AIBU to think my accountant is a CF - or do I have to pay this?

[OrangeCrush19]

Background:

I set up my own limited company and work as a contractor. I was recommended an accountant (who specialises in dealing with clients in my field of work) and had an introductory meeting with one of the directors in December 2016. At this meeting he told me verbally that their fees would be roughly £1500 per year (plus VAT), which was roughly equivalent to what colleagues in my field seemed to be paying.

I started working with them in February this year and was assigned an accountant to look after my business – let’s call him John*. As far as I remember, I never signed a contract with them. I definitely can’t find any emails referring to contracts, nor do I have a copy of one at home.

In May, John* sent me a ‘fee note’ for £1500 plus VAT. I assumed that this was advance payment for the entire year, as per my discussion with the director, and paid it.

On Friday, I received another fee note for £900. I’ve been stressing about this all weekend and sent an email to the director this morning, as follows:

“As you and I discussed, my understanding was that my annual fees for my company would be around £1500 per annum. I've already paid £1500 to you (in May this year), so am shocked that I’ve received another bill for £900 only 4 months later.

When I queried this bill on Friday, John* advised that the first payment of £1500, made in May, was for corporation tax / year-end paperwork, and that this second payment includes costs for preparing VAT returns, setting up payroll and general advice and correspondence.

I had genuinely assumed that the fee we discussed (roughly £1500 p.a.) would cover everything - VAT returns, correspondence, year-end accounts, corporation tax returns. I can't find an email to me or a copy of a contract from that sets out these costs.”

The director’s response:

"I apologise if there has been any misunderstanding. Our fees of £1,500 per annum are designed to cover the preparation of company accounts, dealing with the company secretarial work and preparation of corporation tax computations and submission of online corporation tax return. It does not include VAT returns which work out at £200 per quarter plus VAT. "

This is new information to me, and there's no way I would have agreed to use them as my accountants if I'd known how much they would cost in total.

The £900 breaks down as:
£200 – Q1 VAT
£200 – Q2 VAT
£100 – setting up payroll
£250 – general advice and correspondence
Total - £750 (plus £150 VAT on their fee)

How would you word a reply to this? Do I have to suck up the £900 fee and pay it from my company bank account?

*John isn't his real name...

Hey

Did the client not send a letter of engagement? They should have done as part of their customer due diligence and to protect themselves against civil action and loss of earnings in these sort of cases.

Before you reply, take a look in your inbox for some key words such as "letter of engagement", "professional indemnity insurance" etc so see if it did perhaps get lost in your inbox.

If you can not find it, ask them to provide you with a copy of the letter of engagement that you signed where you agreed fees as you can not find yours- really, they should keep their signed copy for at least 5 years after the last day that you were a client of theirs so if they're saying they do not have it then there is no contract. They may be able to dig out a copy of other written confirmation of what their fees included.

Were you VAT registered before going to them? Did they set you up or did you become VAT registered after becoming a client of theirs?

As you have done make clear to them what you were verbally told about the fees (they know they've been complacent not following up with a letter of engagement) and that they knew you were VAT registered when taking your instruction (if they did) and should have quoted accordingly. and say that you will not be able to instruct them any more. It may get them to reduce or entirely credit the additional fees but I do think you will have to pay something towards the additional work that is done.

Good luck op

Ps

I'm not a solicitor so my advise about whether the contract is valid or not is probably shit BUT I am a bookkeeper and training accountant so am reciting what is absolutely drilled into our heads about establishing a new business relationship

Basically the letter of engagement is key, they should have written one and got you to sign it.

It depends on the size of your business, but it sounds reasonably good value to me.

Thanks Mish. Found the letter of engagement - it lists the services that they will provide as:

• Assistance with the preparation of your annual financial statements
• Assistance with the preparation of your corporation tax computations and submission of corporation tax returns
• Assistance with the preparation of your VAT returns

No mention that VAT returns are charged for separately.

It also states:
"'We estimate the fee for the Services to be no more than £1500 for the first year' - I read this as including ALL services, as listed above.

The T of E also states: 'If we find the actual fee is likely to materially exceed this, we will discuss with you before doing further work.'

I don't have any emails where I was advised that I would be charged more than £1500, either for VAT returns, or for advice and correspondence.

Sounds like you have a point. Write back to them pointing out your letter of engagement and see what they say. I’m paying £1500 a year to include vat returns and personal tax return (I trade through a ltd company).

You need to get back in touch and formally raise the issue of the fee as a complaint. The letter of engagement should explain how to do this.

£1500 doesn't sound too outlandish for everything, tbh.

Decent accountants these days tend to work on fixed fee basis, paid monthly.

£200 per VAT quarter - what are they actually doing for that - where are the numbers coming from - should you in fact be doing some bookkeeping yourself that you are not?

£100 for setting up a payroll seems OK.

A medium sized firm will have a chargeout rate of £100 per hour, and a larger one a rate of around £150.

So you sound as if you have a good point. On the letter of engagement as you can see it uses a capital letter for "Services". Have a look at the first time that word Servies was used eg it might say "Corporation tax advice ("Services")" or it might say "Corporation Tax and VAT returns ("Services") or somethnig like in this letter Services means all those services described above. Either way it is not vital because the overall impression is given that it will be £1500.

I would just politely point out all this and say in the circumstances you hope they can waive the £900 as you did not agree it and they have exceeded the £1500 without your consent.

Then don't use them. I do my own VAT. It's dead easy and does not cost me a penny.

@Oldie2017 I've not heard that before! Learn something new every day

Depends which bit you mean. For VAT I just note down my spending and invoices and then every 3 months tot them up. Anyone with a calculator could do it. If you mean the first bit then contract have this "defined term" thing in them where you use capital letters to define words and then throughout the contract instead of using a full name or full service description each time you just refer to the already defined word with the now capital letter which you defined earlier in the agreement.

Anyone with a calculator could do it. Not strictly true! VAT can be a lot more complicated than that and I would always advise getting your accountant to help you through the first VAT return to ensure that the typical items you deal with in your business are straightforward. A lot are not.

Back to OP. I think on the basis of that engagement letter, unless it has the “Services” part highlighted as a pp noted, that you have a good chance of successfully arguing.

I suspect they will relent this time then not want to keep you as a client as the two sides are quite far apart with regard to fee expectations.

Individually I don’t think the fees quoted are that bad, although I tend to charge £100+VAT for VAT returns and am slightly cheaper for the year-end.

A previous posted stated charge out rates of £100 for a medium firm and £150 for a larger firm, I think these are far too low. Big firms will charge more than that.

Thanks all.

I've found another accountant (recommended by a new colleague) who charges £95pcm for everything. That's more in line with what I was expecting and I'm much happier with a fixed fee.

Regarding this lot, I'm going to email them back today and point out they've exceeded the £1500 without notifying me and see what they say.

@Oldie2017 about the capital to highlight terms. Thanks for letting me know