Corporation Tax Liability

[numbersrule]

If HMRC have sent a CT Bill and the Company Director knows that the Liability is clearly incorrect and too high by 3 orders of magnitude could anyone find fault if the Company accounts included the Bill as a Liability?

 

[Ziggy2024]

CT is self assessment so why would HMRC have amended the original submission? The director will surely be investigating and getting this corrected?

I wouldn't put the amount into the accounts until I was sure that the calculation was correct but there is nothing wrong in doing so.

 

[UK Contractor Accountant]

find fault if the Company accounts included the Bill as a Liability?

provision for corporation tax liability should already been included in the company accounts under FRS102 or FRS105 reporting.

The CT payment should clear the provision otherwise there will be an under/over provision to account for.

 

[DontAsk]

It should already be in the accounts from the year end where the amount owing was calculated. Why did the company submit a return that was 3 orders(1000x!) too large?

 

[MyAccountantOnline]

If HMRC have sent a CT Bill and the Company Director knows that the Liability is clearly incorrect and too high by 3 orders of magnitude could anyone find fault if the Company accounts included the Bill as a Liability?

How does the director know the CT liability is incorrect?

Did this director approve and sign the accounts and CT return?

To answer the question - could anyone find the fault. I'd want a bit more information first including what and why the liability is incorrect and the amounts involved.

 

[numbersrule]

The Director does not have visibility of any of several years of CT600s. The former Accountant seems to have kept things close to their chest.
The Company made large losses some years ago which have nowhere near been used up by subsequent profits. This is all self evident from the Accounts which are visible and known to the Director. Dividends have been 0.00 for years.

The CT Liability is actually 0.00.

When I said 3 orders of magnitude I meant infinitely x incorrect as tens of k's.

 

[MyAccountantOnline]

You most definitely need to see the Corporation tax returns to see what the losses were and if they've been used.

Has the accountant submitted the CT returns to HMRC without a director signing them?

 

[Lisa Thomas]

Yes this seems odd - why/can an accountant do that? I would have serious concerns if they were. Also, could imply an accountant is acting like a shadow director?

 

[numbersrule]

It seems to me that the Accountancy Sector is overworked and clearly decisions are made about which businesses are prioritised for accurate reporting. Some businesses are deprioritised due to Accountants unmanageable workloads. It is well known that Accountants admit to frequent errors.

I don't think this is about deliberate misreporting.

It looks to me like the large losses were mistakenly posted as profits. Then penalties and interest have been added for a few years.

 

[MyAccountantOnline]

As an accountant, I think that’s an unfair and very inaccurate characterisation of my profession.

I don’t accept the suggestion that accountants “admit to frequent errors”, or that we are simply overworked and therefore prioritise certain businesses due to unmanageable workloads.

The type of issue being suggested here — such as large losses being recorded as profits — would be a very unusual mistake.

I’d also be interested to know whether a qualified UK accountant was actually involved.

 

[Ziggy2024]

It looks to me like the large losses were mistakenly posted as profits. Then penalties and interest have been added for a few years.

This is unlikely if the accounts show losses as the accounts will pull through to the tax return.

There are a few things that I can think of that could have happened:

1 accounts profits do not equal taxable profits so it is possible that there isn't the amount of losses that you / your client thinks
2 losses b/fwd could have been omitted

The accountant should have copies of all returns and computations. If they don't supply them you can ask HMRC (but they tend to push back initially in my experience).

 

[GLAbusiness]

My accountant will never submit my accounts until I have approved them.. I have not seen an error yet

 

[fisicx]

It looks to me like the large losses were mistakenly posted as profits. Then penalties and interest have been added for a few years.

If that is the case why didn’t you spot the error when you signed off the accounts? As a director you are responsible not the accountant.

 

[DontAsk]

Are there other directors? Who signed off the accounts?

 

[numbersrule]

If that is the case why didn’t you spot the error when you signed off the accounts? As a director you are responsible not the accountant.

It wasn't me.
The Director is my new Client.
We have written to HMRC.
Watch this space.

 

[numbersrule]

It turns out that even though the Accountants filed Accounts for several years, there were no CT600s submitted.

As a result HMRC made their own determinations of CT Due.

 

[DWS]

It turns out that even though the Accountants filed Accounts for several years, there were no CT600s submitted.

As a result HMRC made their own determinations of CT Due.

And a fair amount of late filing penalties I would imagine, did the client not receive any correspondence from HMRC regarding this before what you mention in the OP?

 

[numbersrule]

And a fair amount of late filing penalties I would imagine, did the client not receive any correspondence from HMRC regarding this before what you mention in the OP?

Yes, plenty of penalties.
Regarding post, the situation seems to have been muddled by the Accountant moving their premises to a new address and either not having mail forwarded or for whatever reason not being proactive in notifying Client of communications. There was also confusion about the Accounts being Filed by one Accountant whilst the Client's Registered Office was still with a different Accountant who had moved.
Like I say earlier in the thread, this is all unsurprising to me and is just part and parcel of working with overworked Accountants.

 

[Ziggy2024]

It turns out that even though the Accountants filed Accounts for several years, there were no CT600s submitted.

As a result HMRC made their own determinations of CT Due.

Wow, that is negligent to say the least. Does the accountant still act for the client? I would think there is legal recourse here.

Like I say earlier in the thread, this is all unsurprising to me and is just part and parcel of working with overworked Accountants.

