6 Year Cut-Off

6 Year Cut-Off

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A client has not submitted Tax Returns since 1997/98. The Inland Revenue have therefore made determinations, penalties and charged interest for each of the years to date.

We are now looking to submit all the outstanding Tax Returns for our client (including 1997/98). As the 6-year cut-off rule would imply that 1998/99 would be the earliest year open for revision, would we still be able to request our 1997/98 submission override determinations/penalties/interest currently in place?

A previous client in the same situation has been told that the determinations, penalties and interest for 1997/98 will stand even though they had confirmed a Tax Return had been received for that year (they informed us that in these situations the returns would not be processed, merely logged as having been received).

Has anyone come across this before or submitted a valid Tax Return in this situation?

LMT

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By andyprentice
05th May 2005 12:24

equitable liability
The IR will usually agree Equitable Liability in cases like this. However it has to be asked/applied for and then pursued.

The tax return will not be processed, but if E L is agreed they will make an amendment to the statement of account.

Also, note that penalties for some years can be reduced by allocating payments made against the most recent years liabilities first. That is to ask for an allocation of a payment made against a liability that incurs the 5% penalty, thus cancelling it.

You need to create a spreadsheet to which which payments should be put against which liabilities.

They can refuse this if you have already asked for an allocation of a payment.

The basis is that payments should be allocated, firstly, according to a taxpayers request, and, secondly, to minimise the interest and penalties due.

IR staff often say they allocate against earliest liabilities first to reduce interest, and suggest that it can't be changed - it can.

If you get the allocation right, you can remove some penalties whilst not affecting the interest charge.

This assumes the client has paid some tax on account!

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By peter.blatch
03rd May 2005 14:45

All is not lost.
If the return is submittted within 12 months of the date the determination was issued it will be in time. This is the case even when the return is submitted more than 5 years and 10 months after the end of the tax year (not sure how 1998/99 is still in date as that return should have been in by 31/01/05).

If that doesn't work you can try the "Equitable Liability" approach which has been mentioned on this website before.

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