Incorrect corporation tax

Incorrect corporation tax

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I have a new client, and I am in the process of calculating the corporation tax due. After reviewing the prior year's calculation I uncovered major errors in the previous accountant's work. They agreed to amend the prior year's return.

I then asked for information relating to prior year's and the same errors have been made in those years. Basically they have made no adjustment for fixed asset additions, depreciation and capital allowances. Therefore the prior year errors will have an impact on later years.

What is the best way to correct this? As a revised return has been made for 2003 anyway, putting in revised returns for 2002 and 2003 again may trigger an investigation?

Any suggestions greatly received
Sarah Kedgely

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By User deleted
22nd Sep 2004 12:52

Thanks for your comment.

The company in question has been trading at a loss, and this loss is understated due to no additions being noted in the capital allowances. The last accountant suggested putting the additions through on this year's CT form, to avoid any investigation by the Revenue.

I am tempted to send in the correct returns for the last two letters with a covering letter explaining the errors uncovered by a new accountant.

What do you think?

Thanks

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By AnonymousUser
22nd Sep 2004 10:36

Explain to the inspector
I think you have to do the numbers first. If depreciation has not been added back and CAs have not been claimed either then I would have thought you would be looking at an error or mistake claim under s33 TMA 1970, since CAs will normally exceed depreciation and therefore there could be tax repayable. If tax is due then the Revenue would have to raise 'discovery' assessments. Either way this involves explaining to the inspector what has happened and obviously there is a risk that they will want to look into other things. Normally the Revenue are fairly amenable to the new accountant in such circumstances and I would think you should be able to 'sell' this to the client as regards fees for the necessary work (particularly if a refund is due). I would then submit revised figures to the inspector for all year and say that error or mistake relief is claimed or invite them to make a discovery. I'd probably give him a ring and even request a meeting if we were talking about substantial amounts as that will often pave the way.

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