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SA back years - how far back?

My client has made a voluntary disclosure of untaxed income. It’s clear in the circumstances that at worst this is “failure to take reasonable care”.

HMRC have been provided with details of the income going back to 1999/00. HMRC have now issued a schedule calculating the tax due back to 1999/00 and have described it as a “request for payment”. No formal enquiry has been opened as far as I can see. The only reference to such matters from HMRC is “I am carrying out a check” and “if I have to make an assessment it will be under s29 TMA1970.”

As it turns out, the oldest year has the highest tax bill, and of course interest would be worst for that year also.

What response should be given to HMRC? Say “sorry mate, you can only go back 6 years for failure to take reasonable care”? Not sure how to bring matters to a conclusion that is cheapest for my client without HMRC throwing their toys out of the pram.

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By vince8
03rd May 2012 12:17

Seen this before

Your client has voluntarily sent detail of 10 years untaxed income, so HMRC are now asking him to voluntarily pay the tax. It would not be unreasonable to also ask for interest, like any other debt. I think HMRC would need to prove careless and deliberate client action for S29 and make a decision based on the size of the potential settlement. Presumably we are talking big numbers here?

 

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03rd May 2012 13:48

I think the struggle here is to argument that

you have made an error going back 10 years but it may be deemed as 'just' failure to take reasonable care.  Of course it depends on what the tax relates to and you seem confident that it is just a question of reasonable care but the implied tax underpayment would suggest the gravity of non declaration is a little more serious.  I think in this context your client should be thankful of the low interest loan he has had off the revenue....of course there is nothing to stop you attempting to minimise the tax position, and perhaps making an offer acceptable to the Revenue which may not be as high as they could strictly get thru charging surcharges/penalties etc may be appropiate. 

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By dreamcatcher
03rd May 2012 13:55

Recently had something similar

I took a client on recently who had undeclared rental income going back 8 years.  The full 8 years were disclosed to HMRC who wrote back saying they were only interested in the previous 6 years.  Needless to say my client was very chuffed at this.

I always take the view that if a voluntary disclosure is done for x number of years then the client should be prepared to settle the tax, interest and penalties on the number of years disclosed.  As if in my case HMRC don't want to tax anything over 6 years then great for the client, but otherwise a client should bite the bullet and pay up.

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03rd May 2012 14:07

replies

Thank you all for your answers.

@vince8

The numbers probably aren’t big in the wider context of IR enquiries but the client will have to borrow from family to pay up. About £7k tax for all years of which about half is for the “out of time” years.

You mention “careless and deliberate”. My client was careless but not deliberate.

 

@justsotax

Why do you think it was an error disclosing all 10 years? One has to make full disclosure surely?

In terms of an offer, are you suggesting offering to pay all 10 years but get agreement to no interest and penalties?

 

@dreamcatcher

Yes, I had a similar case, IR just wanted 6 years even though they knew the earlier years had also been disclosed. That’s the issue with this current case – I am a bit puzzled by exactly which territory I’m in as it’s not going the way that other similar cases have gone.

You suggest paying up but am I fulfilling my duty of care if I could have got the Revenue to settle for 6 years instead?

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By vince8
03rd May 2012 15:00

Make them an offer

The tax is not large. You could try sending them a cheque for the tax and interest due for in date years. Faced with this situation they could accept and close. I have tried this before and it worked but its your choice.

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03rd May 2012 15:14

I think my reply was not so clear....

I was suggesting that given the number of years that have passed I think you would struggle to merely put it down to being careless....therefore i think HMRC would fight any challenge that they can only go back 6 years.

 

I have done similar to vince8....made full disclosure and sent it with an offer (having calculated the interest)....they may come back suggesting a penalty charge so you may want to preempt this with an offer to....but once they have the check in their hand they usually go with it.

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By KH
08th May 2012 11:37

No statute of limitations with regards tax

Hi ... recently had a case where a taxpayer's accountant suddenly died and left him in the lurch, more so, actually, than just dying on him, since he had given this guy completely wrong advice regarding rollover relief and capital gains in general .... so I now have a new client, and, since he wanted to come forward and clean up the whole mess, he asked me to submit CGT comps on the whole shebang going back to 1992 .... well, rollover relief wasn't available due to various reasons, but fortunately the CGT comps for the first few disposal showed no tax liability due to either indexation or taper relief. This left only the last disposal, which fell into the current CGT regime, with about £7k to pay (much better than £30k odd if rollover relief had been available and applied). But I did check to see whether the statute of limitations might have been applicable for the earliest years before embarking on any calculations, and, for tax issues at least, there is no statute of limitations ... so, in theory, the taxman can go back as far as he wants.

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09th Aug 2012 13:00

result!

UPDATE: just had a call from the tax office to say that my offer of tax for just the in-time years + 10% penalty + interest has been accepted. As advised on here, sent the client's cheque for the exact amount with the offer letter. Tax office will be sending written confirmation, they even said I had over-calculated the interest and will be repaying some of it!

Thank you again to all the respondents. Saved my client about £3k.

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10th Aug 2012 12:13

bump

.

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10th Apr 2016 20:27

Let property campaign.
I have received a letter from hmrc stating they are investigating for unpaid tax, as im a registered landlord. My parent loaned me the money to pay off mortgage on property, i agreed parent would receive all rent until debt was paid off, parent is elderly and non tax payer. Hmrc stating as house is in my name that im responsible for paying the tax...im currently working part time(since nov 2014) and receive wtc and ctc .. how far back can they access bank acc etc any advice would be appreciated.

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