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Client in Hospital

Client in Hospital

I have a client who is on life support in hospital and is unlikely to be of any help in the next month.

They are a medium sized landlord and I have *most* of the data as it came in some months ago, but there are gaps which we had been waiting for until we found out this week why we hadn't heard anything. His wife isn't involved in the business but is a co-owner of the properties. 

My plan was to:

1. Prepare draft accounts on a best estimate basis

2. Prepare a list of estimates and assumptions

3. Send these estimates with the draft tax returns to the wife to sign so there is full disclosure

4. Get return in before end of Jan.

My concerns are:

1. Sending a return in without the proper client authorisation. The clients are relatively young and don't have power of attorney in place so the wife ought not be signing for the husband in theory. 

2. Ticking the "estimates" box on the return triggering requests for a final return at a later date - would it be better to just put in the white space whats happening? Based on the illness I think even if he makes it out of hospital (which is at best 50:50) this is going to be beyond him for a long while, possibly permanently. 

3. Should I attach a doctors note or similar to 'ward off' HMRC from taking an interest in the matter? Clearly they must have 'heard this one before' in terms of excuses people make for not doing their returns properly. 

I am trying to do the best for my clients in terms of getting HMRC off their backs at a difficult time but at the same time avoiding getting in hot water myself by sending in non-signed and estimated accounts etc.  

I am probably over-thinking this massively, but any help appreciated.

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08th Jan 2013 15:25

I would have thought that

this is a prima facie claim for reasonable excuse to get any penalty set aside once the returns go in.

I suspect the real issue is that you don't want the jobs worth giving your client ( or his wife) grief at a very difficult time. I think I would write to HMRC enclosing a letter from the Consultant looking after your client and take it from there. Make sure you send the letter Special Delivery so they cannot deny having received it.

As an alternative what about seeking guidance from you professional body about sending a 'providional' return in. This would,of course, be guarranteed to stop penalty notices . If I were to go this route I think I might also keep the wife involved and get her clearance.

One final thought - would the wife have access to funds to make the payment on account etc?

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08th Jan 2013 15:30

You state the wife is co-owner. Do you do a return for her?

When will you know more about his condition? As the penalty is only £100 if you are worried don't do the return until you know more about the likliehood of his survival. You can appeal any penalty for the reasons below

Examples of reasonable excuse (HMRC website)

There are no hard and fast rules, but some examples where HMRC may agree you have a reasonable excuse, if they prevented you from sending your return on time are:

life-threatening illness, for example a heart attack, or the onset of a disability or a serious mental health condition that prevents you dealing with your tax affairsthe death of a partner shortly before a payment or tax return deadlineunexpected or unforeseeable postal delaysimportant documents lost, through theft, fire or flood, that can't be replaced in time late receipt of your online Activation Code, User ID or password even though you asked for them before the tax return deadline

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08th Jan 2013 15:45

Could you clarify?

You mention "a medium sized landlord", "Prepare draft accounts" and "sending in non-signed and estimated accounts", all of which suggest a limited company, but also "Get return in before end of Jan", "Ticking the "estimates" box" and "white space", which suggest an income tax return.

Please confirm that you are talking about income tax returns for a husband and wife owning property jointly and not about a property-owning partnership or a limited company.

If so, I think it depends on the extent of the estimates.  If there are just a few gaps and your estimates are comparable with the previous year, I would not tick the estimates box on the wife's return.  I would give her all the details and ask her to sign her tax return.  If you normally deal with her husband, I suspect that he probably just puts her return in front of her and tells her where to sign - you would probably be giving her more information this year than she normally gets!

As to his identical tax return (assuming 50:50 ownership), I would be inclined to get the wife to sign, but complete boxes 23 to 26 on page TR6 to say that she is signing on his behalf and give the reason in the white space in box 19.

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08th Jan 2013 16:06

@Euan, Its income tax, he has a number of BTL properties. 

There are two returns, one for each of them, but I don't think she knows much about it, and quite frankly is in no position to go digging through all the paperwork. I don't know much about her other than she works full time, there are children (early teens),  and she is at the hospital all evening sitting with him and I simply don't want to add to her stress. She sounded very tearful when I spoke to her yesterday.  I don't doubt she normally just signs her copy but this year she is going to have to be responsible for it, so its a bit different. 

I am pretty confident no tax arises due to past losses, but I have a list of about 20 things i would normally ask the client, some missing mortgage statements etc but we can make reasonable estimates of those, I have prepared a list of those so I guess my backside is covered and if we do pick this back up later its clear what I have done, without asking her to go through it all. 

What i want to do is just kick it down the road for 6 months so the wife (and quite possibly the widow by this point) has time to adjust and work out what she is going to do and would rather get a return in than go through the whole appeal process and having to prove anything.

 I am torn between just banging it in with a short note in the white space and hope it goes under the radar and going belt and braces with a doctors note, list of estimates etc but this seems to be asking for the exact trouble we are trying to avoid for her!

 

 

 

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08th Jan 2013 16:10

Property business

In my experience, you should try not to allow yourself or your client to use the word "business", no matter how extensive a property portfolio is.

In this case, it seems you have a joint husband/wife landlords so why complicate matters by thinking the wife is not involved in the business? She has just as much right to instruct you on the preparation of the income & expenditure from the properties as the husband.

I would also agree that it is unlikely that your "esitmates" actually amount to estimates at all. If you have used your professional judgement to fill in the gaps this is not the same thing as taking a punt on the stock.

 

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08th Jan 2013 16:27

MY advice now is do not attempt to insert estimated figures but send a letter to HMRC explaining that the return will not be submitted and why. Also I would contact the agents' hot line and get their answer, which you can log for later.

