[Opinion] Negligent Accountant/Tax Practitioner

[dellatjie]

Good Morning!

I am having trouble, and was hoping someone could help me.

One of my clients' previous tax practitioner submitted named client's 2011 income tax return in February (Sole Prop - thus late). The correct assessment was then issued, stating that the client owes SARS nothing. SARS then requested supporting documentation. The tax practitioner did not submit any supporting documentation, not even after the final demand letter that allows an additional 21 days.

In July, the client wanted to apply for a tax clearance, so I phoned to find out what is still outstanding. What a shocker! There was VAT outstanding of R40000 for a period in which insufficient evidence was submitted for the audit (should have been R700), there were 2 EMP201's outstanding, as well as credits and old returns unpaid. Last, but not least, SARS assessed the client for R140000 on the abovementioned return!

This is not the worst. In September, SARS took R60000 out of the business's bank account, and a few weeks later, R30000. For a small business like that, this can mean the end of it!

Take into consideration that the client is also losing business from the local municipality, as he cannot receive a tax clearance.

The client decided to take legal steps. The attorney had an interview with the previous tax practitioner last week. He is adamant that he is not going to pay anything, as he delivered these services for free! The client denies that services were not paid for.

So here is my question:
Can a tax practitioner/accountant not be held liable for negligent actions if no fee were charged?

And also, is there any way for me to force him to provide me with his previous year's workpapers in order to proceed with 2012's financials? NB: He is not registered with SAIPA or SAICA or any professional body.

Hope you guys can help!

[Dave A]

The client decided to take legal steps. The attorney had an interview with the previous tax practitioner last week. He is adamant that he is not going to pay anything, as he delivered these services for free! The client denies that services were not paid for.

As I was reading your post, I was wondering if the defence would go that way.

Have your client produce proof of payment(s), as much in your own interests as anyone else's.

[Citizen X]

Good Morning!

I am having trouble, and was hoping someone could help me.

One of my clients' previous tax practitioner submitted named client's 2011 income tax return in February (Sole Prop - thus late). The correct assessment was then issued, stating that the client owes SARS nothing. SARS then requested supporting documentation. The tax practitioner did not submit any supporting documentation, not even after the final demand letter that allows an additional 21 days.

In July, the client wanted to apply for a tax clearance, so I phoned to find out what is still outstanding. What a shocker! There was VAT outstanding of R40000 for a period in which insufficient evidence was submitted for the audit (should have been R700), there were 2 EMP201's outstanding, as well as credits and old returns unpaid. Last, but not least, SARS assessed the client for R140000 on the abovementioned return!

This is not the worst. In September, SARS took R60000 out of the business's bank account, and a few weeks later, R30000. For a small business like that, this can mean the end of it!

Take into consideration that the client is also losing business from the local municipality, as he cannot receive a tax clearance.

The client decided to take legal steps. The attorney had an interview with the previous tax practitioner last week. He is adamant that he is not going to pay anything, as he delivered these services for free! The client denies that services were not paid for.

So here is my question:
Can a tax practitioner/accountant not be held liable for negligent actions if no fee were charged?

And also, is there any way for me to force him to provide me with his previous year's workpapers in order to proceed with 2012's financials? NB: He is not registered with SAIPA or SAICA or any professional body.

Hope you guys can help!

Good afternoon Dellajie,

1.I'm going to give you a top of my head response(will provide you with a comprehensive responsive in due course!)
A potential remedy is called the condictio indebiti under the branch of law: Unjustified enrichment i.e. perhaps I'm reading things wrong here, but If SARS over taxed, then that's unjustified enrichment;
2. The free tax service: This tax practitioner presumably had a power of attorney(I think SARS requires that all tax practitioners have a power of attorney), if so, it may just have indemnified him/her against such negligence;
3. To test his/her blameworthyness is a matter for court under the auspices of sueing for damages;
4. Th crux of what I'm saying is that if SARS took money that they were not supposed to take , for whatever reason, then that's unjustified enrichment...

[dellatjie]

Vanash,

Thank you for your answer.

I am working on correcting SARS's "unjustified enrichment", but the problem here is, the consequences of the tax practitioners' actions (or lack thereof), ie. that the client cannot get a tax clearance, and is losing out on hundreds of thousands of business with the municipality.

[Citizen X]

Vanash,

Thank you for your answer.

I am working on correcting SARS's "unjustified enrichment", but the problem here is, the consequences of the tax practitioners' actions (or lack thereof), ie. that the client cannot get a tax clearance, and is losing out on hundreds of thousands of business with the municipality.

Good morning Dellatjie,

I appreciate that! This is just so wrong! I should be able to provide you with a comprehensive response by Friday!

[Rafael]

I would love an answer to.

Every year, i deal with this, where a client asks me to assist with their individual tax and there is a problem due to the previous practitioner not submitting docs or just not knowing what he is doing.

[dellatjie]

Hi guys,

You will not believe how far out of control this has gone!!

The VAT Audit-gone-wrong (in June 2011) has just gone worse! When I phoned SARS on 2 seperate occasions, they informed me that an ADR1 was submitted during Dec 2011 and Feb 2012.

I have, in the meantime, afforded the branch an opportunity to correct this matter, as the audit has still not been finalised.

When the branch had no answers, I had the go-ahead to refer the matter to the SSMO.

They, in turn, referred me to the VAT Audit department, who assured me that they never received an ADR1, and that I should just send a copy of the ADR1 submitted, and they would make this case priority.

Previous tax practitioner named above, appointed a very reputable audit firm to handle this part of the mess, after which they raised a fee of R2500.

When contacting the very reputable audit firm, they checked and checked again, but cannot provide me with proof of submission!!

I have, in the meantime, explained the matter to the contact person at the VAT audit dept, and am hoping for the best ie. that she will allow me to submit a new ADR1, as 1.5 years has passed in the meantime...

Oi, when will it end!

[Dave A]

You need the patience of a saint...

I do hope your client appreciates the effort (and pays your bills promptly).

[dellatjie]

Hi guys,

I am happy to report that the VAT audit has been finalised without any further hiccups.

After filing a complaint with the SSMO with regard to the income tax problem, I was informed that a hearing will take place next month.

Do I need to be worried?