Is it possible to make an error or mistake releif claim for 2004/05, where:
- There is no change to the amount of tax due, and
- It creates a loss which could be carried forward against 2005/06?
The amendment is in respect of an error in the mileage claim (was claimed on actual cost, should have been on a pence per mile basis).
Would it cause a problem with HMRC? I know the enquiry window will probably extend by another 10 months.
Many thanks.
Rich Kid
Replies (8)
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don't need to.
You don't need to make an error or mistake claim.
The submission date for the 2004/05 return was 31 January 2006. The tax office have 12 months to open an enquiry, but equally the tax payer has 12 months to amend the return.
Just redo the appropriate page (presumably self-employment) and send it before 31 Jan 2007.
Any penalties?
If the amended 2005 SA Return is submitted before 31st January 2007, is a penalty payable?
No penalties
There is no automatic penalty.
However, if extra tax is payable as a result of the amendment, HMRC will charge interest and possibly a surcharge. It also extends the enquiry period i.e. the time in which HMRC can start an enquiry.
But...
a penalty can still be charged, even if the return is amended within the amendment window. TMA1970 s.95 applies to any return that is submitted incorrectly due to fraud or negligence - it does not require that the Revenue discover the error, through enquiry or otherwise. Where the taxpayer has made good the error as soon as it is discovered, this helps any defence against such charges.
Of course, the penalty is based on the additional tax due. The question in this case suggests that if anything the amount of tax due is reduced (by virtue of losses created) and so no problem with penalties here.
Hold it - right there!
It sounds as if your client is going to change from an actual cost basis to using the HMRC approved mileage rate, because they are not liable to be registed for VAT.
Assuming that is correct you need to be aware that using the AMR is a concession for taxpayers under Schedule D and you cannot just change unless you are also changing the car in question. So unless your client has sold a car and you are now going to apply the change from the date that the change is made you can't do it - this comment is from IR222 - "such a basis is applied consistently from year to year so that any change to or from an 'actual' basis (including one required by a change in turnover relative to the VAT registration threshold) takes place only when one vehicle is replaced by another."
Paul's right
I think Paul's absolutely right.
However, if this is the first year of trading, you could still have an argument to change the basis of the claim. However, if he now goes down the mileage rate route, he will have to stick with it in subsequent years, at least until he changes car, as Paul says.
Obviously, if he's been trading for some years now, he's stuck with the actual cost basis (again until he changes car).
Thank you for the comments
In respect of the last 2, I can confirm that the car was changed.