As we are all aware, this year paying the tax on time will not be enough to avoid a late filing penalty for a return. What is the position regarding submitting provisional figures on a return? Will a return with provisional figures submitted by 31 January avoid a penalty (subject to accurate figures being supplied reasonably promptly) or would final figures not being submitted by 31 January count as a late return?
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I thought of this
As I have a client I can't contact - I suspect he's in Ireland where his daughter in law is ill and he's the most laid back client I have.
You have nothing to loose and £100 to save - I wouldn't make it a habit though...
"You have nothing to loose"
Wouldn't this be an inaccuracy in a Return to which the penalty provisions of Sch 24 FA 2007 apply? You'd need to show "reasonable care". I can't contact the client for the info so I'll bung in my best guess probably isn't reasonable care.
The daughter-in-law's illness may be reasonable excuse though.
I don't think you'll get anything definitive from HMRC
My previous comment was more directed at memyself-eye's situation rather than the provisional return concept. I don't think HMRC openly accept the concept of a provisional return. There is obviously the check box to indicate when a return contains estimated/provisional figures. You should tick the box and use the best possible estimate as well as disclosing in the white space what's been estimated, why and when you expect to be able to provide accurate information.
I think you could still face having to show reasonable care though. Reasonable care also involves reasonable diligence, so the reason you're estimating needs to be outside the taxpayer's control to get yourself safely within reasonable care, in my opinion.
Provisional return
Look at:
SAM121190
It also makes comments about agents filing a significany number of provisional returns which is interesting
I didn't say I wouldn't be 'diligent'
As I know his numbers from last year (BTL property income) and the only variable is likely to be interest (although that will be in line with last year also). The provisional return would if anything overstate his profits.
The question was: is submitting a provisional return in the absense of known figures acceptable to avoid the fine, I'm not advocating it as a routine course of action.
I'm also aware that once the taxpayer thinks you've sent the return many forget that they actualy need to come up with the correct numbers which is where a larger than expected tax bill helps.
provisional figures and penalities
My client has just died, was waiting for some national savings certificates, would you write to hmrc and tell them that the inc.tax return will not be forthcoming for some time ie get my "rewengy" in first - thanks blackadder. Or would you send in an estimate return now
If you file a return on time it is not late...
so no late filing penalty.
If you make an error or mistake in a return, then under Sch 24 FA 2007 provided that you took reasonable care in the first place and you notify HMRC of the error - so the amendment is unprompted, you will not face a tax penalty.
If you do not take reasonable care or are negligent in any aspect then if HMRC catches up with you a penalty may well arise. Of course you may be able to argue to suspend the penalty. That will not possible if you are shown to have not taken reasonable care.
So each case turns on its own facts. If you are making a deliberate decision to provide estimates in place of the actual figures then some might be suspicious of this practice. On the other hand a very sensible thing to do if there is a genuine reason for the delay and it was not just down to apathy on the part of the taxpayer.
Would not suggest that you do this other than rarely - the chances are that HMRC may become interested in a tax agent that practices this regularly!
Virtual Tax Support for accountants: www.rossmartin.co.uk
Nichola
If you're going to try and say something useful for a change, you should consider getting it right...
If you make an error or mistake in a return, then under Sch 24 FA 2007 provided that you took reasonable care in the first place and you notify HMRC of the error - so the amendment is unprompted, you will not face a tax penalty.
... if there's reasonable care, there's no penalty for a prompted or unprompted disclosure. No penalty can arise unless the error is careless or deliberate.
Dealing with chancewind's point
Unless it folows a debilitating illness, I doubt that the recent death of your client is a reasonable excuse for delaying the tax return now simply because you still don't have all the information to put on it. I'm obviously unaware of all the circumstances though.
Their death may be a reasoanble excuse for late filing if it means that you're now unable to get it approved for submission by a person suitably authorised to sign it. Once the reasonable excuse ends though, you need to submit the Return to avaoid penalty.
