Bad advice from accountant

Mike_Eile

About three years ago, after setting up as a sole trader I sought some advice from an accountancy firm (Company A) regarding VAT returns and general tax advice. Company A did not deal with sole traders but they generally outsourced that work to a female accountant (I'll call her Mary) who worked for herself.

Company A contacted Mary who subsequently phoned me and arranged to call to my office. I was only a few weeks in business at this stage. Mary advised me primarily in relation to VAT returns. Mary gave me an excel document (see screenshot below) and told me the following:

(1) That I could claim 59 cent a mile when going to visit my clients from my office and then returning to the same office. I just had to keep diesel receipts.
(2) That I could claim up to €13.71 in the form of a subsistence allowance when I was out visiting my clients, as long as I showed receipts to back it up.
(3) That I should offset these expenses against my VAT liabilities prior to doing my VAT returns bi-monthly.

<Mod Edit> Deleted as it makes the thread too difficult to read and it does not add anything significant to the issues raised.

For 2 years I offset travel and subsistence against my VAT liabilities. However, I subsequently learned from another accountant (I'll call him John) that I approached (and who has being doing my tax returns the last two years) that I should NOT have been given this advice by Mary.

Mary should not have given me that excel sheet because sole traders cannot claim €13.71 a day in subsistence or 59 cent a mile when visiting clients. I have tried to contact Mary but she has failed to respond to my emails. I have not tried to call her yet because I'm not sure what I should do. I have been told my John that I have underdeclared by VAT by approximately €5,500.

This has set me back to a degree. I have not informed the revenue as of yet. I don't know what I should do in this case. If anyone has any thoughts that would be greatly appreciated. Should I seek legal advice? Should I go back to Company A and explain the situation. Company A did my tax returns in 2011 but never identified that there was an issue with my VAT.

Thanks in advance.

power101

Sole traders can't claim mileage and subsidence at civil service rates however you can claim business expenses for fuel and hotels/accommodation if you have receipts for backup.

For mileage for instance. If you drive 200 km, you cannot claim 118(200 *.59) but if you had a receipt for fuel for lets say 40-50 euro you could claim it.

dbran

Hi

This is really bad advice, the third item particularly so which only goes to prove that bookkeepers should be bookkeepers and accountants/tax advisers should be just that.

As I see it you have two choices:

1) Make a voluntary disclosure to the revenue of the amount of tax underpaid and pay off the liability via a phased payment arrangement with the revenue. This will usually entail interest but reduced penalties.
2) Adjust the VAT returns and pay over the amounts immediately ie make a self correction. This may still entail interest as the errors have been going on for over two years. But you may just get away if you pay the liabilities now.

I dont think there is any point in persuing the previous bookkeepers/accountants as you are only paying the VAT that you should have paid anyway. The only loss would be perhaps the interest and penalties that may arise.

Best of luck

dbran

Immy

As John is now your accountant I would look for guidance from him, or look for a new accountant.

neverwasser

Mary is not liable for the VAT you underpaid as it should have been paid anyway, what she is liable for is any interest and penalties that have/will be incurred as a result of her incorrect advise.

The accountants may get away with its as they did not give the advise directly but its possible they should have spotted it in the course of their work, I think it will be harder to catch them for it.

Mary may also be liable to pay any professional advise you are charged for amending the vat returns.

I am shocked that this advise has been given to you, I am not saying I am a genius but the travel expenses rule for sole traders/company directors is basic knowledge.