getting straight after a tax investigaton.

by **audievo** on Fri Aug 27, 2010 10:07 am

I had a 3 year tax investigation which finished last year ending in me paying a six figure sum.
I got done, and paid back fair enough!
However, part of what was wrong was my accounts balance sheet showing 80k owing to creditors, which to be honest just wasn't right.
I had no creditors.
I have paid back my tax and plenty in penalties but now need to know how when i do my current tax return i can just wipe this figure and have a balance sheet that can work.
I'm stuck!

by **wamstax** on Fri Aug 27, 2010 10:27 am

Hi there,
Clearly HMRC will have carried out their investigation up to a certain point in time and it will depend if subsequent accounts have been prepared for the years following the enquiry. If accounts for later periods have been prepared then it might depend on what alterations had been made to the accounts in the later years "to correct" the previous understatement of profits and overstatement of creditors.

The easiest solution would be to process a "prior year adjustment" in the next accounts to be prepared. This would balance the accounts by adding an increase of profits in earlier years for the "£80K " spurious creditors while reducing the Creditors by the spurious £80K (presumably brought forward). The additional tax and interest and penalties (which would not be tax deductible) would then be processed in the accounting period in which they were established.

Perhaps it might be best to get an accountant to prepare your accounts in the future - assuming of course that it wasn't an accountant that got you into trouble in the first place with the spurious creditors.

by **audievo** on Fri Aug 27, 2010 10:48 am

Thankyou for that, it sounds just the job.
Unfortuneately my previous accountant pretty much "made up" these figures to balance the books.
Yeah i know it was mostly my fault becuase i was underdeclaring and have admitted to it.
After a 3 year investigation, a living hell, i don't want to go there again so need to be sure everything is bang on in the future.
I do have an accountant who took over from the previous one.
The new accountant has made my accounts for me to sign but has simply carried this 80k on.
I have said i am not signing this set of accounts and have been told to call into the office to "sort it out"
My accountant didn't mention this "prior year adjustment"
I will suggest it and see what happens.
Thankyou.

by **wamstax** on Fri Aug 27, 2010 2:30 pm

OK if he has any problem ask him to contact me for a chat - Initial chat free but sounds like he might benefit from having a tax adviser that he can rely on in the future.

by **audievo** on Sat Aug 28, 2010 12:13 pm

Thanks for that.
The old guy wasn't very good and i think caused more harm than good on my investigation.
His firm has now been taken over and i have let the new owners continue with my business.
I will tell them about your advice and hope they will listen.
There is no way i'm alowing them to continue to put this figure in just to balance the books.
I'll post more next week when i have been to see them.