Partnership Return -Late Filing Penalties

Partnership Return -Late Filing Penalties

Didn't find your answer?

My client was a member of an LLP but he fell out spectacularly with the nominated partner & resigned from the LLP on 23 October 2012.
The LLP had a 30 April year end.

The partnership Return for 2013/14, incorporating the 30 April 2013 accounts was submitted late & my client has been fined £990. My client was not entitled to a share of the LLP profits arising in the accounting period ended 30 April 2013 & was in no position to influence the LLP into submitting a 2013/14 Tax Return as he had effectively resigned in the prior tax year.

I am aware that only the nominated partner can appeal against the late filing penalty - but my client thinks this is grossly unfair & he is being punished for something that he had no control over.

The penalty has been imposed under Para 25 Sch 55 FA 2009. Para 16 is of some interest to me;

Special reduction

16(1)If HMRC think it right because of special circumstances, they may reduce a penalty under any paragraph of this Schedule..
(2)In sub-paragraph (1) “special circumstances” does not include—.
(a)ability to pay, or.
(b)the fact that a potential loss of revenue from one taxpayer is balanced by a potential over-payment by another..
(3)In sub-paragraph (1) the reference to reducing a penalty includes a reference to—.
(a)staying a penalty, and.
(b)agreeing a compromise in relation to proceedings for a penalty.

Could my client appeal against the penalty by quoting para 16 & trying to reach a compromise with HMRC?

Replies (10)

Please login or register to join the discussion.

avatar
By Jane Wanless
05th Feb 2015 12:41

Does the question relate to a 2013 return?  Penalties of £990 would not yet arise on a 2014 return - surely there'd only be the initial £100 fee for missing the 31/1/15 deadline?

Thanks (0)
By Paul D Utherone
05th Feb 2015 13:48

Unless they had submitted 13-14 on paper

after 31/10/14.

Whilst not taxable on profits from the partner notional trade in 13-14 - as he left in 12-13 tax year Oct 12 - He was I think a @relevant partner' for the partnership 13-14 return as he was a member of the LLP in the LLP's accounting period relevant to the 13-14 partnership return.

Thanks (0)
By johngroganjga
05th Feb 2015 13:39

What you are saying is that your client ceased to be a partner to all intents and purposes on or before 30 April 2012.  That must be the case because you say his share of profits after 30 April 2012 was £Nil.  Presumably his name does not appear on the profit allocation statement in the partnership return for 2013/2014.  Or does it in fact appear with a series of blank boxes?

If the above is right I would appeal on the grounds that the client was not a partner in the relevant year so no penalties can apply to him.  The "resignation" on 23 October 2012 would just be a formalisation of the terms of what had already occurred in the previous April.  

Thanks (0)
Replying to DJKL:
By Paul D Utherone
05th Feb 2015 13:52

But

johngroganjga wrote:

What you are saying is that your client ceased to be a partner to all intents and purposes on or before 30 April 2012.  That must be the case because you say his share of profits after 30 April 2012 was £Nil.  Presumably his name does not appear on the profit allocation statement in the partnership return for 2013/2014.  Or does it in fact appear with a series of blank boxes?

If the above is right I would appeal on the grounds that the client was not a partner in the relevant year so no penalties can apply to him.  The "resignation" on 23 October 2012 would just be a formalisation of the terms of what had already occurred in the previous April.  

The client should appear on the partnership pages for the 13-14 return as the partnership AP ends on 30 April 2013 and he was a member in the AP relevant to the partnership return.

The notional partner trade ended in 12-13 but he was a relvant partner in the 13-14 partnership return, so the partnership statement boxes should not be blank for him in the 13-14 partnership return ... unless I suppose the partnership ceased when he left as it was a twm man LLP that split in Oct 12

Thanks (0)
By johngroganjga
05th Feb 2015 14:15

All I am saying is that a "partner" not sharing profits is, arguably at least, not a partner at all.  So an appeal on those grounds would be worth a try. That's what I would do.

Thanks (0)
avatar
By Wall1690
05th Feb 2015 14:18

Sorry - my mistake. he penalties relate to late filing of the 2012/13 partnership Return.

He was a member of the LLP in that tax year (having resigned in October 2012) but he had no income from the LLP in 2012/13 and no influence over the submission of the Tax Return.

It seems that he will be hit with the penalties - but is there no way around this as it does seem quite harsh?

Thanks (0)
Replying to SXGuy:
By johngroganjga
05th Feb 2015 14:23

Retirement deed

Wall1690 wrote:
Sorry - my mistake. he penalties relate to late filing of the 2012/13 partnership Return. He was a member of the LLP in that tax year (having resigned in October 2012) but he had no income from the LLP in 2012/13 and no influence over the submission of the Tax Return. It seems that he will be hit with the penalties - but is there no way around this as it does seem quite harsh?

What did his retirement deed say?  Were there no indemnities protecting him here?

Thanks (0)
By Paul D Utherone
05th Feb 2015 14:19

Was he not entitled to a share

in the period to Oct 2012?

If not was he even a partner in the 30/4/13 AP? Something does not quite stack up to me

Thanks (0)
RLI
By lionofludesch
05th Feb 2015 15:48

Every Sympathy

I have every sympathy with the OP here.  The rules for partnership returns seem totally inequitable and illogical to me and this case only serves to reinforce that.

Only one return but fines for everyone.  Only the precedent partner can appeal against the penalties charged on all the other partners.  No real guidance on who is the recedent partner other than it's the partner who signs.  It's a shambles.

As the ex-partner received no income in 2012/13, there is a case to say that no penalty should be due but the fact remains that he seems to have been a partner until at least 30 April 2012, if not 23 October 2012.  Either way, a date in 2012/13.

Thanks (0)
avatar
By Wall1690
05th Feb 2015 15:54

Yes - a partner until October 2012 & so a partner within the 2012/13 tax year - all be it a partner who received no income.

My original comment about HMRC reaching a compromise under Para 16 of Sch 55 FA 2009 is what intrigues me. Is this a possibility?

Thanks (0)