Questions from HMRC about my 2011 SA return

Questions from HMRC about my 2011 SA return

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HMRC have written to me this week, saying they think something is wrong with the dividends reported on my tax return for the year to 5th April 2011. I am puzzled on two counts: (a) I thought that after 12 months had passed I could assume that return was finalised and closed? and (b) why would HMRC be even looking at a 2011 return in October 2014 - do they routinely review years old returns, or would something/somebody have "rattled their cage"? Fully intend to co-operate, and see if some kind of mistake was made at the time, but I would like advice please on what's likely to have prompted this letter.

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By dropoutguy
16th Oct 2014 22:51

Probably

a check under Sched 36 FA 2008.

If there was an error and disclosure was such that HMRC could not have picked it up at the time, then they will be able to make a discovery assessment.

 

 

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By puzzledcitizen
17th Oct 2014 10:54

Answers for Basil, I hope

Hi Basil,

Thanks for your help.

1. Letter starts "I believe that your return for the above year is inaccurate." No indication of legislation, although there is a factsheet provided titled "Compliance checks series - CC/FS1a" I have been given a phone number and am being asked to call the writer

2. Yes, I am a HRT.

3. I am the major shareholder of a private limited company. HMRC's query seems to relate to dividends on my 2011 return v dividends shown in company accounts for the year to 31/03/11. This makes sense, and I understand this but this return and those accounts we filed years ago. Why ask questions now?

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Replying to Wilson Philips:
paddle steamer
By DJKL
17th Oct 2014 11:23

Different parts of HMRC

puzzledcitizen wrote:

Hi Basil,

Thanks for your help.

1. Letter starts "I believe that your return for the above year is inaccurate." No indication of legislation, although there is a factsheet provided titled "Compliance checks series - CC/FS1a" I have been given a phone number and am being asked to call the writer

2. Yes, I am a HRT.

3. I am the major shareholder of a private limited company. HMRC's query seems to relate to dividends on my 2011 return v dividends shown in company accounts for the year to 31/03/11. This makes sense, and I understand this but this return and those accounts we filed years ago. Why ask questions now?

I wonder if that part of HMRC that deals with the company has flagged a discrepancy.

I had a similar enquiry , this arose as the accounts had accrued preference share dividends (required under FRS25) so the dividends had not been paid nor credited to loan accounts but were reflected in the accounts as accruals (in this case as part of the interest payable) I am not suggesting this is the case/ reason re your current enquiry, more as to background as to how/ why the issue arose.

We received HMRC letter re years to 5/4/08, 5/4/09 and 5/4/10 on 19 March 2013 for one director and a HMRC letter  re 5/4/10 re the other director on 25/3/13. Both directors received similar worded letters but from different HMRC operatives and different scope of years.

The fact that within a week of one another each director received a distinct enquiry ,and  the fact that both HMRC officers took very different approaches trying to argue the accrued dividends were taxable on the individuals ( they were not and they eventually accepted my case) ,strongly suggested to me that they were not acting in concert and that the original enquiry had arisen from some form of review of the company accounts, well past their date of lodgement, that had triggered  some form of internal HMRC notices/alert to the  departments dealing with the tax affairs of the individual directors . I would accordingly hazard a guess that this is some form of HMRC initiative re compliance, targeted at potential omissions, and being run re years that are now quite old.

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By Roland195
17th Oct 2014 11:01

Interesting

Not usually one to start on the conspiracy theories however this does seem to indicate that information has been drawn to their attention by someone and is unlikely to be a random enquiry.

 

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By johngroganjga
17th Oct 2014 12:00

Why not just reconcile the two figures, and if the reconciliation does not indicate an under-declaration on your return just provide the explanation to HMRC.  If it does take further advice.

What I mean is, if there is a simple explanation it's much quicker just to provide it than to waste time investigating whether HMRC are entitled to ask.

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By puzzledcitizen
17th Oct 2014 16:17

Peace of mind and finality

Thanks everyone for your contributions here, much appreciated.

Having now checked the figures, I am happy that a timing issue exists that can be easily explained to HMRC.

However, for the future, am I now best working on the assumption that one can never regard a tax return as "finalised" and that, even years later, it can be resurrected simply because an HMRC officer has decided, in an idle moment, to have a speculative dig around in long ago filed returns?

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Replying to justsotax:
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By Roland195
17th Oct 2014 16:41

Not known to me

puzzledcitizen wrote:

However, for the future, am I now best working on the assumption that one can never regard a tax return as "finalised" and that, even years later, it can be resurrected simply because an HMRC officer has decided, in an idle moment, to have a speculative dig around in long ago filed returns?

 I am unaware of HMRC regularly and randomly undertaking any sort of concentrated exercise to reconcile the accounts of private limited companies with individual self assessment records. HMRCdo not have the available information to do this for one thing from only publically filed information and that on the tax returns.

I would therefore conclude that in this instance, HMRC had some particular reason to enquire. You seemed to indicate that someone may be attempting to stir up trouble in your initial question.

 

 

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Replying to Wanderer:
paddle steamer
By DJKL
17th Oct 2014 17:20

Our pull last year

Roland195 wrote:

puzzledcitizen wrote:

However, for the future, am I now best working on the assumption that one can never regard a tax return as "finalised" and that, even years later, it can be resurrected simply because an HMRC officer has decided, in an idle moment, to have a speculative dig around in long ago filed returns?

 I am unaware of HMRC regularly and randomly undertaking any sort of concentrated exercise to reconcile the accounts of private limited companies with individual self assessment records. HMRCdo not have the available information to do this for one thing from only publically filed information and that on the tax returns.

I would therefore conclude that in this instance, HMRC had some particular reason to enquire. You seemed to indicate that someone may be attempting to stir up trouble in your initial question.

 

 

 

I am not so sure no random cross checking of companies to Individuals.

Our enquiry re this in 2013 certainly was on the back of looking at the company accounts, the covering letter stated,

"I cannot reconcile the amounts of dividends shown on the returns with those included in the company accounts"

Attached to the letter was a separate sheet listing the company dividends for its accounts and the corresponding dividend totals on the director's ITR.

Whilst the enquiry was run from Local compliance individuals & Public Bodies (Bootle) there was a fair chunk of it that involved the nuances of FRS25 and even analysis of the company's Articles from Companies House; it certainly had the air of someone who knew their way round company accounts despite being a personal tax enquiry. 

I am not suggesting it is endemic, more that I feel there must be a random cross check; maybe  with online filing of booth ITRs and CT 600s/ IXBRL accounts, HMRC records are in some places more joined together and their system throws out lists of anomalies which are checked at random.

 

 

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