Provisional Tax Returns
I have a few clients with outstanding 2010/2011 Tax Returns, for whom the accounts for the relevant basis period have still not been prepared.
In most cases the reason for the delay in preparing the accounts is long-overdue accountancy fees.
Not all of the clients in question are "D class" clients - some have simply fallen into financial difficulties as a result of prevailing economic conditions and are extremely embarrassed at the fact that they have been unable to settle my fees.
It is my understanding that, if a client in this situation fails to submit a Tax Return online before 1 May 2012, penalties of £10 per day will start to accrue.
I do not wish to prepare the outstanding accounts until my fees for previous work have been settled, in part at least. However, I do not mind trying to help some of these clients to prepare and submit provisional Tax Returns, although I would not like to invest too much time in such (unpaid) work.
Is it acceptable to put on the Tax Return completely estimated round-sum figures for income and expenditure, together with an explanation that the figures are provisional in the absence of the necessary accounts, which have not yet been prepared owing to financial difficulties? I am aware that the provisional Tax Return would have to be amended in due course and that failure to file an amended Tax Return should, in theory at least, lead HMRC to initiate an enquiry. Whilst the suggested action may lead to an increased risk of an HMRC enquiry, would it prevent the imposition of daily penalties? If so, what do Aweb members think of this strategy? Is it asking for trouble?
I look forward to any guidance and comments.
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