Penalty on a tax return

Penalty on a tax return

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A penalty was issued today for a tax return which was submitted on 23rd January 2015. The client is a full-time employee who had never submitted a tax return  and did not have a unique tax reference. He came to me in the first week of January 2015 with the rental income details. I prepared the accounts and computed the tax liabilities and advised the client to settle the tax liabilities before 31st January 2015. The client brought the cheque to me which was sent to HMRC together with the self-assessment return and a covering letter explaining the change of circumstances.The cheque sent to HMRC was cashed on 28th January 2015. Does the client have to pay the penalty?

Regards,

Azeem

Replies (20)

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By K81
02nd Apr 2015 16:16

what year is the penalty for?

need some further information.

 

presumably not for 2013/14 as filed before 31 January 2015.

If for an earlier year then a tax return must have been issued for a late penalty to be issued.

 

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By duncanedwards
02nd Apr 2015 16:16

What tax year was the return for and what does the penalty notice say it is for?

Do you have a submission receipt?

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Replying to paul.benny:
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By Azeem Dosani
02nd Apr 2015 16:22

This is for 2013/14 tax return. A letter was received which states that 'the deadline for telling us that you need to fill in a self-assessment tax return was 5th October after the end of the year when your circumstances changed.'Because you told us after the deadline that you needed a tax return, you should have paid any tax you owe by 31st January following the end of the tax year. As you have missed this deadline, interest charges and late payment penalties are already building up.The rest appears to be a standard letter

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Replying to paul.benny:
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By Azeem Dosani
02nd Apr 2015 16:25

The tax return was submitted together with a cheque. The fact that the cheque was cashed on 28th January 2015 by HMRC suggests that it was received by HMRC before 31st Janaury 2015. I used the client's NIC No as a tax reference as he did not have a UTR no.

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By Anne Robinson
02nd Apr 2015 16:20

I don't think OP filed on line (couldn't have as didn't have UTR) but rather posted it which is outside deadline of 31 October for paper return but does the 3 months from issue date kick in here as it appears no return was issued.

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Head of woman
By Rebecca Cave
02nd Apr 2015 16:23

Was it a paper return?

"The client brought the cheque to me which was sent to HMRC together with the self-assessment return and a covering letter explaining the change of circumstances."

So you submitted a paper return after 31 October 2014 - that makes it automatically late, according to the HMRC computer - hence the penalty for late submission.

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By Snoppy76
02nd Apr 2015 16:26

How did you send a tax return if he didn't have a UTR number. This is on the tax return. If you sent a paper tax return to HMRC in January then it will be late as the deadline for paper returns was 31st October. Did you file it online?

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RedFive
By RedFive
02nd Apr 2015 16:40

Unless he posted the cheque and covering letter into his disc drive then it's pretty clear the whole lot went in the post.

Therefore, as already answered the penalty is for late submission, deadline for paper being 31st October 2014. Doesn't matter that the tax was paid before 31st Jan, that is different deadline.

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By Paul D Utherone
02nd Apr 2015 16:48

Are we not all missing a salient point?

It was a late notification and no return had been required by HMRC in the normal run of things.

The return was submitted with a cheque on paper. That is fine as it would have been due on paper or electronically within three months of being required by HMRC.

Sounds like the cheque may not have been credited to the correct account yet, but was sent with the return PRIOR to 31 Jan 2015, so once the payment is linked to the account any penalty andinterest should probably be cancelld

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By Snoppy76
02nd Apr 2015 16:48

It is a 5 minute job to copy a paper return into an online format. If you're not authorised to file online then issue an online 64-8 before the deadline and file the return upon receipt. HMRC will waiver the penalty under these circumstances. If you wish to file it beforehand then use some online software such as Andica or Iris Open Tax. It will cost under £10 to file the return on time but saves a £100 penalty. As I mentioned it's only a 5 minute job, it makes sense rather than sending a paper return after the deadline. You probably won't be successful in your appeal now.

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Replying to djtax:
Stepurhan
By stepurhan
02nd Apr 2015 17:13

No UTR

Snoppy76 wrote:
It is a 5 minute job to copy a paper return into an online format. If you're not authorised to file online then issue an online 64-8 before the deadline and file the return upon receipt. HMRC will waiver the penalty under these circumstances. If you wish to file it beforehand then use some online software such as Andica or Iris Open Tax. It will cost under £10 to file the return on time but saves a £100 penalty. As I mentioned it's only a 5 minute job, it makes sense rather than sending a paper return after the deadline. You probably won't be successful in your appeal now.
I would agree with you except for one fact. No UTR so could not be filed online at all.

That is the basis for an appeal. Whether the penalty will be replaced with a late notification penalty instead is another matter.

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By nogammonsinanundoubledgame
02nd Apr 2015 17:08

I thought ....

... that filing deadline was the later of
(A) 31 October (paper), 31 January (online) or
(B) 3 months from issue of a section 8 notice to file (either method).

Here we have the submission of an unsolicited return.  If HMRC choose to accept it as such, their instructions are to treat the return as being in response to a s.8 notice for which date of receipt is the due filing date (SAM121140).  So it has not been filed late.

