Inspector has asked to see clients books having chosen my clients 2013 return for examination, have since noticed that I neglected to disallow some motor expenses which could be offset by claiming additional CA's. Should I tell her in letter or submit amended return with adjustments then tell her?
Not quite sure of the correct protocol,
Thanks
Replies (17)
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If you just submit amended return you will keep it as far away from the enquiry as possible, which has to be a good thing.
Good terms
I wouldn't advocate changing Returns 'behind the Inspectors back' when she is looking into the 2013 Tax Return. Being honest from the outset can only be a plus point.
Yes but I would make the letter to the Inspector brief and non-committal. No explanation of the changes or the reasons for them. Just drawing attention to the fact of the submission of an amended return on such and such a date. With a bit of luck the original version of the return will be forgotten about and you will never have to explain the reason for the changes,
In reality...
Just drawing attention to the fact of the submission of an amended return on such and such a date. With a bit of luck the original version of the return will be forgotten about and you will never have to explain the reason for the changes,
If only that were possible! The online system will let you lodge an amended return and the date will be recorded. All will look well from our side. However the back end system at HMRC does not accept it against your clients record when a Return is under enquiry by an Inspector. The Inspector can still see it though. I would definitely recommend being upfront with HMRC genuine mistakes and oversights do happen.
Amendment not possible
whilst a return is under enquiry as far as I remember.
If the additional c allces match the disallowance there is no consequence to the amendment. I would write a brief letter advising her that you had noted an amendment to the c allces c/fwd to the next year (which would be white spaced on that return) as there is no requirement to actually amend a return if it would result in no material difference to the liability. The Inspector will then be able to incorporate an amendment to her findings if deemed necessary but it should have no impact on the conduct/results of the enquiry itself.
If there is an additional liability you should tell the Inspector as soon as possible so that they do not find it first through their questioning.
Be honest
We had a client under investigation, HMRC decided he had undeclared income but pointed out themselves that we could therefore claim more CA's which had been restricted. Ended upon first name terms with the inspector, lovely woman.
Also have had similar situation to yours recently where we omitted a small expense, so correction would be in our favour. Didn't even occur to me to resubmit, I just advised HMRC in my letter and in detail (why be brief?) and they thanked us very much and would include it in their workings. Much better to do that and be open, it creates better communication in the long run and they are more likely to trust in your explanations then (as well any potential penalties being lower if you declare before they find - though none in your case anyway).
Well that's my two penn'orth anyway.
Don't make a big issue of it
Just make a brief comment to the Inspector for now. Deal with the detail at the end. No doubt you've discovered this error as a result of your own review of the return.
How much is involved ? A lot or a few quid ?
Unprompted disclosure
Ever since the new penalty regime based on the behaviour of the taxpayer (prompted or unprompted disclosure, careless or deliberate error etc) has been in place, un unprompted disclosure has helped. So do disclose.
The way I understand it
Ever since the new penalty regime based on the behaviour of the taxpayer (prompted or unprompted disclosure, careless or deliberate error etc) has been in place, un unprompted disclosure has helped. So do disclose.
Is any disclosure after an enquiry has been opened will be regarded as 'prompted'.
I still feel the best plan is to notify the changes to the Inspector, not to submit an amended return. Looks sneaky and may give the wrong impression.
agree with jcresswall
had an incident recently where client under enquiry but needed to amend TR for reasons not relating to the enquiry - revenue picked this up and issued letter which had suggested that the amendment was as a result of the enquiry - it wasn't....but doesn't make the enquiry any easier to deal with. Be upfront.
Amending a return is not an unprompted disclosure - it is about exercising a right granted by the law.
In this case the client will not LOSE anything by making an unprompted disclosure. The enquiry may or may not have unearthed the error; unless it was one specifically in to motor expenses
If you do that you will lose the opportunity to leave the error outside the scope of any penalty discussions that arise during the enquiry, which your client will not thank you for - even if it is a forlorn opportunity.
If the net effect is a nothing
because the disallow is covered by the additional CA's and the return, and indeed source, is already under enquiry, I think that the only thing you can do is mention the two changes to HMRC and deal with it as part of the closure. If the net effect is nothing for tax then other than it being a complete jobsworth who goes to town on the basis that if there's one there must be more there's not a lot that you can do otherwise.
An amendment under TMA s9ZA while the return is under enquiry is governed by s9B in which sub 3 states:
(3) So far as the amendment affects the amount stated in the self-assessment included in the return as the amount of tax payable, it does not take effect while the enquiry is in progress and—
(a) if the officer states in the closure notice that he has taken the amendment into account and that—
(i) the amendment has been taken into account in formulating the amendments contained in the notice, or
(ii) his conclusion is that the amendment is incorrect,
the amendment shall not take effect;
(b) otherwise, the amendment takes effect when the closure notice is issued.