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Probably a stupid question for a rainy Monday morning

A client just asked what is the situation if they have found purchase invoices (paid from own finances) that have not been claimed in a previous period, can they be claimed in this period? Can you do that? Apolgies in advance if this is a dull question and I probably should know the answer but no one has ever asked me that before.

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21st Nov 2011 11:20

Overpayment Relief...

...is due if it happened after 1/4/2010, but I'm guessing it was earlier.

In that case you need 'error or mistake' relief which was Para 51 Sch 18 FA 1998 for companies and S33 TMA 1970 otherwise. You need to have actually overpaid tax in the earlier period, and you would revise the earlier return rather than try to claim for purchases in the wrong period.

However let me be the first to ask the obvious question before anyone else does. How come your client found overlooked purchase invoices, but didn't find any overlooked sales invoices? Don't rush to pursue this. Make sure (1) the amount is worth pursuing and (2) you've got a watertight answer to the question.

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21st Nov 2011 11:58

I take the view

that if they cant be bothered to find them when the accounts and tax return are done then I'm buggered if I'm going to amend retrospectively. It's just tough that they then pay too much tax. I suspect this happens a lot in our business - to HMRC's benefit - and the caveat's mentioned above are well made.

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21st Nov 2011 13:20

Whose side are we on anyway?

Depends.  I certainly wouldn't make value judgements about their failure to deliver invoices in previous years.  If our clients were skilled bookkeepers and record-keepers they wouldn't be using us anyway.

I try and take a practical approach.  Don't forget, on an SA basis you can amend last year's Return without blinking, and that's what I'd do with a few specific and substantive payments.  If the amount is relatively small I'd just ram it into the current year - life's too short to make work and trouble for both Revenue and ourselves.  If it's substantial and pre 2009/10, then yes Overpayment Relief is your boy - but be prepared for a very resistive approach from the Revenue if you just approach them on an "oops, forgot about these basis".  I've had them try to re-open accounts on a taxpayer who simply had been paying Class 1 and 4 NI on the same money for a few years. 

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By Luke
21st Nov 2011 13:38

Unless material, shove it into this year

MarionMorrison wrote:

I try and take a practical approach.  Don't forget, on an SA basis you can amend last year's Return without blinking, and that's what I'd do with a few specific and substantive payments.  If the amount is relatively small I'd just ram it into the current year - life's too short to make work and trouble for both Revenue and ourselves.

I agree with the pragmatic approach.  Unless an item is material, then just put it in this year.  If however it really would skew things to put it in this year then go back and amend last year's return.

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21st Nov 2011 14:02

Completely agree with Marion and Luke....

we need to remember who we act for and why they have engaged our services.

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21st Nov 2011 14:53

Thanks all
 

Thanks all

 

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25th Nov 2011 11:30

Another thought

If an employee claimed his expenses late they would be put into the accounts for the year of the claim. This may be the way forward.  ie treat as being incurred by the business when re-imbursement takes place

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25th Nov 2011 11:44

VAT?

Is the client VAT registered? If so you should put in a defensive "admission of guilt" backside covering declaration of error letter showing the omissions and making the retrospective VAT adjustment.

However, otherwise I'd just include immaterial adjustments in the current year.

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