Excessive Accountant's fees?

B

Beamish

Guest
Hi. I am just wondering if somebody can tell me if these fees are excessive.

When my cousin died a few years ago, we found that she was the holder of a bogus non - resident account and hence there was going to be an issue with respect to underdeclaration of Income tax.

My sister was the executor and she got her accountant to handle Revenue. When my sister got my cousins previous returns to Revenue we discovered that my cousin had not declared any deposit interest earned in the previous 25 years.

As a result, the accountant had to calculate tax due, together with interest and penalties for this 25 year period.

We gave the accountant copies of my cousin's returns over this period and we gave her the relevant bank statements. This is basically all the accountant needed to calculate the tax liability in this case.

I am not exaggerating, but calculating the tax due together with interest and penalties is just a few pages work and I could easily have done it myself in an afternoon following the instructions on the Revenue website.

Basically, the accountant:
(1) Wrote to the solicitor a few times.
(2) Wrote to Revenue a few times
(3) Prepared and submitted a summary of revised calculations for the previous 25 years.

The accountant's fees were calculated on the basis that 25 years of tax returns were prepared at approx. E520 per year inc. VAT, which came to approx. E13,000!

E13,000 seems like a ludicrous amount of money to me, seeing as my own self assesment tax returns are much more complicated, involve a lot more work and take a lot more time. My own yearly returns cost around E550.

My point is this; it's not as though the accountant had to trawl through 25 years of invoices, cheques and receipts in order to prepare & submit 25 individual revised profiles which were detailed & complete - she simply had to submit a summary of her calculations based on:
(a) My cousin's previous returns to Revenue
(b) The relevant bank statements

I know some of you are thinking that the accountant probably saved us money by using her expertise to reduce our tax bill, and this is what we were paying her for. This, however, is not the case; I came up with exactly the same set of figures myself when I followed the Revenue guidelines.

I also know the fact that I could have sorted this out myself isn't the point; we hired a professional to do this and & it's only fair that she should get a fair wage.

I don't mind paying somebody a fair wage for a fair days work, but the fees charged in this case were totally disproportional to the work done.

Then again, this may be a standard method of calculating fees in such cases; I just don't know.

I'd appreciate it if somebody could tell me if these fees are excessive with respect to an underdeclaration of income tax case. If so, is there a means to complain complain about excessive fees to some governing body?

I would really appreciate some advice on this.
Cheers
 
Re:Did you agree any kind of fees upfront?

No, there was no agreement whatsoever with respect to fees.

Although we should have known better, I'm sure this is a mistake a lot of people make.

I don't know if it's relevant to the accounting profession, but I know for example, with respect to solicitors, even if you don't agree fees, you can still get an independent evaluation of the work done by going to the Taxing Master. The Taxing Master then decides if the fees are excessive and, if so, will decide a reasonable fee which is binding.

I don't know if there is a similar mechanism with respect to accountants.

If the fees charged in this case are:
(A) Reasonable for an underdeclaration of income tax case.
or
(B) If the fees are excessive and there is nothing I can do about it
then that is fair enough.

I just don't know anything about these affairs and would appreciate some advice.

Cheers
 
Re: Re:Did you agree any kind of fees upfront?

Hi Beamish - I'm afraid I really can't answer your substantive questions, though perhaps others will do so.

With all due respect, I do think you were crazy to request an accountant to do this work without agreeing something about fees up front. I'm sure if you got a carpenter or a painter in to do a job in your house, you'd look for a quote, so why not the accountant. Note that I'm not absolving him of any blame - just pointing out a key issue for other posters who may find themselves in similar circumstances.
 
Re:"You were crazy to request work without agreeing fee

Hi, Rainyday.

Yeah, I have to agree.

You live and learn.I obviously wouldn't hire somebody again without at least getting a quote or, preferably, a written estimate.

Cheers
 
Re: Re:"You were crazy to request work without agreeing

Rainyday
I have tried this system and I cannot get it to work.

1. Asked accountant how much to make sole trader returns he qouted about E850 just got invoice for E 2700 inv Vat.

2. Sold house in England which accountant suggested should be bought by setting up a Company.
I paid all estate agents fees etc, and the balance stg£70,000 was in bank.
He could not give price as he would have to appoint Liquidator there were no complications .
The invoice for liguidator E7000 deducted by liguidator.
I expect I will get another from the accountant.

