On Account or a determination

On Account or a determination

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Hello 

I have a client who had a gap between 2 rounds of self employment.

The gap was 4 years. One year no work and 3 years under PAYE and provable as such.

The first problem is that the Revenue for whatever reason did not understand that the earlier self employment had ceased.

There are payment on account balances due for the interim years. These are not based on any trading but rather they have taken the tax due from the last year of the old self employment and applied this going forward.

My questions are as follows:-

These debts are not described as determinations. Just payments on account. Does this matter?

The 2 key years here are 06/07 and 07/08 so we are time barred. But if it isnt a determination can it still be time barred?

We can prove fairly well that there was no income for these years.....but is this of any relevance?

Short of proving an administrative error...such as the last return filed 05/06...having a white paper disclosure that trading had ceased is there any way forward?

Out of interest what are the deadlines for time barred self assessment?

For 06/07 and 07/08 when was the last point that an advisor could have appealed the amounts owing?

This is a small trader, not a lot of tax and not in a sector where the revenue would see a likely hood of avoidance. 

There were also very good and provable reasons why the client could not attend to the issues in the gap years.  There is also the belief that the accountant who filed the last return has advised the revenue that the trade had ceased.

Thank you

Colin

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By Paul Soper
06th Aug 2014 10:57

Payments on account

First note that the cessation of self employment would not mean the cessation of payments on account as the payment on account is in respect of the total liability of the taxpayer which may include income from many sources.

If a payment on account is made in respect of a year with no liability it should give rise to a right to repayment and that will not be time barred.  If the liability for the year was lower than the amount of the payment on account as determined by reference to the previous year then an application should have been made to reduce the amount of the payment on account and the previous accountant should have (if he was still acting for the client) done this.

I think you need to pursue this with care as HMRC probably issued returns for the years in question - did the former accountant submit them?  If so what was on them?  If the returns were issued but not filed there could be further penalties due for late submission although for those years the penalties would be limited to the tax payable. 

When trade ceases there is, of course, a box for indicating the date of cessation of trade and if this was not completed by the former accountant this will be why HMRC assumed that the trade continued.

Once you have ascertained from the former accountant just what he did do invite HMRC to adjust the record to delete the carry forward of payments on account not actually due but be prepared to pay interest on the amounts that should have been paid but were not subject to an application to reduce the amount payable.

Of course if there were determinations the scenario is rather different - but this should become clearer, one hopes from the former accountant...

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