Bad tax advice

Jorayner

I am worrying about my tax position and hope you can offer some advice.

In January I paid an accountant £250 to do my husbands tax return. We bought a holiday home in Florida during the tax year which we had let out, and wanted to make sure we were paying the minimum necessary tax.

When I first went to see him he did one version of the return . As I was leaving we discussed how it was going renting it out, and almost as an aside, he said "maybe we could consider it as a furnished holiday let" I left him to look at in and he came back to me and said yes we could , so reworked the tax return, which I submitted. I also submitted my tax return based on his advice.

We have since received tax rebates of nearly £3000.

I have now found out that furnished holiday lets only apply for UK properties and we should not have treated it this way for tax purposes.

Therefore I will have to contact 2 tax offices , and resubmit 2 corrected tax returns, as well as find the £3000 to pay back, which I have since spent as I thought it was rightfully ours.

I am going to write to the accountant to ask for the £250 back. Can I ask for compensation to make up for the time and worry it is causing me? I know I have to pay the £3000 back.

Any advice on how I should get myself out of this mess?

WHA

Presumably you got a tax refund because you made a loss on the property rental and claimed to set it against your other income. Are you certain that the loss (or part of it) can't be set against your other income - have a look at http://www.hmrc.gov.uk/worksheets/sa106-notes.pdf page FN10 - in some cases this is possible with an overseas property - depends on how the loss arose.

You need to submit correcting tax returns - instead of using the land and property pages, you need the foreign supplementary section instead (I have assumed you wrongly used the land and property pages). HMRC will process the corrections and send you a bill for the tax wrongly refunded to you. Remember to claim the loss to be carried forward against future profits from that property.

As to recompense. Yes, I would think it appropriate to get a refund of their fees (or at least the part relating to their mistake). I don't think you'll get anything else I'm afraid. You are relying on normal contract law and their letter of engagement or terms & conditions needs to be looked at - i.e. what exactly did you agree to for them to do and probably limitations as to their liability.

That is for your husband's tax return - presumably they didn't give any advice on your tax return so they can hardly be liable for that - presumably there is no contract between you and the accountant.

You may also be able to claim your costs of putting it right, e.g. if you use another accountant to sort it out. Their mistake has not actually "cost" you anything - HMRC made a repayment which you have to pay back. It's not as if you relied on their advice to take an action which has resulted in your loss. I suppose if HMRC charge interest or a penalty (unlikely), then again the accountant should pay.

If they are members of a proper professional body, such as Institute of Chartered Accountants, Association of Chartered Certified Accountants, Chartered Taxation Institute, you can raise a formal complaint about them if you are so minded. If they are unqualified, there's no-one to complain to.

Cook_County

There are several issues here:
1. The property is in Florida and in joint names. Therefore you will have had to file two (one each) US tax returns. US tax is on GROSS income (ie before expenses) unless you have each elected to claim expenses. Assuming these ekections have been made, the US tax will be on similar income and expenses to those claimable in the UK - except for depreciation on the building. Have you filed US tax returns as yet?

2. The UK will not treat foreign property as a furnished holiday let. However you can still get 10% wear & tear allowance. As WHA says, the income and expenses should be entered on the foreign pages.

3. You do not say what qualifications your adviser has, but a Court would put you back in the position you should have been. I would suggest you appoint a dual qualified US/UK tax adviser to prepare both sets of tax returns - calculate the tax refundable and negotiate the additional interest/penalties for you. Your new adviser should also calculate the cost of the borrowing you will now need to make. The entire bill (including your new advisers fees) should be sent to your previous adviser to settle. If they will not play ball, then head for the small claims court. I would also suggest checking the words of your contracts with your previous adviser.

Jorayner

Thanks for the advice . The US tax returns are all done and hopefully correct.

I didn't have a contract with him, so I don't expect I'll get very far.

I will write and ask for my money back and see what he says. He is a memeber of the institute of Chartered Accountants , so I will go to them if necessary.

I will contact the taxman to see if I can pay it back gradually.