I cannot see any reason why a fine  (if served) could not be appealed against successfully .(see my previous answer)

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08th Jan 2013 17:17

The issue

bernard michael wrote:

MY advice now is do not attempt to insert estimated figures but send a letter to HMRC explaining that the return will not be submitted and why. Also I would contact the agents' hot line and get their answer, which you can log for later.

I cannot see any reason why a fine  (if served) could not be appealed against successfully .(see my previous answer)

 

Whilst I agree it is a cast iron reasonable excuse, I can appreciate that the OP does not want to cause further stress to the Client by running the risk of HMRC's less than sympathetic reminders, fines and other collection letters which would be sent after 31 January.

I wouldn't trust HMRC's systems to prevent the letters being despatched.

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08th Jan 2013 16:49

.

Thanks for your varied points of view I will have a think tonight.

 

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By UK Tax
08th Jan 2013 17:01

Estimates

Haven't checked, but seem to recall that if you use estimates in a provisional return you need to explain this but also confirm the date when the estimates will be replaced by actuals, or HMRC can/will reject the provisional return.  Putting a date might be difficult, so £100 penalty (possibly overturned on appeal) might be the least issue.  Just make sure that both HMIT (as was) and Collector are joined in and don't call the client /spouse (I'd even consider changing the client's listed contact phone numbers to your own just to make sure).  Their systems can go on "auto pilot" very quickly in Late Feb etc.

 

 

UK Tax

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By John R
08th Jan 2013 19:19

What I would do.

In all the circumstances a £100 penalty (£200 if you include the wife) is not the end of the world when you consider the extra costs that may be incurred should you prepare estimated returns only to revisit them when the final information becomes available. The husband will almost certainly have a reasonable excuse for a late return. The wife however possibly does not. I would definitely not submit a provisional (or final) return for the husband unless it has been signed by the client. I think the Revenue (and any professional body)  would take a dim view of an agent who was found to have submitted returns that were not approved by the client.

I would write to the wife and explain that she has a choice i.e. either collate all the information herself (she may end up doing this anyway if the husband dies) or accept that she and her husband may have to pay a penalty. If she chooses to collate the information herself and this enables you to prepare both returns, send them to her and ask that she gets her husband to sign his as soon as he is well enough. You never know, there may be some improvement before the end of January. If she chooses to leave everything then at least you will have warned her of the penalty which, frankly, is the least of her problems.

I can see no point in incurring time costs writing explanatory letters at this stage as I think the reasonable excuse has to exist throughout the period from 31 January to the date the return is eventually submitted.

 

 

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By nutwood
08th Jan 2013 20:30

I had exactly the same situation last year with a client.  He was hospitalised in total from July 2011 to September this year.  It wasn't until about June that he was in a fit state to arrange for his son to get the paperwork to me and to sign off the return.  Getting the fine lifted was no problem with HMRC - a letter from the client with a letter from the hospital - no argument at all.

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09th Jan 2013 10:59

Lodge Reasonable excuse claims now

You don't need to wait until penalties are issued, you can lodge resonable excuse claims now in advance of the deadline. You can use this form even though it is predominantly used for IT issues. You can download the form here http://www.hmrc.gov.uk/carter/sa-reasonableexcuse.pdf.    

Client doesn't need to sign them. I would then tell the wife what you have done, tell her that HMRC may still issue penalty notices but just ask her not to be too concerned and pass them on to you to deal with. You can tell her you have a few queries that she can deal with when she feels able and include the list.

It might also be worth estimating the tax liabilities and asking her to pay on time to minimise potential interest charges but this too is likely to be beyond what she can manage at this point. She may find it easier to give you a cheque, or cheques if they both are likely to owe tax, made payable to HMRC (not to you!) for you to arrange to forward on.

As far as I'm aware the wife cannot legally sign her husbands Return on her husbands behalf as no Power of Attorney is in place even if your accounts/computatations were complete.

 

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By KH
11th Jan 2013 15:28

Do tax returns, and send in separate letter

Hi

I've been in similar positions ... one client in and out of hospital over three years, and anther client whose son put his bookkeeping records in the wood stove just before they were meant to be posted to me ... in first instance I just wrote HMRC and said client very ill and would miss deadlines, and then, when the £100 penalty fines kicked in, wrote back to have them rescinded, enclosing a doctor's note stating the position of my client, whereas in t'other case I just prepared accounts based on previous year, with "appropriate" amendments as I thought fit, and included a letter to HMRC stating exactly what had happened and what I had done ... in both cases, after successfully applying to get penalties rescinded, everything went perfectly smoothly, with all guesstimates taken on board as fair and reasonable in view of the circumstances.

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11th Jan 2013 15:40

Reasonable excuse

The husband certainly has a "reasonable excuse" so I wouldnt worry about his return.

I am also of the opinion that a wife at the bedside of her seriously/terminally ill husband also has a "reasonable excuse". If HMRC don't agree I would simply appeal their decision.

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11th Jan 2013 16:41

Resaonable Excuse

Reasonable Excuse claims are all very well and good however bearing mind they have to be actively pursued and even if ultimately successful will involve time & effort on behalf of the agent and potential upset to the client when they recieve the copy correspondence.

If the wife tells you the husband has authorised the filing I am sure a quick file note will satisfy you, your institute and HMRC.  

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11th Jan 2013 17:05

Agent Helpline

Ring the Agent helpline explain the situation and ask that a note be made on both clients records. It may not stop the first reminders being issued but if you then phone the helpline again it will prevent further action.

At this time of year HMRC tend to chase those that are not paying attention and leave those who have a reasonable excuse which has been notified alone.

This will give you time to properly compile the returns in February. If the worst happens and he dies, once HMRC have been advised they will back off

 

 

 

 

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