accountant oversight

[cliveant]

A friend had his previous yrs accounts signed and sealed with no tax to pay. However the auditor ha now realised he missed out almost half a million pounds worth of stock....on total stock of what should be approx £6m. The auditor does the stock figures himself.....it is property.
This has triggered a totally unexpected tax bill of almost £100K as the auditor has redone and submitted the accounts
Where does my friend stand ...is here any come back on he auditor

 

[Tom McClelland]

What loss has your friend suffered from the error? Are their any fines or penalties resulting from it? If it is simply an error which was corrected in time for your friend to pay their tax on time (or at least without penalty) I'm struggling to see why any comeback might arise.

 

[cliveant]

The tax should have been paid last year.....but the auditor only realised the error when signing off ths yrs accounts.
He is assuming there will be interest and charges to pay once the tax man is made aware.
The main problem though is cashflow....he had been told there was no tax due and now is being asked for £100K out of the blue

 

[David Griffiths]

He has stock of £6.5million and is getting wound up over a tax bill of £100k?

 

[cliveant]

Most of the stock is owed to the bank....he has massive loans and cash flow problems

 

[elaine@cheapaccounting]

Most of the stock is owed to the bank....he has massive loans and cash flow problems

£100k of tax - that must have been a fair profit then.

If now trading as you say - will there be losses this year to carry back for a refund?

 

[cliveant]

no...he had losses brought forward but they are all used up now.
It seems a lot of profit but the banks are killing him.....all the cash has been taken up in refinancing and paying interest as they have put everything onto libor and want to refnance with huge fees so he is at their mercy
This tax bill will wipe out his cash flow and he is starting to question what other mistakes they may have made