hi Guys
I am helping out a good friend with his expenses, etc for a CIS SAR return. I am new to this but think I can do it with a good deal of research which i have started to do in the last few weeks.
He has not submitted a Self assessment since he started as Self employed subcontractor fitting kitchens in 2009. Thankfully, he has been fully registered for CIS and his contractor deducts the 20% on all invoices submitted since then he just has never deducted any expenses so we think he is due a little bit back somewhere along the line
However, I have a quick question, the HMRC lines are busy and i cant get through.
As he is filing VERY late BUT has paid his tax already would he be fined for the late submission, if you see what I mean? If he is to be fined then looking at the penalties then it seems to not be worth doing it, I could be monumentally wrong here off course but can seem to find the answer to this one anywhere
Many thanks in advance
Steve
Replies (28)
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Fixed penalties from 2011
I think it was for the year ended 5 April 2011 when late filing penalties became fixed, before this it was limited to the lower of £100 or the tax owed.
This means that your 5 April 2011 and 5 April 2012 will be into considerable daily penalties.
Tax paid doesn't affect the penalties any longer
This used to be the beauty of the old legislation when penalties were reduced to nil because the tax had been paid but I'm afraid it doesn't work that way now.
He's probably looking at fines of £1,000 plus for each of 2011 and 2012
Ambiguous
I am not sure I agree with the above in these circumstances.
This is a failure to notify. No returns or UTR have yet been issued I assume.
Therefore, once issued the filing deadline kicks in so I think you have 3 months to file.
Penalties for failing to notify are all tax geared so if there really is no liability outstanding on the calculations then there can be no penalty?
Rebecca Benneyworth is the one to ask - I seem to remember she did a comprehensive summary on here when the new penalty systems were kicking in. Someone may have flagged it and have the link please?
If he's registered for CIS under 20% deduction
Then hasn't he also registered for self assessment?
He is registered
If he has a UTR, and is getting 20% deductions (not 30%), then he is registered for self-employment.
You need to find out whether he has received a notice to file for any year. If so, then the penalties for 11 & 12 will stand at around £1300 each year.
No, Steve
It is his responsibility to inform HMRC of his new address, not HMRC's responsibility to track him down.
He may not have penalties for the years before 2011 though, so it could have been worse, and if he fesses up before they do track him down, then it will go in his favour.
Do 2013 first
2013 means 2012/13, and so on.
You won't get all the tax refunded. He is out of time on the earlier ones, so I would submit the last three years and then wait to see if they ask for earlier ones.
I wouldn't wait....
2013 means 2012/13, and so on.
You won't get all the tax refunded. He is out of time on the earlier ones, so I would submit the last three years and then wait to see if they ask for earlier ones.
I would still submit the earlier returns before HMRC issue determinations of tax due. Once they are issued for periods where the last filing date has passed those determinations will sand, even if the return shows a nil liability or a refund due.
Not convinced
he is registered for self assessment. Is he paying class 2?
If done through contractor that long ago will not necessarily have been verified etc.
Do you know his UTR? If so a quick call to check where to send 64-8 will not trigger any interest but will let you know if there are any returns issued.
Plus, if he can show he had notified change of address in some way returns were not issued validly and he could have them cancelled. Just don't tell them current address before making them write to you confirming addresses used. Once it is updated the history is lost.
I agree with Shirley that you start with 2012/13, then do 2009/10 (goes out of date on 5/4/2014), then 2011/12. I doubt there will be much in the way of capital allowances to worry about.
Failure to notify
If you are sure he did not register for self assessment then the penalties are calculated on tax due. If a return was not issued then he can't be late filing.
Submit his details online for authorisation - I assume you have commercial software? That will let you file the returns online as long as you know the UTR.
I would just do the returns in the order Shirley suggested, submit them online, and wait for the response. Explain to him that you are not sure what their response will be.
Online login
Steve, you will need to request an online login to enable you or your friend to submit the returns online. Request this as soon as possible as it takes at least 7 days to arrive. Go into the self-assessment section on HMRC site and you will need to enter your friend's UTR. HMRC will need an up to date address to send the code so you may need to change the address first. Obviously make sure that you have permission from your friend to login as him and submit the returns. How are you going to assess whether the expenses are deductible or not? Are you sure you can do this yourself or would your friend be better off getting an accountant to help out to ensure that the expenses are correctly claimed and to minimise penalties. Also make sure you gross up the CIS income on the return.
SA
You state he is not registered for SA, but he must be as he has a UTR and only 20% CIS deductions. You also seem to think that CIS deductions cater for his liabilities and nothing more need be done. You mention that it may not be worth doing the tax returns and there you miss the point. CIS is just a way to collect some tax on account. The rules for tax returns apply to all self-employed, CIS or not.
SA
Having a UTR does not mean he is registered - just that at some point he has been issued a UTR. It certainly doesn't mean a return was issued. Sadly, a deduction of 20% does not necessarily mean the contractor has verified him and is doing it right.
You are right that the tax deducted does not always cover liability. It depends how much you are earning.
SA
OK Marion, I was assuming he has been verified by the contractor, which also means he is registered.
Take Shirley's advice
It will take more than a couple of days for the reference to arrive Steve.
In the meantime take Shirley's advice. Do the three returns and submit them soonest.
If he was issued returns on 6th April each year then going past another 31 January increases the penalties, but a wrong name and old address increases the possibility that the notices were invalid.
HMRC will not be thinking of all the consequences when you talk to them and they are under no obligation to tell you things in your friends favour.
Good luck!
Like Marion, I know the helplines often give incorrect advice, but hopefully you got the name of the HMRC employee, and recorded the date/time of the call.
Please return to let us know what the final penalty situation turns out to be, as I suspect it will not be as advised.