The Secret Accountant shares a valuable lesson in client management.
I would like to relay a salutary true tale of how even the most longstanding – seemingly trustworthy – clients can take advantage of the business relationship that we build up over years.
We had been preparing VAT returns for a self-employed client for many years, and each quarter the records were very similar. Until one quarter when my colleague preparing the VAT return brought to me (in my capacity as MLRO) a purchase invoice that seemed slightly ‘dodgy’, in that it looked somewhat ‘home-made’, and not like other invoices we had received from the same supplier previously.
It was for a large amount so I called the client – he explained it was prepared by the husband of a husband/wife partnership; they had split up and so the non-computer-literate husband was doing his best with the invoicing, which the wife had been dealing with this previously. Sounded convincing, and it all checked out on the VIES website, the detail was all there, and so we put it through.
In the next quarter my colleague is again with me, and there were a couple of similar purchase invoices – both high value, but all correct as far as technical content concerned. However, one was from a local company I knew, and it is a substantial company; the invoice was not compatible with theirs so suspicions were aroused.
Having made an SAR report, it was unsurprisingly not long before a VAT visit was scheduled, which was perfunctory, but followed shortly after by a call from HMRC to the client requesting all the records for the past four years. Having possession of these records, things went quiet for a few weeks, and the next I heard was a call from a stern HMRC official notifying me that the client was subject to a criminal investigation for VAT fraud, and potentially may be facing imprisonment.
Said official requested to come and interview me as he wanted to know our level of involvement and what we had contributed to the matter. Several sleepless nights passed and the interview came. Apparently, there were in fact many false purchase invoices, all produced on his home computer, claiming VAT of many thousands of pounds. Payments to cover them had been made to himself. Thankfully the officer accepted that we had done what we could to seek explanations and could see we were not complicit in all of this. Huge sigh of relief. The only comeback was the officer wanted me to make a statement to support their criminal prosecution of the client.
We instantly resigned from acting, and my next worry was whether the criminal prosecution would be in the press and would our name be related to it – no matter how innocently we had acted, would other clients reading the story accept that in full, or would we lose reputation? In the event there has been nothing in the press, no fall out for us, and we have heard nothing more so hopefully it is now history.
The point is that I don’t consider myself naïve but in this case felt duped by a client I have known well, got along with, and trusted for a lot of years. This could have caused us much damage so please bear the above in mind if you have any doubts about the bona fides of even the best and most long-standing client – you just never know!
The Secret Accountant practices in the heart of England.