Lazy accountants cost small firms £1.8bn

 

Posted by Natalie Brandweiner   PM | on Tue, 13/12/2011 – 13:36 

Sloppy, short-sighted accountants are making costly mistakes and harming small businesses, according to a new report authored by Mark Wickersham and Steve Pipe.

The study by The Accountants Club found that accountants frequently make mistakes including:

• not considering incorporation for sole traders
• allocating illegal dividends
• failing to claim capital allowances properly
• not claiming R&D tax credits
• failing to undertake inheritance tax planning
• not reviewing tax credit eligibility

The report says there are two types of client: "overlooked" clients and "valued" clients, and that there are many instances where partners lavish outstanding service on a handful of favoured clients, while at the same time cutting budgets so drastically on the affairs of other clients that service is inevitably compromised.

Mark Wickersham, one of the report’s authors, said: "Large parts of the accountancy profession are costing clients a huge £1.8bn in poor advice. The entire profession has to sit up and do something about this as a matter of urgency."

The study suggests that accountants are making mistakes with 40% of the 4.5m private sector businesses in the UK, therefore affecting 1.8m clients. In many cases these mistakes will cost those clients many thousands of pounds each, so factoring in an average cost of £1,000 is unlikely to be excessive, the study claimed.

The report labelled accountancy as a "two-track profession" made up of "stars" and "laggards". Laggards who fail to provide a full range of services and advice to their business clients make up the majority of the market. Star firms that pick up the mistakes other accountants tend to miss only make up 27% of the industry.

Star firms are also more likely to leave client meetings more profitable because they are:

• more proactive
• more likely to share ideas that can generate significant additional amounts of cash for the clients
• more likely to link the fee to the value so that the client can’t possibly lose
• Make it easier for the client to say yes by offering client satisfaction guarantees

If all accountants followed the example of Star firms they could get better results and small business could save billions, the report claimed.

HMRC wins online VAT evasion case

 

01/12/11

Pat Sweet

HM Revenue & Customs has won a court case involving an attempt by an online trader to evade VAT, and says it will be launching a campaign targeting e-marketplaces in the near future.

Gregory Allnutt from London was sentenced to 20 months’ imprisonment following an HMRC investigation which found he had sought to evade over £420,000 of VAT due on goods sold online.

Allnutt used a VAT registration number to obtain zero-rated goods from suppliers within the EU & then sold them on through another online company, failing to declare and pay the tax to HMRC.

Over a three-year period, Allnutt sold £4.7m of electrical goods via eBay at prices which undercut the competition because he did not charge VAT, according to the Daily Mail. The paper said Allnutt’s accountant warned him of his VAT liability at a meeting in 2007 but the trader, who was making £4,000 a week, continued to file ‘nil’ accounts until 2010.

Chris Martin, HMRC’s assistant director of criminal investigation said: ‘Allnutt thought that by trading online he could avoid paying his taxes, but he has discovered that isn’t the case. Our successful investigation and today’s sentencing send a clear message to others involved in such crime that our investigators will identify and pursue you.’

HMRC said has already begun gathering information about other individuals and companies who may be failing to pay the tax owed when buying and selling goods online, and will start a campaign focused on e-marketplaces in early 2012.

Two sisters from Wales have also been given jail sentences following an HMRC investigation into an employment agency which they claimed to be running. Andrea and Roberta Owen were found guilty of a range of offences connected to a series of tax and benefit frauds.

The pair received £120,000 in tax credits over a five year period, despite one sister claiming incapacity benefit and the other claiming to be self employed. The sisters also attempted insurance fraud by seeking out mortgage and motor vehicle repayments by claiming loss of earnings. Finally, they submitted a false VAT repayment claim for £161m in December 2008, which was not paid.

Simon De Kayne, assistant director, HMRC said: ‘The scale and variety of their criminal attempts was astonishing, but it wasn’t enough for them and their greed led to the £161m VAT claim, and their downfall.’