How best to declare a mistake on a tax return by previous agent

How best to declare a mistake on a tax return...

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Just acquired a new client who is the spouse of an existing client, who came to me last year.

It would seem that his previous accountant didn't declare a capital gain on the 2013 return that was included on his spouse's return (50:50 asset split). It seems that her previous accountant didn't relay the necessary information to his previous accountant. I'm the innocent party now trying to sort it all out.

I am wondering which is the best way to declare the Capital Gain to HMRC:

1. To simply file an amended tax return which will attract interest and late payment surcharges (each 5% would be significant!).
2. To write a grovelling letter to HMRC to come clean with an amended return and hope they'll amend the account and not charge the late payment surcharges.

Either way could open an Enquiry but we can cross that bridge if necessary - just wanting to reduce/eliminate any late payment surcharges.

Replies (3)

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By Tim Vane
03rd Mar 2015 17:33

Presumably the client did actually approve the return that was filed?

And presumably the client was actually aware that there had been a disposal and a consequential capital gain?

And presumably they therefore failed to point this out to the previous accountant?

I would suggest that the client should fess up quickly before HMRC do a cross-check and discover the omission themselves. Unprompted disclosure is the better alternative...

Thanks (1)
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By derdle
04th Mar 2015 12:15

Many thanks for the response.

There's no doubt about fessing up, it's just which would be the best way to go about it - an amended return or a letter.

The disposal was one of his wife's assets which her accountants suggested be split 50:50 with him. The odd thing is that her accountants advised his accountants of the share of rent but not the Capital Gain!

He's adamant that he was on the periphery of her tax planning and wasn't aware of the gain that should be declared on his return.

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By Rammstein1
04th Mar 2015 12:20

Tread carefully

I think you will have to be careful because you are out of time to amend a 2013 Tax Return submitted electronically but you don't want to send in a paper one and get a penalty.

I would suggest a letter advising them of which entries need including in which boxes.  I would also tell your client to pay the additional tax now and point out to HMRC that it has already been paid.

Thanks (1)