Regulatory burden

Regulatory burden

An “argumentative” sole practitioner who was far too busy to respond to the ICAEW’s requests was severely reprimanded and branded “aggressive and unhelpful”.

The investigation involving M could never be described as amiable. He treated the ICAEW’s requests with secondary importance, prioritising instead his clients.

M continually butted heads with the ICAEW throughout the year-long investigation. Towards the end, M even told the ICAEW his intention was to retire in two-to-three years’ time so he would be grateful to be left in peace.

But the tribunal found M’s delays unsatisfactory and ordered him to pay a £5,000 fine as well as footing the Investigation Committee’s costs of £8,960.

The investigation dates back to a practice assurance meeting in November 2015. At the time of the review, M jointly owned the firm with his wife and because he did not have the majority voting control, the ICAEW advised him that it could not automatically be his AML supervisor.

Once M took majority ownership, a practice assurance case manager then carried out a further meeting in April 2016, raising issues regarding, among other things, the firm’s AML supervision.

M responded at first asking for an extension and then in June 2016 when he asked for assistance, attributed the delay on his part to having two elderly family members needing care.

But despite the ICAEW providing him with links to information and support, M continued to find excuses for further delays. He asked the PCD to relieve him of this “pressuring burden” so he could instead use the time for the proper supervision of his clients’ accountancy and tax affairs.

In January 2017, M was told if he did not respond by March, matters would be referred to the Practice Assurance Committee (PAC). He responded the same day blaming the looming tax return deadline for the delay and expressed concern about being ‘threatened’ with referral to the PAC.

Later in 2017, the case was escalated to the PAC who decided M should pay for a follow-up QAD meeting. M replied saying a “one-man practice simply could not afford such a cost”.

He also claimed his AML issues remained unresolved as he blamed the ICAEW’s website for being like “minefield” and said the support network “could not really be called a support network”.

The PAC continued to pursue matters until June 2017 when M refused to pay anything for the proposed follow-up meeting. M said it was “outrageous that a one-man firm, under constant pressure to service clients, should be subjected to the degree of scrutiny and bureaucracy that the ICAEW impose”.

M claimed he could not spare the time to attend a course on AML because he was a sole practitioner. But the ICAEW disciplinary committee found this excuse “profoundly unsatisfactory”.

The tribunal also heard another complaint where M failed to provide details of an alternate in the event of his death. M considered his executor would have the power to manage the client bank account, but the Investigation Committee was not satisfied with this.

The Disciplinary Committee also pulled M up on the “argumentive” way he engaged in correspondence. “The tone was aggressive and unhelpful. He stated that his priority was his clients (a point repeated to us during the hearing), and the requests from ICAEW were of secondary importance.”

Chris Cope comments:-

I have some sympathy with M. Regulatory enquiries can be frustrating and time-consuming. This must be irritating for the sole practitioner. Nevertheless, in this highly regulated age in which all professionals must exist, satisfying the regulator that you are compliant is the penalty for enjoying the qualification which ought to give the practitioner a good standard of living. Reverting to hostile correspondence helps no one and can be costly. M ended up with a severe reprimand and fine of £5000, both wholly avoidable if the matter had been handled courteously and promptly.

Misleading accounts

The ICAEW has excluded an Oxfordshire-based small practitioner who deliberately concealed the existence of a director’s loan in order to make tax savings for his clients.

The ICAEW disciplinary tribunal considered that exclusion was the only sanction, seeing that concealing information was not an isolated case as it had happened with two different companies over a period of three tax years.

W also has to pay a financial penalty of £5,000 and the costs of £18,000.

The case centred on the corporation tax returns W prepared for two limited companies from 2010 to 2011. The tribunal heard how W failed to include the overdrawn director’s loan accounts in the companies’ CT600s and accounts.

W did not include these loans within the notes to the accounts, as required by FRSSE.  He did, however, write to a director of both limited companies and advised them not to declare the loan in the CT600 as it would attract tax at 25%. He recommended that they wait and see if HMRC spotted it.

But without disclosure in the CT600, coupled with a failure to disclose in the accounts meant that HMRC would not know there was an outstanding director’s loan at the end of the tax year.

However, W insisted the director’s loan omission was a short cut and not a ploy to avoid additional tax as it was anticipated that the client would be paying back the loan within nine months.

The tribunal, therefore, did not believe W’s shortcut assertion and concluded that he had deliberately concealed the information.

It is worth noting W suffered a prolonged period of ill health and sold his practice in 2012, shortly after the issues at the heart of this complaint.

Although the tribunal took into account W’s good character and clean disciplinary record, this was not an isolated case in that more than one client had been involved and in one case, the same had occurred over three consecutive years. And so, W’s fate was ultimately decided as exclusion with a hefty financial penalty.

Chris Cope comments:-

I should probably make little comment on this case, seeing that I was instructed by W, who was represented by Counsel. There were, in all, some 12 complaints of which ten were either found not proved or were withdrawn by the Investigation Committee following defence submissions. The allegations went back as far as 2004. The latest occurred as long ago as 2012.


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