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Can Hmrc issue a penalty for 2013 tax returns already?

We submitted a 2013 SA return for a client in jul 2013. It then came to light that a large dividend had been omitted from the return and it was resubmitted in dec 13 with the correction. Hmrc have now threatened to add a penalty as they consider the omission was deliberate.

Can they add penalties like this when the deadline for submitting the return hasn't passed yet?

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Yes

The penalty isn't for a late return but for an incorrect return.

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22nd Jan 2014 21:35

Did you approach them with the correction?
With it being a dividend, I expect so. I would be surprised and disappointed if HMRC do carry out their threat. Everyone makes mistakes. Just kindly point that out and raise the point that the treasury hasn't lost a bean.

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By BKD
22nd Jan 2014 22:20

Doesn't matter that no tax has been lost

Penalties are based on potential, not actual, tax lost. Having said that, it would be a harsh Inspector indeed that imposed a penalty. Deliberate omission doesn't square with voluntary correction before the deadline (assuming it was voluntary).

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22nd Jan 2014 22:25

.

BKD wrote:

Penalties are based on potential, not actual, tax lost. Having said that, it would be a harsh Inspector indeed that imposed a penalty. Deliberate omission doesn't square with voluntary correction before the deadline (assuming it was voluntary).

Whilst you are of course correct with reference to the potential lost revenue, the fact that no tax has actually been lost is a moral bargaining chip I wouldn't miss in any correspondence.

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23rd Jan 2014 00:19

@ OP (montgoke1)

You say that :-

" It then came to light (my emphasis) that a large dividend had been omitted from the return and it was resubmitted in dec 13 with the correction".

You do not state how it "came to light".   This leaves open the possibility that HMRC (perhaps directly - perhaps indirectly) provided that "light".  If hypothetically HMRC instigated the correction, then this might affect one's view of the matter, since it might point to the likelihood that, without that "light" being shone, the taxpayer would not have submitted the formal amendment.   I am perhaps playing devil's advocate, but one must always scrutinise carefully the client's case in circumstances such as this.   

It does, prima facie, seem draconian conduct on the part of HMRC, whose ethical standards in recent years have from my own experience fallen significantly, on several occasions, to unacceptable levels ; and this appears on the balance of probabilities to be the case here.    

I understand that the "bar" is set at "careless" for the HMRC right to seek penalties.  Valid points have been made above re the absence of any tax loss, which must at least be a factor in the taxpayer's favour.

The onus I believe is on HMRC to establish the culpability of the taxpayer, but this does not mean that the taxpayer should take a passive line in mounting his defence.

I personally would like more detail as to how and why the admittedly "large" dividend     ( the omitted dividend figure would help also, please - £1000 is one thing - £50,000 is something else - the size will affect my overall view also) was omitted in the first place and, as mentioned above, how it was discovered, before commenting in more detail.

Just trying to show some balance to a very interesting question.

Basil.

 
 

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By TOC
27th Jan 2014 14:13

Tax Returns

I was under impression tax return could be amended at any time up to filing deadline so no penalty is due.

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28th Jan 2014 09:51

Amendment and forced change

TOC wrote:
I was under impression tax return could be amended at any time up to filing deadline so no penalty is due.
If it is simply an amendment due to an innocent error, then that is one thing. If it is an omission that has been picked up by HMRC who have then forced a change, that is another. In the latter case, it would be the discovery of an error by HMRC that gave rise to the penalty. Whether HMRC would be justified in applying a penalty when any additional tax wasn't even due yet is a matter for debate.
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To answer the headline

Yes - you can receive a penalty for late filing now if the Return has been sent in on paper.

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28th Jan 2014 10:40

I did the same thing 2 days ago...

...but picked it up yesterday, and submitted an amended return.  I included the total in the box for 'personal services company' but simply forgot to add my dividend to the worksheet.

The amount was significant enough to make me question my own return when I looked at the calculation.  I would question why your client did not tell you about it for 6 months.

 

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