Interest, surcharges and interest on late payment of tax

Interest, surcharges and interest on late...

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Hi all

I wonder if someone could help.

I have a client who I have only acted for since 20010/11.  He has just advised that he sold a property in August 2007 (2007/08 tax year) which he never declared when he was preparing his own tax returns.  This was never rented out - more of a holiday home down south for him and his family.

I have worked out the chargeable gain after annual exemption to be circa £3,500.  

The client wants to know what penalties/interest he is facing

My question

1) As this was prior to the new penalty regime coming in, what penalties and surcharges is the client looking at? or would i have to work this out using the new penalty regime for unprompted disclosure etc?  He is keen to pay what ever he owes ASAP and I am about to write to HMRC detailing the omission.

Bob.

Replies (3)

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By duncanedwards
30th Mar 2015 15:34

I think the old rules are available on HMRC's website (SA Manual).

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By thehaggis
30th Mar 2015 15:45

Assessment and penalties

Before a penalty can be charged, there must be unpaid tax that HMRC can recover.

The assessing time limits follow the new rules.  It was probably at least careless to omit the disposal from the return, but that only carries a 6 year limit which ended on 5 April 2014.  To assess the unpaid tax, HMRC would need to establish that the omission was deliberate, which carries a 20 year time limit.

If it was deliberate, s95 would impose a maximum penalty of 100%, reduced according to disclosure, co-operation and seriousness.  Assuming this is a completely voluntary disclosure an additional 10% reduction may be due, meaning that any penalty would be minimal.

I doubt your client will be liable to pay anything., If he is keen to pay something he could make a payment to HMRC for voluntary restitution, but that would be entirely up to him.

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By duncanedwards
30th Mar 2015 17:41

How can it not be deliberate? The OP says the client prepared a tax return and, it appears, failed to report the disposal of a chargeable asset which gave rise to a taxable gain.

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