My new client has sent in tax returns over the last few years. I cannot speak direct with HMRC as I don't have authorisation yet and he needs to appeal/respond to their decision by Friday 17 Feb. He gave me all his paperwork a couple of weeks ago and it is clear that he has put incorrect figures in the returns. The 14/15 one says he was deducted over £8k in CIS tax yet only earned £11k that year!!! This is probably why HMRC have delved into his returns in detail. Unfortunately he has sent all his CIS returns to HMRC as they were unable to verify the figures (not surprisingly) so he has nothing but bank statements to show me.
I don't believe there is any dishonesty involved but he seems very unsure of his position with HMRC. They claim that he owes £300 in tax and have written to him separately about penalties. When I checked his account on HMRC's site there was no mention of penalties, just the £300 outstanding. On the check of his tax return for 14/15 they have said he undeclared incomeand over declared CIS tax. It's a mess. HMRC have also indicated there was a tax return due of over £6k which was cancelled in the line below that. I suspect this is them just working down from the figure the client put in - not sure?? But client needs to know why his account went from him being due a rebate to owing them £300.
Can anybody recommend an approach I can take with HMRC considering I'm working in the dark? I am this evening drafting a letter to them (from the client) in response to their letter. I was hoping to get more time to respond or maybe get them to accept estimated expenses or something/anything? I am still trying to gather all the correct figures together and the client seems unable to help much. I will also state the figures as I know them and ask for a better explanation. There is nothing at all online to explain the figures used.
Furthermore, the client signed an undertaking to submit his tax return for 15/16 on time or a penalty of over £700 would be added as this was being withheld for now. I put his tax return in on 1/2/17 as I was unable to get HMRC's system to accept his password before midnight. It was only by fluke that I tried a different browser the next morning and that worked. I feel sorry for the guy and this hasn't helped.
thanks
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Replies (19)
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Write in with a 64-8.
The initial 6k refund will be due to him putting the wrong CIS tax deducted figure in. They have now adjusted that.
Make sure the effort is worthwhile if HMRC are only asking for £300 now.
If he's signed an undertaking it may well be that he has already agreed to the 14/15 amendments & the undertaking was that he would do things properly & in time in the future & this postponed penalties.
Thanks. I agree that he's lucky to end up with a £300 tax bill in some respects. However, I'm also unhappy that he's missed out on claiming expenses etc.
He is very unhappy that he hasn't got his £7k refund, so I will draft something along the lines of "please explain how you arrived at xyz" etc without being too challenging. I have also explained to client that you cannot get a refund of £7k if you haven't paid that in tax, so I'm working on his CIS net payments tonight to figure out what tax he paid and take it from there.
I just wondered whether there was a recommended approach to take with HMRC but you suggest not pushing it I believe? I cannot send in a 64-8 as the client doesn't even live near me. I will do an online authorisation and hope it doesn't take too long. To be honest, although I want to try and help this guy, I can do without the headache for what I'm charging him.
Finally, the bottom line is he will not be able to pay the tax bill this week anyway so writing may also give him a little bit longer to get the money together. Like I said, it's all a bit of a mess.
Why not email him a pre-populated 64-8, get him to print it off, sign it, send it back to you in the post and then you can include it with your correspondence to HMRC.
I assume you have offered to pay his £700 late filing penalty? Why would you need HIS password to file? Do you not have software?
And if you have no 64-8 how are you viewing his online account?
Something doesn't add up. Is this a wind up?
I assume you have offered to pay his £700 late filing penalty? Why would you need HIS password to file? Do you not have software?
And if you have no 64-8 how are you viewing his online account?
Something doesn't add up. Is this a wind up?
He's a new client - friend of a friend. No, I don't have software as I've just set up practice again after being ill. So I log in to his account 'as him' so it's not a wind up.
As for paying any late filing fee, no I won't. He didn't tell me about the undertaking or show me any agreement until the deadline was missed. The password he gave me originally didn't work so a new one was requested and I spent ages trying this. Had it been the usual £100 late fee I might of covered it but not any more than that. And HMRC should be able to see an audit trail of attempts to log in and file. So I would challenge/appeal any attempt to add to the usual late filing fee.
I am only charging him a very low fee as well for all this work I'm doing. By the way, I've been a member of Aweb for years, so why would I start pulling wind ups now???!!!
I am only charging him a very low fee as well for all this work I'm doing.
OK, but possibly a false economy if he could have avoided a £700 penalty by going to an established accountant with the right software.
BTW, I would be careful of using the argument that you could not get into his account - using a client's login is frowned upon by HMRC.
I agree, and had I realised first off that this was such a mess I might have suggested going to someone else. Initially I was lead to believe it was all very straightforward, then me and my family all got ill with a sickness bug the week before filing deadline so that didn't help.
I was only going to charge him £100 but I probably won't now anyway. I'm hoping that HMRC won't be as horrid as he says they're going to be - I still haven't seen the undertaking he signed.
I am drafting the letter 'from him' and will get him to agree the wording - but it seems the consensus is to not push our luck with HMRC.
There is no mention of any penalties due on his online account, just the £300. I'm hoping they will let this one go. I live in hope anyway because £700 would be awful for him and, yes, I would probably end up contributing.
Chalking this one up to experience. Maybe I need to invest in software again first, and not agree to last minute favours as this will make me look bad.
