I have a new client who has come to me to do their end of year accounts, they were previously done by themselves but they made mistakes on their expenses which subsequently led to a HMRC enquiry for the 2014/15 tax return, this enquiry has now ended and a closure notice given.
My client agreed that HMRC was correct and payment was made for the outstanding tax, HMRC also issued a penalty which they suspended.
I have now started to prepare the accounts for 2016/2017 and whilst working out the WDA for this year I have noticed that my client also made a mistake on last years Tax return, it is not a large amount of money but still an error.
The client was due a rebate for 2015/16 but despite them claiming a repayment online on 3 occasions no rebate has been issued which makes me think that HMRC may be aware of the error as it has a direct link to their investigation.
My plan was to speak to my client and ask for their permission to amend the tax return or speak to HMRC on their behalf.
What I am not sure about is how this will affect the suspended penalty will HMRC take the opinion that another mistake was made and enforce the penalty or will they be happy that the mistake has been amended?
Any thoughts or advice on this would be appreciated
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Doug
These are only my opinions of how I see things and therefore should not be taken as advice
Morning Doug
Do you think the error you have now found is a continuation of the original error and was made effectively before the investigation conclusion? Plus one that can be considered careless (and easily repeatable) rather than deliberate. At first glance on the info provided this looks like it could be a separate error.
Out of interest, sole trader/limited?
Do you have the letter from HMRC which sets out their conclusions, timeframe for the suspense to remain in place and actions they expect the client to make to not repeat the errors? That I think is key as to how likely this will result in what happens next in terms of both a likely penalty/your arguing against it. Was the submission of the second incorrect tax return after the enquiry?
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
Morning Doug Do you think the error you have now found is a continuation of the original error and was made effectively before the investigation conclusion? Plus one that can be considered careless (and easily repeatable) rather than deliberate. At first glance on the info provided this looks like it could be a separate error.
Out of interest, sole trader/limited?
Do you have the letter from HMRC which sets out their conclusions, timeframe for the suspense to remain in place and actions they expect the client to make to not repeat the errors? That I think is key as to how likely this will result in what happens next in terms of both a likely penalty/your arguing against it. Was the submission of the second incorrect tax return after the enquiry?
Hi Joanne
Thanks for the reply
He is a sole trader
It is not a continuation of the original error but has come about because of the original error if you see what I mean, what happened was the client claimed for the full amount of a vehicle when they should have only claimed for 8%, HMRC picked up on this and adjusted the tax return to reflect this, the investigation was completed and a closure notice given before this new return was submitted.
What happened next was that my client then filed their next return (2015/16) using the same figure that HMRC had allowed for the WDA in 2014/15 instead of 8% of the new WDV, it is not a large amount and I have no doubt that my client has not done so deliberately after all the troubles he had the year before, but I was not sure how HMRC would view this with it having a direct link to the original enquiry.
I cant get hold of the "Notice of penalty suspension" as the client is away for the next two weeks, but was just trying to get a feel for how others would deal with this even though this all came about before I took over the accounts.
Cheers
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Doug
These are only my opinions of how I see things and therefore should not be taken as advice
Hi Doug
Cant say I have any experience so its just my view, but this is certainly more 'connected' than I originally thought so you may have a good chance of arguing the case, although I do feel that the HMRC letter will need to be seen first, because it does depend on what their suggestion was to prevent it from happening again and the timescale of the two events, ie receipt of the letter v the tax return being submitted. (At least its not a complete re-work of company accounts, which is why I asked). I understand HMRC usually provide suggestions, which really should be followed to avoid the fine kicking in, so its worth seeing what they are. Given you arent on a tight deadline for this year, albeit not wanting to leave it too long before admitting a mistake, I think it needs to wait until they come back so you can get hold of that letter.
Hope you update us idc, its an interesting one.
Be interested to hear from anyone who has seen such things.
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
It is unlikely that is why they have not paid back the refund.
You are still within time limits to submit and amended return and it may be worth doing this.
Regards
Phil
Hi Phil
Thanks for the reply
I am definitely going to amend the return but can not do so without permission from my client also waiting to get a look at the "Notice of suspension" letter first to see what it says,
So in your opinion why do you think they have not released the refund? Just seems a bit strange that my client has requested it 3 times now.
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Doug
These are only my opinions of how I see things and therefore should not be taken as advice
The suspension of penalties runs until the 1st August 2017 and the conditions are basically to keep complete records and to file correct returns up to this date but this has not been adhered to because of the incorrect 2015/16 return.
What I plan to do is to gain permission from my client and to amend this return so that it has the correct WDA.
Does anyone know how I will stand concerning the rest of this return in that I am only amending the part that I have identified as being incorrect, I have had no access to the rest of the years accounts and cannot vouch that this is the only error, I was going to put this in writing to my client and get a signed declaration saying this, do you think this will be sufficient?