My bills so far this year E 9700 and I am a very small trader.
 
Re: Re:"You were crazy to request work without agreeing

Asked accountant how much to make sole trader returns he qouted about E850 just got invoice for E 2700 inv Vat.
Click to expand...
So did you tell him (like I tell the guys at the garage when I'm getting my car serviced) 'if you need to do any work above & beyond the quotation, call me and discuss before you proceed with the work'? Did you tell him that fixed price quotations are really important to you and you'll be looking for another accountant if he can't stick to them?
Sold house in England which accountant suggested should be bought by setting up a Company.
Click to expand...
And did you ask him what fees would be incurred by going down this road? And if he couldn't answer, did you suggest finding a different way of doing this transaction to ensure that the fees would be predictable?
 
Re: Re:"You were crazy to request work without agreeing

Beamish

As a general rule accountants charge an hourly rate based on the partners/employees experience. If a senior person was working on your calculations their charge out rate could have been up to €200 p.h. It could quite easily take 2+ hours to recalculate each years income tax liablility. Add to that the time spent in discussions with the Revenue, Solicitors & yourselves and it does all add up.

I suggest you revert to your accountant and ask him/her for a breakdown of the time spent on the calculations.

If you are still unhappy you should contact the relevant body that he/she is a member of ( Institute of Chartered Accountants, ACCA or CPA)and ask them to arbitrate in the disagreement. They will organise for a third party to inspect the work and revert to you with their assessment of the value of the work done. There will be a fee for this but if its found that the original accountant has overcharged you the original fee will be lowered. If its found that you were charged correctly in the first instance you have another bill to pay...

I also agree that you were crazy to not get a quote first...or at least a ball park figure.

HTH
 
Re: Excesive Accountant's Fees?

Hi Kiddo,

In the covering letter attached to the accountant's bill, she said that she was charging on a per year basis.

I'm not sure if it would be relevent to request a breakdown of the time spent on the calculations; I'm pretty sure that she would just reply and say that she was charging on a per year basis.

Regarding a complaint about possible excessive fees, I'll have to think about this; it could very well be the case that an arbitrator would decide that the fees were justified & I'd end up paying another Bill. However, I think that I probably will go ahead and submit a complaint about the fees.

If I go down this road, I'll post again in a few months & say how I got on.

I really appreciate the advice on this Kiddo as I don't know anything about accounting affairs - I didn't even know:
(a) If there was a mechanism in place to complain about excessive fees.
(b) How to go about complaining.
(c) Where I should submit such a complaint.

Cheers.
 
Re: Excesive Accountant's Fees?

Regardless of if she is charging you on a per year basis you are still entitled to ask for (and receive) a breakdown of the work actually done. Most accountants (and I think others who are normally charged out on an hourly basis) should record the exact amount of time (well, at least to the nearest quarter-hour is what happens where I work) spent on any job. It's entirely reasonable to request a detailed breakdown of work done and bear in mind taht this could then also be used to potentially renegotiate next year's fee if you feel that the amount of work being done plus any additional work that would be expected to arise is less than you are being charged for. Your accountant shouldn't just pluck figures out of thin air - they should reflect in some way the work you are getting done.
 
Re: Excesive Accountant's Fees?

. Sold house in England which accountant suggested should be bought by setting up a Company.
I paid all estate agents fees etc, and the balance stg£70,000 was in bank.
He could not give price as he would have to appoint Liquidator there were no complications .
The invoice for liguidator E7000 deducted by liguidator.
I expect I will get another from the accountant.

My bills so far this year E 9700 and I am a very small trader
Click to expand...
.

Hi Roger

I'm afraid I don't understand this.

First of all, I think it would cost a lot more than €7K to liquidate a company. That's why liquidations are only used as an option of last resort nowadays - generally where there is some sort of crisis such as insolvency and unsatisfied creditors.

Secondly, the CRO have relatively straightforward strikeoff procedures to allow companies to be dissolved. This process is totally separate from liquidation procedures and does not require the appointment of anyone such as a liquidator to oversee the process. It shouldn't cost €7k (or anything near it) either?
 