I have worked with accountants for a long, long time. This sort of thing is rare, I have come across something of this magnitude maybe twice and suggests incompetence (IE the accountant is unaware that they should be filing with HMRC) rather than overwork / prioritisation.

 

[MikeJ]

The directors are responsible for filing the tax return, and for making sure it is correct. We're obviously only getting one side of the story here. It's not inconceivable for there to have been a conversation in the past where the directors said they'd file the CT600.

 

[fisicx]

@numbersrule - have you checked that the accountants were actually tasked with filing the CT600?

 

[numbersrule]

Evening everybody
This is not the first thread that I have been involved in where there has seemed to be a general disbelief about the performance of Accountants and a general consensus that this type of occurrence is very rare.
Well, all I can say is that I must have been very unlucky during my bookkeeping career which started about 2 years ago. To set out some clear statistics, solely in terms of my own experience, I have worked with a total of 15 Clients in the 2 years. Out of those 15 there have been extremely serious accounting problems with the Accountants of 5 of those Clients.
I hope you will understand therefore that from my experience these occurrences are not rare events.
Maybe I have just been unlucky.

 

[fisicx]

maybe they come to you because they have problems with their accountants. Or you are picking up penny pinching clients who engage with cheap bottom feeder accountants.

 

[numbersrule]

Wow, that is negligent to say the least. Does the accountant still act for the client? I would think there is legal recourse here.

There will probably be no need for any legal recourse.
All the CT600's can be submitted now.

 

[numbersrule]

maybe they come to you because they have problems with their accountants. Or you are picking up penny pinching clients who engage with cheap bottom feeder accountants.

Yes. This is an interesting observation. However, in this particular case the Accountants were very expensive considering they didn't provide a full service.

It's certainly true that 11 of the 15 Clients had significant problems with their bookkeeping ( as opposed to extremely serious ) and I have never had any new Clients where I could just pick up and run with an established system.

It seems anybody advertising for a bookkeeper is highly likely to have some sort of problem to solve.

 

[Ziggy2024]

There will probably be no need for any legal recourse.
All the CT600's can be submitted now.

The client has presumably paid the accountant for a service that they didn't provide. Although there will be no interest, there will still be late filing penalties unless you get these overturned so a financial loss. Up to the client of course.

To be fair, 15 clients is a very low number for any sort of statistical analysis.

 

[MikeJ]

maybe they come to you because they have problems with their accountants. Or you are picking up penny pinching clients who engage with cheap bottom feeder accountants.

Something like this. Or the accountants have quoted on the assumption they'd be handed management accounts in good order, hence the need for a bookkeeper to tidy up the data into a format they can handle.

 

[fisicx]

Yes. This is an interesting observation. However, in this particular case the Accountants were very expensive considering they didn't provide a full service.

That’s an issue for the directors not the bookkeepers. If the directors were properly fulfilling their fiduciary duties this wouldn’t have been a problem.

 

[MyAccountantOnline]

It turns out that even though the Accountants filed Accounts for several years, there were no CT600s submitted.

As a result HMRC made their own determinations of CT Due.

I truly find this very hard to believe.

Errors I could understand, but an accountant engaged to complete the accounts and tax returns and failing to submit tax returns for ''several years'' is really odd.

Was this a UK qualified accountant?

 

[numbersrule]

I truly find this very hard to believe.

Errors I could understand, but an accountant engaged to complete the accounts and tax returns and failing to submit tax returns for ''several years'' is really odd.

Was this a UK qualified accountant?

Based on your posts on this forum I suspect you are a very organised accountant who tends to make sure that things are as they should be.

I therefore fully understand that you will find this type of thing really odd.

There is a limit to what I can say in this thread.

What I can say is that if a bookkeeper or accountant starts off in the early days by being lucky enough to have plenty of Clients who wish things to be as they should be, then those Clients are likely to associate themselves with other businesses who wish things to be as they should be and that will inevitably mean that a good start leads to more good things.

Conversely, if an accountant starts off in the early days by being unfortunate enough to pick up some Clients with serious problems, then they can expect a long hard slog with an uncertain outcome.

 

[MyAccountantOnline]

Based on your posts on this forum I suspect you are a very organised accountant who tends to make sure that things are as they should be.

I therefore fully understand that you will find this type of thing really odd.

There is a limit to what I can say in this thread.

What I can say is that if a bookkeeper or accountant starts off in the early days by being lucky enough to have plenty of Clients who wish things to be as they should be, then those Clients are likely to associate themselves with other businesses who wish things to be as they should be and that will inevitably mean that a good start leads to more good things.

Conversely, if an accountant starts off in the early days by being unfortunate enough to pick up some Clients with serious problems, then they can expect a long hard slog with an uncertain outcome.

Thank you for your kind comments I do appreciate that.

I've been an accountant in practice for many years and the type of clients you end up with is much more about the standards you set, and the way you work, than luck.

You’ll always come across clients with issues at times but that doesn’t automatically mean a long slog. Quite often it’s where you can add value. And if something’s not a good fit, it is something you can manage rather than just accept.

It's such a shame to draw conclusions from a limited set of experiences. There are plenty of good accountants out there working to a high standard.

 

[fisicx]

Conversely, if an accountant starts off in the early days by being unfortunate enough to pick up some Clients with serious problems, then they can expect a long hard slog with an uncertain outcome.

Or you part company with the client and take care to do due diligence in future.

I never take on clients before being sure I know we can work together.