Sole traders and contractors depend on accountants for more than just compliance—they rely on them for technical tax planning, sector-specific advice, and business support. Even with years of working together, disputes can arise as regulations change, business models evolve, or expectations shift. Understanding your rights and the technicalities of common disputes is essential for protecting your business and personal finances.

2. Engagement Letters and Scope of Service

A well-drafted engagement letter is the foundation of a healthy accountant-client relationship. It should specify the scope of work, deliverables, exclusions, and the frequency of reviews. Ambiguities often lead to disputes, especially as your business grows or your needs change. For example, a contractor may assume IR35 advice is included, but the accountant only covers tax return preparation. Always review and update engagement letters annually, and clarify whether advisory services (such as contract reviews or HMRC enquiry support) are included.

3. IR35, Employment Status, and Tax Planning Disputes

IR35 and off-payroll working rules are technical and frequently misunderstood. Disputes often arise when accountants misclassify employment status or provide incomplete advice on contract reviews. If an accountant incorrectly determines a contractor is “outside IR35,” HMRC may investigate and issue a backdated tax liability, including interest and penalties. Accountants should provide written status determinations, document their reasoning, and advise on risk mitigation strategies such as contract amendments or insurance.

4. VAT Registration, Returns, and Sector-Specific Issues

VAT is a common source of technical disputes. Accountants must monitor turnover against the registration threshold, advise on the correct scheme (standard, flat rate, or sector-specific), and ensure returns are accurate. Errors in threshold calculation or scheme selection can result in overpayment, lost cash flow, or HMRC penalties. For example, a sole trader in construction may be advised to use the wrong VAT scheme, leading to unnecessary costs. Accountants should provide a VAT registration checklist, sector-specific guidance, and regular reviews of VAT returns.

5. Expense Claims, Allowable Deductions, and Record-Keeping

Allowable expenses are governed by strict technical rules. Disputes often arise when accountants advise on claims for travel, subsistence, home office costs, or capital allowances without proper documentation or apportionment. For instance, claiming mobile phone costs without separating business and personal use can trigger an HMRC enquiry. Accountants should supply detailed expense policies, templates for record-keeping, and guidance on evidence required for each claim. Regular reviews of expense claims and supporting documentation help prevent disputes and HMRC challenges.

6. Fee Disputes, Billing Surprises, and Service Quality

Fee disputes are common, especially when accountants charge for “advice” or additional services not clearly outlined in the engagement letter. Scope creep—where work expands beyond the original agreement—can result in unexpected invoices. If you receive a bill for services you didn’t request or that weren’t delivered, request a detailed breakdown and compare it to your engagement letter. Escalate unresolved disputes to the accountant’s professional body, such as ICAEW or ACCA, and keep all correspondence as evidence.

7. Data Protection, Confidentiality, and Access to Records

Accountants are legally required under GDPR and professional codes to safeguard your data and provide timely access to records. Disputes may arise if there are delays in handing over documents, missing historic tax returns, or unauthorised sharing of your information. For example, changing accountants and facing delays in receiving previous years’ tax returns can risk late filing penalties. Always request a full data handover in writing and confirm your new accountant has received all necessary records.

8. Complaints, Escalation, and Legal Remedies

If informal resolution fails, escalate your complaint in writing, referencing specific breaches of contract or professional standards. Professional bodies have formal procedures for investigating complaints, and you may also pursue a claim in the small claims court for financial loss or poor service. Gather all relevant evidence—engagement letters, invoices, correspondence, and technical memos—to support your case. Contractors have successfully recovered fees after proving breach of contract and inadequate service.

9. Preventative Steps and Best Practice

Annual reviews of engagement terms, regular communication, and written summaries of advice are essential for preventing disputes. Using cloud accounting software provides transparency and real-time access to records, making it easier to spot errors early and track submissions. For example, a sole trader using cloud software can monitor their accountant’s filings and quickly identify discrepancies or missed deadlines.

10. Conclusion

Technical understanding, thorough documentation, and proactive management of your accountant relationship are key to protecting your rights as a sole trader or contractor. Assert your rights, challenge poor advice, and seek redress when necessary. Regular reviews and clear communication help ensure your accountant delivers the service you expect and deserve.

Disclaimer:
This material is for general information only and does not constitute medical, financial, tax, or legal advice. For guidance on your specific situation, consult a qualified professional.