Reply to: Incorrect advice given by accountancy firm

[ASB]

Just as an aside, the above can be a bit of an impossible task for any accountant to get right. Clients often write short questions (eg "Can I claim my lunch?"), and what they want is a short yes/no answer. Of course we can virtually never do that, as inevitably the answer starts "It depends...". It's one thing listing out a few possible scenarios the client might be in now that would suggest whether it's allowable or not. It's another to also lay out possible things the client might consider doing X months down the line. It's a hard balance, as of course not only does the client want a short, easy to understand answer, but also we don't have all day to run through every hypothetical scenario which might crop up.

I would say I'm pleased that most posters on this forum do seem to understand this, and don't always jump to the "your accountant's an idiot" response whenever an OP has a moan.

Whilst still contracting my last accountant was a local guy so decent repute, went indy with a few clients after seeling out to one of the big 4 some years previously.

Anyway, I worked by delivering him incomplete records, trial balance etc and all he really had to do was check what I was putting through was OK, sort out capital allowances and that sort of thing. And disallow some of the more excessive items - if I didn't try I wouldn't get.

After he'd done it we'd have a bit of review for an hour or so. Things that were taking the mick - and why. Things that I didn't have that other clients might etc. It was always time well spent.

[Maslins]

It may also be the case that the advice as originally received was correct, or subjective, and it is only subsequent events from the OP like extensions or life events that have caused it to become subsequently invalid. (One might argue that if the advice was "yes it's chargeable" rather than "yes it is currently chargeable but it may fail later if something like xxxx happens" was not comprehensive enough).

Just as an aside, the above can be a bit of an impossible task for any accountant to get right. Clients often write short questions (eg "Can I claim my lunch?"), and what they want is a short yes/no answer. Of course we can virtually never do that, as inevitably the answer starts "It depends...". It's one thing listing out a few possible scenarios the client might be in now that would suggest whether it's allowable or not. It's another to also lay out possible things the client might consider doing X months down the line. It's a hard balance, as of course not only does the client want a short, easy to understand answer, but also we don't have all day to run through every hypothetical scenario which might crop up.

I would say I'm pleased that most posters on this forum do seem to understand this, and don't always jump to the "your accountant's an idiot" response whenever an OP has a moan.

[Old Greg]

Yes, I can see that as a possibility. But perhaps the OP had already extracted all the retained profit and there wasn't a possible dividend last year as a result (obviously I have no idea if this is the case).

But, if the advice as received originally was wrong and the OP if in effect forced to increase dividend to specifically cover the costs and that dividend costs more (7.5%) then there is an argument that is the quantifiable loss. It may also be the case that the advice as originally received was correct, or subjective, and it is only subsequent events from the OP like extensions or life events that have caused it to become subsequently invalid. (One might argue that if the advice was "yes it's chargeable" rather than "yes it is currently chargeable but it may fail later if something like xxxx happens" was not comprehensive enough).

Equally if the op had loads of cash in the bank etc then the counter argument could potentially be "you had the resource to pay it personally, and you had already used all your BR rate dividends so there is no extra cost".

What is the esteemed panel's view on accountancy firm liability for accountancy advice. There was a thread last week on subsistence: http://forums.contractoruk.com/accou...allowance.html

If my accountancy firm advises that I cannot claim subsistence and I then find that I could have, can I claim damages for the loss of not claiming. Seems unlikely to me but maybe I'm wrong.

[ASB]

The 'loss' would be the additional cost of an extra dividend this year rather than last year.

Yes, I can see that as a possibility. But perhaps the OP had already extracted all the retained profit and there wasn't a possible dividend last year as a result (obviously I have no idea if this is the case).

But, if the advice as received originally was wrong and the OP if in effect forced to increase dividend to specifically cover the costs and that dividend costs more (7.5%) then there is an argument that is the quantifiable loss. It may also be the case that the advice as originally received was correct, or subjective, and it is only subsequent events from the OP like extensions or life events that have caused it to become subsequently invalid. (One might argue that if the advice was "yes it's chargeable" rather than "yes it is currently chargeable but it may fail later if something like xxxx happens" was not comprehensive enough).

Equally if the op had loads of cash in the bank etc then the counter argument could potentially be "you had the resource to pay it personally, and you had already used all your BR rate dividends so there is no extra cost".

[Old Greg]

Shocking. There can't really be anyone like that, can there?

It's a worrying new trend.

[teapot418]

You seem to be suggesting that you would have contined with the rental and simply not charged it to the company. I think this makes the attributable loss nil.

The 'loss' would be the additional cost of an extra dividend this year rather than last year.

[WordIsBond]

As many long term posters on here will be aware, people sometimes have a tendency to only mention the bits which support their claim, conveniently forgetting to say the things that might demonstrate it wasn't allowable, only mentioning them when pushed.

Shocking. There can't really be anyone like that, can there?