There's limited mileage in notifying HMRC now, although it may prove helpful later on if you have to take a penalty appeal to tribunal.
On the estimate issue, the point I was making previously is that a penalty arises where a Return contains one or more inaccuracies. Since estimates tend to prove not completely accurate, an estimate is, by definition, a deliberate inaccuracy. If it's revealed as such though and the actual figure is provided promptly, HMRC may consider that you've taken reasonable care, particularly where there are such extenuating circumstances. They may not though. You need to weigh a possible %ge penalty charged on the extent to which your estimate might prove inaccurate, against the fixed non-filing penalty with a potential reasonable excuse. It's a brave new world.
reasonable care and negligence
What is with the sacastic comment, George? I note that you have directed a few to me, and I think that it is really not in the spirit of this forum. Give me a ring or email me and lets sort out whatever your problem is privately.
Unfortunately though you have failed to read the next line in my response and so quoting only an extract of my response is pretty unhelpful.
I also said:
"If you do not take reasonable care or are negligent in any aspect then if HMRC catches up with you a penalty may well arise. Of course you may be able to argue to suspend the penalty. That will not possible if you are shown to have not taken reasonable care."
This point I make is that if you are not found to be taking reasonable care then you are clearly careless or else it is a deliberate course of action and that may well attact a penalty AND, if a penalty arises, then you will not be able to suspend it either.
Virtual Tax Support for accountants: www.rossmartin.co.uk
Thanks Nichola
I'd forgot to mention in my response to chancewind that if a penalty were charged for an inaccurate estimate they'd be unlikely to get (discretionary) suspension in their circumstances as HMRC (upheld by a recent tribunal, but not so upheld in one a while back) view suspension should only be applied, where it is likely to serve as encouragement for the taxpayer to fulfil their obligations more diligently in the future. Deceased clients tend to be beyond such encouragement.
Nichola, I'm puzzled by a point in your posts. You seem to be drawing a distinction between "negligence" and "not taking reasonable care" that's escaping me. I'd always seen them as two sides of the same coin?
Steve
well neglience is the term under the old penalty system and Sch 24 uses reasonable care instead.
For the new regime, I am guessing that reasonable care is used becase it is easier to talk about and understand different degrees of reason than of the attaching to negligence. So what we see is that "negligence" seems to be banded around as if it is black and white, you are either guilty of negligence or you are not, whereas reasonable care can be considered in tones of grey.
Thanks Nichola
I do agree that "failure to take reasonable care" lends itself to a less precise interpretation than "negligence". I'm not sure though that that's really a good thing nor that the two things are really all that disparate.
Does this help?
I got a new client in March 2011, only to discover that the previous accountant had estimated the partnership profits at a "round sum" 30,000. The true figure was nearer 60,000, which was a big deal as the payments on account for 11-12 were also based on 30,000 even though it was obvious to me just from conversation with the client prior to the change that this was a ridiculous estimate - final figure 75,000.
Anyway I have filed revised returns, as you can see the estimates were a joke. No queries have been raised by HMRC with me, the client or the accountant who filed the 30,000 return.
Comments from Rebecca Benneyworth
I "borrowed" Stepurhan's question and put it in front of Rebecca Benneyworth to get her Self Assessment A&A clinic for Sage Taxation users rolling this morning. Even if you are not registered to ask her questions, you can follow the Q&A as it proceeds through the rest of January.
You'll find Rebecca's answer here. To Stepuran's main question she replied, "First, if a return is made by the due date then one would not expect a penalty for a late return, so that avenue is dealt with - or is it? I have wondered if it is open to HMRC to claim that the return filed does not constitute a "proper return" because it is incomplete. They don't take this view but they may need to think carefully about a sudden rash of estimated figures by people keen to avoid the new penalty. I suspect that the Tribunals would resist this as a matter of law."
But then she went on to look at alternative possibilities.