Also as a side note if I had not noticed the error until after the 1st August suspended penalty deadline could HMRC have said that my client had breached the conditions set by them and impose the penalty even though my client could still legally amend their return?
Any thoughts and advice on this would be very much appreciated
Cheers
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Doug
These are only my opinions of how I see things and therefore should not be taken as advice
Hi Doug
Ive just had another read of your posts above, this time with a little more time on my hands (mostly as Im skivving off as its so warm!)
The problem is that the client is supposed to have learnt from the first mistake, yet they made the same mistake again, so at first glance I would think they would be charged a further penalty and have to pay the original one. That said the question has to be - are HMRC not adhering to their own guidlelines? The suspensiomn notice is supposed to contain SMART conditions. This from one of their flowcharts (although Im not aware the date of it, but its worth a rummage in the manuals - Ive not done that!)
Can you set at least one SMART condition of suspension?
SMART conditions (CH83153) are:
Specific directly related to the business or individual.
Measurable the person will need to be able to evidence that the condition has been met.
Achievable it must be in the persons power to meet the condition.
Realistic Conditions cannot be unreasonable, (e.g. it would not be reasonable to require a small oneman
business to employ a full-time bookkeeper).
Time bound there must be a clear date by which the condition must be met.
It is crucial that compliance with the specific condition(s) is 'Measurable'. Ask yourself whether, if you returned to ask the person to evidence that they complied with the condition they would be able to do so. Meeting a condition to put in place a comprehensive recordkeeping process is something that could be evidenced by demonstrating its existence; they could show it to you. In contrast, meeting a condition that amounted to nothing more than agreeing to take better care in future cannot be evidenced.
It seems to me (and again, Im just surmising, as I have no experience of having to go through such) that the comment you made of ''keep complete records and to file correct returns up to this date'' could amount to 'nothing more than agreeing to take better care'' per the above last line. Crucial is anything else in the letter of suspension or prior letters issued by them about the 8% malarky, I would suggest, so worth a punt?
On the spotting it after 1 August - the question on that one (how long is a piece of string) is that they are not coughing up his refund as they suspect a problem, so Im assuming they would not actually issue their cancellation letter, which you would need despite the date (?).
Has he actually phoned HMRC to see what the hold up is? Or just tried the online 'refund me' option.
I would say - a Chartered view would be better, rather than mine....these are just my musings!
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
Hi Doug Ive just had another read of your posts above, this time with a little more time on my hands (mostly as Im skivving off as its so warm!)
The problem is that the client is supposed to have learnt from the first mistake, yet they made the same mistake again, so at first glance I would think they would be charged a further penalty
....these are just my musings!
Hi Joanne
Thanks for reply
I like your musings, and must admit I do agree with what you say about making the same mistake again trouble is from my side is that now I have picked up on the error I feel I have to deal with it and the only way I can do that is to amend the error I have found and if HMRC decide to apply the penalty then so be it., I have explained this to my client and he accepts it.
He has not spoke to HMRC about the refund only requested it online, I will speak to them after the return has been amended.
I am going to have a look at the link you have provided but like you I am skiving and I have spent most of the afternoon in my garden.
Cheers
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Doug
These are only my opinions of how I see things and therefore should not be taken as advice
I like the way you have spent most of the afternoon in the garden v my version of skivving which is just starring at my PC and the work piles!
Agree that you dont have a choice on the error thing, but wondering if there was a way to escape it. At least the client has accepted it - thats one less awkward situation. Do let us know how you get when its all been re-submitted as its good learning!
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
I like the way you have spent most of the afternoon in the garden v my version of skivving which is just starring at my PC and the work piles!
Hi Joanne, will definitely let you know the outcome
It wasn't all play in the garden I did put the parasol up so I could do some work on the laptop (very little)
I decided to give myself the afternoon off after a client asked me to pop round to his as he had all his receipts ready for me so that I could complete his year end accounts, these consisted of a plastic bag crammed full of crumpled up receipts so I tipped them in the middle of the living room and it looked as though I had pulled off the perfect heist but instead of money I had diesel and screwfix receipts, it was then I decided that I love being self-employed and "why do today what I can put off until tomorrow"
But this means I have a very busy day tomorrow (Hope it rains)
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Doug
These are only my opinions of how I see things and therefore should not be taken as advice
Ah. so it's your fault that it's cold(er) today Doug.
Put my shorts on today expecting it to be 24 degrees and it was blooming 16!! Didn't know til I went outside this morning. Swiftly got back into trousers, which brought a sigh of relief from the residents of Ripon lol.
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
Dont put the kiss of death on it. Its the longest day today so by law it has to be sunny! Its all down hill by 22nd! 