Re: Excesive Accountant's Fees?

All said, wasn't it "bad practice" on behalf of the accountant not to give an indication of what the overall fee might escalate to?

As a tradesperson/(small)businessperson, I always indicate to clients what my rates are, and on work which can't be immediately quantified, I keep them in them informed and in the "loop" in relation to costs and progress.

It works for me, creates mutual respect, and allows me to sleep comfortably, without visualising my customers with saddles on their backs.
 
Re: Excesive Accountant's Fees?

We (my wife and myself) had bought the house about four years ago to let in East London ,and had difficulty getting tenants for more than six month lets.
We decided to sell as the price had almost doubled.
We were not comfortable with the house idle for half the time.
The agent looking after it for us were excellent .

It seems in retrospect that although we were only ten minutes walk from Canary Warf it was ten minutes in the wrong direction.

We sold the house in September 03 there were no outstanding bills ( Bank loan.Gas ,Electricity, Estate Agent solicitors etc.) were all cleared and the balance was left in the Company account.
As we still had the Company we had to return Sterling accounts.

Our accountant said we must appoint a Liduidator this he did, and we now have our cheques as the only shareholders.

We did ask for a ballpark figure on costs and were told they didn’t know what would be involved.

The only payments were the Liduidators fees €7000 and a three Euro bank fees.

The next step is CGT for both of us with another accounts bill.

I’m finding that the accountants fees are becoming more expensive and I cannot increase my rents or my charges as a sole trader to continue on this road.

Is there an alternative, I have been trading for thirty something years writing up the same expenses typing the same Invoices and sending in Vat returns, and submit PAYE returns when necessary.

Perhaps I could bring my accounts to the Tax people direct.

If you could suggest some questions I could ask the Liquidator or my Accountant, or some questions I could ask another Accountant to get back to an affordable situation.
I really would appreciate your suggestions.

Roger
 
Re: Excesive Accountant's Fees?

Hi Roger

As your queries appear to relate to a UK scenario you are unlikely to get reliable guidance here as it is unlikely that contributors will have much knowledge of UK company law or tax. Your only real option is unfortunately further professional advice preferably this time from an independent advisor you know and trust.

In relation to Beamish's grievance above, it is worth noting that many accountancy firms refuse to handle problematic arrears cases such as bogus or offshore accounts - generally because of the nature of the work (involving as it almost invariably does, large tax liabilities, the calculation of which is often necessarily based on incomplete or missing information), the often intolerably tight deadlines imposed by Revenue, the risks of legal jeopary and/or litigation if anything goes wrong, and the reluctance of some customers (who may already be facing the prospect of virtual insolvency or the forced sale of assets) to pay their fees.

In that context it is unsurprising that other firms choose to charge premium rates for this type of work.
 
Re: Excesive Accountant's Fees?

I endorse fully what Tommy says. I work for a leading firm of tax consultants (I am in admin.) and the firm made a concious decision at the outset of the issue of those "BNR" accounts not to take them on for exactly the reasons outlined above.

One or two "sneaked" in (no body knows how) and they have turned out to be a nightmare for all concerned. Missing information, clients "forgetting" about accounts, chasing Banks for paperwork going back years, incomplete records, hassle from the Revenue, need I go on. The time expended on each one has been massive.

We charged by time clocked up rather than by each years returns and all I will say that the fees were considerable.
 
Re: Excesive Accountant's Fees?

I also have to agree wit Tommy, I avoided doing any of the BNR work like the plague. a lot of detailed work for effectivly little fees.U said that you got calculated the liability in an afternoon. I am not saying that you are lieing , I would have to doubt your time keeping. Also remember your accountant couldn't be fairly sure that he had it right, he had to be sure, no room for error, so it would take a lot longer to do, and this remember was after geting all the info which ititself can be time consuming.
 
Re: Excesive Accountant's Fees?

From a common sense point of view, before going down the road of arbitration, have you talked to her? I.e have you made an appointment solely for the purpose of discussing her fees, and in a non-confrontational manner told her that you think her fees are excessive and ask her to talk you through them and possibly reduce them?
 
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