Remission by HMRC

Remission by HMRC

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We have just taken on a client who is one of the executors of his late father's estate. His father died in August 2014 having been very ill with COPD and registered disabled for a number of years before his death. He ceased working as a building subcontractor in March 2008. He was not terribly good with his tax affairs and was frequently late in submitting returns and paying tax due. He was a relatively low earner and his maximum income was apparently in the region of £20,000 per annum.

A tax return was submitted for 2006/7 in November 2007 (by an accountant) which resulted in a tax and nic liability of circa £4,000 which was never paid. No further returns were submitted. HMRC are now pursuing the estate for a total liability of £11,132 which includes the 2006/7 liability plus an estimated figure for 2007/8 of £4,436 which is shown on a 2006/7 Tax Calculation. In addition there is interest, penalties and surcharges.  

HMRC are adamant understandably that the 2006/7 liability must stand as it was based on a tax return submitted. For 2007/8 they state they are aware that the late taxpayer was self employed and paid tax under the CIS scheme as they hold CIS vouchers. They also state that the taxpayer was given many opportunities to submit his return and promised to do at a number of visits made to him by HMRC after 2008 but he failed to do so. Unfortunately the executors have been unable to ascertain from any paperwork what income and tax there was for 2007/8 and presumably it is now too late to submit a return for that year in any case.

Any thoughts would be greatly appreciated. It seems a little harsh of HMRC to be pursuing an liability for 2007/8 when they know the level of income and that there were CIS tax deductions made.

Replies (12)

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By pawncob
25th Aug 2015 17:56

Back Duty is always difficlut.

Have they given credit for CIS deductions?  If not could these cover the tax due?

 

HMRC are not always as clever as you think they should be.

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Replying to Michael Davies:
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By adambl
25th Aug 2015 18:15

Thanks for your comment. HMRC are saying nothing apart from the return for 2007/8 was never submitted and they know from the CIS that he was still working so the estimated should stand. As there are no records held by the executors I have no way of arguing the estimate one way or the other.

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Replying to Michael Davies:
RLI
By lionofludesch
26th Aug 2015 17:35

Cleverer

pawncob wrote:

HMRC are not always as clever as you think they should be.

Twenty years ago, I thought HMRC are cleverer than me.

Now, they're definitely not.  Which, somehow, seems disappointing.

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By Marion Hayes
25th Aug 2015 21:18

Ask for a breakdown -

It was common practice to supply a list of CIS income and tax deducted when requested then.

When you have that information you can estimate expenses based on a pro rata of the expenses he claimed the year before

Then you can do a tax calculation and write back with the results.

Also ask for confirmation that the full CIS deductions were credited against the earlier year liability.

 

 

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By refs8
26th Aug 2015 11:53

Stand your ground

I would always stand your ground and challenge everything with HMRC and follow there complaints procedure if necessary. Read there charter and quote it if need be !

Good luck

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By JCresswellTax
26th Aug 2015 14:14

The thing is

You can challenge them all you want but you are out of time to displace the determination that has been issued for 2007/08.

Your only hope is a claim for special relief and unless there were any good reasons for him not submitting the 2007/08 tax return, I would say you are likely to fail with that claim.

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By SteveHa
26th Aug 2015 14:33

It depends on when the 2007/08 determination was made. We may still be in the appeal window.

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Replying to atleastisoundknowledgable...:
By JCresswellTax
26th Aug 2015 14:43

Fair point but HMRC's manual says the following on determinations:

HMRC wrote:

No determination can be made after the period of three years beginning with the filing date. The 'filing date' means the 31 January filing date for electronic returns or, if the notice requiring the return is issued after 31 October, three months from the date of issue.

So the last date they could have raised a determination would have been 31st January 2012 so I believe you would now be out of time to do anything with that determination...

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By petestar1969
26th Aug 2015 14:43

Well

I've submitted old tax returns for clients.

HMRC almost always say they are out of time and won't be processed and the tax position adjusted to NIL, no refunds and no liabilities.

As they won't process what you submit just submit something....

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By adambl
26th Aug 2015 15:04

What is a determination?

There has been no formal determination by HMRC as such just an annual tax calculation for 2006/7 which included payments on account due for 2007/8. Would that give me an opportunity?

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By cmiskin
26th Aug 2015 16:40

Higgs

If the 2007/8 liability is payments on account HMRC should process the return if submitted now, following the Higgs decisionhttps://www.pumptax.com/ut-decision-higgs-v-hmrc/. If it is a determination a claim to Special Relief would be required. In either case the main difficulty may be getting the figures to prepare the return unless HMRC can be persuaded to release the CIS data.

See http://www.hmrc.gov.uk/manuals/salfmanual/salf209.htm for an explanation of determinations and .http://www.hmrc.gov.uk/manuals/sacmanual/sacm12215.htm for Special Relief.

 

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By thomas34
26th Aug 2015 17:53

Sounds Fair Enough

So the chap was frequently late in submitting tax returns and paying tax due including £4K due on 31 January 2008. His CIS payments for 2006/2007 clearly didn't cover his liability for that year so there's no evidence that a similar liability for 2007/2008 wouldn't have resulted from him discharging his proper duties as regards record keeping and accounts preparation.

If it was my client I'd tell him to pay up and be grateful that it wasn't pre-1997 when HMRC could pluck estimated profit figures out of the air and await an appeal. £11K sounds a reasonable figure to protect the public purse and the vast majority of taxpayers who take the trouble to do things properly.

 

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