I think we've all been there, or somewhere very similar! The important thing is always to learn the lessons for next time, that way you can benefit. It's all growth! Good luck...
£100 fee? Stop feeling sorry for this guy and quote a proper fee to cover your time, irrespective of any penalty contribution that may be required.
Also, there must be some expenses. Accountancy? Telephone, use of home, stationery, insurance, travel / motor?
Estimates (if reasonable) are worth a shot. Has the guy kept no receipts at all? He sounds like a nightmare. Why would he enter 7k in the CIS deducted box?
Are you sure he is as thick as pig muck and not just trying it on?
Best of luck anyhow. For software look at Taxfiler. £9.99 per month, or Absolute Top up Tax (pay as you go).
I would get him to call HMRC and authorise you to speak to them as his tax agent. You need all the facts before you can write the letter. You can post him a 64-8 for him to send in or wait for the code. I don't see why the letter should not come from you but I would get all the facts first and charge a proper fee.
I would not take the blame for the late filing, he still had 10 months to appoint an accountant or check his password worked.
Radical idea for you!
That thing on the corner of your desk that ''rings'' pick it up and press the buttons that correspond to the telephone number on the letter and tell them you have been appointed and ask for further time.
On what authority does HMRC charge a £700.00 penalty for not filing the 2016 TR on time? £100.00 fixed penalty is normal and expected for everything but a reasonable excuse. Past poor filing should not affect the level of current penalties. File a 64-8, FAX a copy to HMRC and call them to make sure they've received it. Then talk to them, asking for more time. Any decent inspector would grant a month's grace. Good luck.
On what authority does HMRC charge a £700.00 penalty for not filing the 2016 TR on time? £100.00 fixed penalty is normal and expected for everything but a reasonable excuse. Past poor filing should not affect the level of current penalties.
It would be a past penalty for careless behaviour that has been suspended & will never be collected as long as there are no further transgressions within a set time period.
http://www.hmrc.gov.uk/gds/ch/attachments/suspension_of_penalties_flowch...
Thanks for responses. I agree, there is a fine line between trying it on and being stupid. The 'man in the pub' might have suggested the approach he took. I just can't for the life of me understand why he used the figures he did, they are just so random.
I have come up with a completely different schedule of figures based solely on what is in his bank statements and these show a refund is due but, again, working in the dark a bit and need to consider where HMRC got their figures from.
I didn't know I could call HMRC and ask for an extension. I will do that and see what happens.
As for my fee - I know it's giving it away but it's just a family and friends fee - but 'friends of friends'???!!! Maybe not in this case. I'll play it by ear and see what happens with his penalties which apparently they are withholding for now?
I think this friend of a friend is taking the proverbial. Before you go any further I would say you assumed it would be fairly straightforward but its a mess (all down to him). Tell him your normal charge out rate and how many hours you've spent so far and are likely to have to spend and then tell him you'll charge, say, half what you normally would, or even less as a fixed fee amount. But you have to draw the line somewhere.
And I agree with the earlier poster, HMRC are usually amenable to an extension, particularly if an accountant has just been appointed to try and sort things out. If they won't speak to you yet then get the 'client' to call for this.
Hi Eve. Two comments:
1. Re Fee: I don't know what hourly rate you are charging, but even for a small sub-contractor the accounts and tax return might take at least 4 hours of your time. I would be charging at least £450 ex-VAT, to allow for some work at a "junior" rate, and some at "senior" rate. £100 even for a friend is giving it away!
2. Re Expenses: I agree with Manchester_Man -- make sure you claim all expenses incurred (motor at mileage rates 45ppm etc), even if you have to make reasonable estimates.
Good luck!
1 - As others have suggested, get 64-8 sorted, so that you can actually deal with this and ask for an extension.
2 - Friend of friend means diddly squat in this game - I charge my family members my hourly rate without discount, everyone will be your friend of a friend if they can. Don’t devalue your service (or the profession as a whole) by doing favours, because I can almost guarantee the ones you choose to lower your fees for will be the biggest PITA’s on the planet.
3 - Don’t waste your time on this clients bank statements, if there are materials included in their wages then there will be no deduction on this element. Even if the daily/weekly/monthly rate is the same for each payment, you still don’t know if they were being deducted 20% or 30%, don’t potentially put your neck on the line making a guess.
4 - Get the client to get copies of their CIS statements from the contractor if they don’t have invoices - even if they don’t have statements, they can screen shot the CIS returns, then reconcile this against the bank statement. Then put together the real figures and put these in a letter to HMRC (once you have authorisation).
5 - Don’t assume HMRC or the contractor have got it right - 60% of my clients are in the construction industry and every year I have to send reams of paperwork off to HMRC to back up the overpayments because the contractor has ballsed up their returns and not paid the correct amount of CIS.
6 - Don’t believe the client - he is pulling the wool over your eyes and trying it on with HMRC. You do not have to be a rocket scientist or even vaguely intelligent to figure out that 8k is not 20 or 30 or even 60% of 11k. He tried it on and got busted. If this person is in the construction industry, they will be doing measurements or estimates or working with figures somewhere along the line - believe me when I say, they really aren’t that stupid!
Let us know the outcome :-) always interested to hear !
Some great responsese here. I feel that you need to sit down with this person and explain the facts and then write and confirm. If you dont it will become your fault. Set deadlines for data whether estimates or receipts and bear in mind that the next date is 28 February 2017. Then a 5% penalty is applied to late tax payments