[Maslins]

Indeed. It will be interesting to see what the accountant says. You say 'advice' so is it just that and it's up to you to make sure it's right or is there some commitment from them if it's wrong.

Any of our accountants got a view on that?

Well, if an accountant advises on a certain course of action, the client does, and it later transpires there was a better course of action which would've saved £X, then the accountant could be sued for negligence to compensate for the loss from their poor advice. If the accountant is regulated they will have to have insurance (PII) against this, unregulated accountants hopefully would, but might not.

In practice, where the amounts are modest, it's not going to be worth either party taking it to court or getting solicitors involved. The client might have a bit of a moan, the accountant will look back, assess things, and possibly offer a cash goodwill gesture.

As others have suggested though, it's not always clear cut who's at fault. As many long term posters on here will be aware, people sometimes have a tendency to only mention the bits which support their claim, conveniently forgetting to say the things that might demonstrate it wasn't allowable, only mentioning them when pushed.

Also having skim read the above, I'm unsure whether the OP would have done anything differently with different advice. For it to be a valid business expense, it basically needs to be additional accommodation required (ie not the person's new home) near the place of work, being wholly and exclusively for the benefit of the trade. Sheds some doubt on the whole thing if the OP is now saying they wouldn't have rented it if it wasn't allowable.

[northernladuk]

Yes I'd also be interested in:-

1) Why they now think its not allowed?
2) Why they're advice changed.

Must admit if it now transpires that they gave wrong advice in the beginning and, because of this, its now going to cost me money, I'd be looking for recompense.

Indeed. It will be interesting to see what the accountant says. You say 'advice' so is it just that and it's up to you to make sure it's right or is there some commitment from them if it's wrong.

Any of our accountants got a view on that?

[psychocandy]

The fact that time has passed could mean the 24 month rule has kicked in. Or you couldld have sold you main property or similar as mentioned.

In the event that the advice is wrong quantifying your loss will be tricky.

You seem to be suggesting that you would have contined with the rental and simply not charged it to the company. I think this makes the attributable loss nil.

You haven't set out your circumstances in any detail, or what you think your loss is.

This is true if that is the case i.e. OP would have rented anyway. BUT surely then theres a fair amount of hassle in the case of "I thought I had this much now I've got £XK less than I though".

And as OP said, if hes now got to pay extra dividend tax this year when this could have been done previous years with no extra.

I think even if my accountant told me I could do something (e.g. claim for mileage) and I did so for some time, only to find out later I can't and have to pay tax on it I wouldnt be happy. Even though I'd have to do it anyway, ie. drive to client, I'd not be happy to find myself worse off than I thought.

After all, might have just booked a holiday based on a healthy warchest only to find out that the £25K expenses in the last two years are now not allowed and I've got to pay 20% CT (e.g. £5K). So £5K down :-(

[psychocandy]

Yes I'd also be interested in:-

1) Why they now think its not allowed?
2) Why they're advice changed.

Must admit if it now transpires that they gave wrong advice in the beginning and, because of this, its now going to cost me money, I'd be looking for recompense.

[ASB]

The fact that time has passed could mean the 24 month rule has kicked in. Or you couldld have sold you main property or similar as mentioned.

In the event that the advice is wrong quantifying your loss will be tricky.

You seem to be suggesting that you would have contined with the rental and simply not charged it to the company. I think this makes the attributable loss nil.

You haven't set out your circumstances in any detail, or what you think your loss is.

[teapot418]

the problem here is that the advise given could have just been a copy and paste from HMRC website. The problem is that most accountants don't take their time to better understand their clients and then customise the response accordingly. We Do

So have you got anything useful to add to help the OP? Or are you just here to tell everyone how much better you are than your competitors? When I was at school, the mantra was "show, not tell".

FTAOD, IANAA. I am a teapot.

(And it's "advice")

[dx4100]

If the rental was necessary (wholly and exclusively) for your business, then it should be allowable.

The sort of thing that might blow that out the water is:

- You don't have another permanent home
- You've rented out your permanent home, so can't live there
- You've moved your family to the rented property (i.e. relocated)
- You are expecting to be there more than 24 months
- The rented property is no closer to the workplace than your permanent home

This is all good advice. I would imagine the devil is in the detail above for your accountant ?

If not I would be seriously questioning the advice you can't claim for it.

In the end its your company you can claim for what you want. Your accountant can only advise really.

[jmo21]

Thanks all for the responses.

The only circumstances that changed were that my original assigned "accountant" left the company and I was assigned a new accountant

I have absolutely made decisions based on their advice e.g. to continue renting the same property, to put it through the company as a business expense (which I wouldn't have done if this was disallowed)

The implication here is that the accountancy have made a mistake, or rather the original accountant did, based on the information you gave him/her.

Have they told you exactly what that mistake was? Or are they trying to get away with it by just telling you what you need to do?

I'd demand to know what has changed in their advice. Exactly what the issue is. Then it will be clear if the original accountant had made a mistake in his advice.