessing the capital gain using best of judgement figures. The agent had told Peter everything was in hand but he had not even appealed against the closure notice, so the additional tax became due! Even worse was to follow, the Inspector decided the additional tax had arisen because of a deliberate behaviour and charged a 70% penalty totalling over £60,000.  

At this point the agent appealed against the penalty and ultimately listed if for Tribunal hearingHowever, he then failed to respond to any of the Tribunal’s directions in just over a year with the result that the case was eventually dismissed by the Judge. Even at this late stage there was still an option to have the proceedings restored but nothing was done, and the deadline was missed. 

I am not sure who is more shocked. Peter is completely devastated that the man who acted for him for many years lied to his face in saying everything is fine whilst failing in his duty of professional care on a spectacular scale. For my part, I have seen some truly epic failures from accountants, but I think this has to take first prize. We are currently trying to restore the tribunal proceedings which will at least give us a fighting chance of reducing the penalty. We are also looking at the possibility of submitting a late appeal against the assessment issued by HMRC although we will struggle as it was issued over three years ago and there are no obvious grounds for late appeal, other than the accountant was inept and lied to the client. We have tentatively raised the question about suing the agent if we are unable to seek some form of recourse through official channels although Peter is reluctant to do this. 

It is a sad situation when a professional person is willing to take someone’s money but not actually look after their affairs. Thankfully most accountants are professional, reliable and trustworthy but any failure on this level is truly terrible. Thankfully Peter had the good sense to seek independent advice and we will certainly do our best to bring his tax affairs back to normal over the coming months.  

If you are having doubts about your accountant, or would simply like to receive a second opinion, please don’t hesitate to contact us. 

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