HMRC may then consider whether a separate penalty is chargeable for a failure to comply with s7 TMA 1970 obligation to notify chargeability to tax by 05 October.  But any such penalty will be tax based, by reference to the amount outstanding on 31 January, which in this case is £nil.

So ... no penalty, in my view.

With kind regards

Clint Westwood.

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Replying to memyself-eye:
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By cbp99
02nd Apr 2015 17:08

Cheque been allocated to client's account?

I agree with Clint.

I wonder whether the cheque, though cashed, has been allocated to the taxpayer's account?

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By Paul D Utherone
02nd Apr 2015 18:51

Pre

cisely :-) 

 

 

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By Tim Vane
02nd Apr 2015 19:30

The OP is asking if the client has to pay the penalty. My own view is that in this case the agent has made an error and has advised the client incorrectly. The agent should cover the cost of any penalties due.

The client is not in self assessment and has gone to the agent with an undeclared liability, which could most efficiently have been dealt with through the let property campaign, for minimum costs and penalty risk, and they would then have 3 months to calculate and pay the owed tax.

Instead, the agent has gone off half-cocked, submitted a return that has not been requested triggering unnecessary penalties and an earlier than necessary liability, and has no doubt charged the client for making a mess of the situation.

Ethically the OP has an obligation to sort the mess out, ask the client to pay what would have been the penalty under the let property campaign, then deduct any additional fines and penalties out of their own fee.

Or am I being unrealistic?

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James Reeves
By James Reeves
02nd Apr 2015 21:21

@Tim

Looking at the OP's previous posts he does seem to have a history of making poor decisions and causing unnecessary penalties for his clients.

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By Paul D Utherone
02nd Apr 2015 23:36

Why has submitting an unrequested return

triggered an unnecessary penalty?

On the face of it:

No 13-14 return had been required by HMRC, but one needed to be made to return a liability.The client did not have a UTR - because the need for a return had not been notified to HMRC earlier so they were not set up for SA and did not have one.The client came to the OP who prepared a return, told the client the tax due, got a cheque and in the absence of a UTR submitted a paper return with a cheque for the liability before 31 Jan 2015, when the tax was dueHMRC received an unsolicited return for a 'customer' they previously had no SA record for and had not requested a 13-14 return from, with a cheque for the tax due.What should then have happened isHMRC created a record, andrequired a 13-14 tax return from the client.That return would be due either on paper or electronically 3 months from the date that it was required as above, butHMRC already had a paper return so, presuming it was correctly made and accepted, filing was complete on time and there is no filing penalty.for interest purposes the tax was also payable within three months of the return being requiredthe tax was paid by cheque at the same time as the return so there should be no interest payablethere is potentially a late notification penalty, but that is based on tax outstanding at 31 Jan 2015, andthe tax was paid by cheque at the same time as the return (23/1/15) so there should be no late notification penalty either.

What may have happened is that the cheque has not been correctly allocated to the client account yet so that there appears to be tax outstanding at 31 Jan 2015 and the late notification penalty has been charged.

We are told it has been cashed, but is it showing in the client SA account with HMRC, or is it languishing in an HMRC Suspense account at Shipley awaiting allocation?

If not apparent on the SA Account then a call HMRC with details of the paying bank sort code, account, cheque number and date it was cashed would be advisable, so that they can trace and allocate the payment correctly against the liability.

Once that is done then any late filing penalty should be cancelled. It would probably also be advisable to appeal the penalty on this basis in the meantime, assuming all the above assumptions from information provided are correct.

If so, then the course would seem sensible to bring matters up to date and ultimately prevent filing or notification penalties.

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By Tim Vane
03rd Apr 2015 00:11

You may be right it may all be sorted out in the wash, and the penalties should eventually go away, but my point is that the whole exercise is stressful and unnecessary. I agree that paying the tax was the right thing to do, but filing the return was simply not required and was always going to trigger penalties with the way that HMRC's system works (or doesn't work). Yes it can probably all be fixed after spending additional time (and possibly cost) and always presuming that a 64-8 is finally in place (we have to assume there wasn't one in Jan), but it could have all been done so much more easily and cheaply.

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By nogammonsinanundoubledgame
03rd Apr 2015 00:17

Agree with PDU

The OP has "triggered" an "unnecessary" penalty - "unnecessary" only in the sense that HMRC has failed to comply with their own internal guidelines - guidelines with which the agent is entirely entitled to expect HMRC to comply, and compliance with which would not have resulted in any penalty.

Assuming that (as you have a right to expect) HMRC comply with their own guidelines, which is the shortest and most efficient route to the correct final outcome?  Following some convoluted Let Property Campaign guidance, or just filing the return, and paying the tax on time?  I submit the latter.  And that only is inappropriate in this case because of HMRC incompetence.  If you take the view that HMRC incompetence is an odds on prediction, which is a depressing prognosis but possibly justified, then Tim Vane's solution is correct.

With kind regards

Clint Westwood

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By nogammonsinanundoubledgame
09th Apr 2015 07:17

My last post ...

... crossed in the ether with that of Tim Vane.  All piling back from the pub, perhaps.

TV regards the issue of a penalty in the OP circumstances as being predictable despite being outwith the legislation.  I have not been placed in that particular position so cannot comment on that.  I bow to his greater experience of this particular situation.

With kind regards

Clint Westwood

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