SA: Points to watch for this year's returns
When the heat is on it is very easy to get things wrong. AccountingWEB tax editor Rebecca Benneyworth provides a few top tips to carry you over Christmas and into January. Do add your top tips on as comments, and we can grow the article into a useful resource.
Student loans
As time goes on, more and more clients will be repaying income contingent student loans. You have to watch out for the tick box at the foot of page 2 (Box 1) and enter the deductions from employment (if any) in box 2. If your client thinks that their loan is almost repaid, they must take it up with the student loan company – you cannot accept their instruction to omit a tick in box 1 – the return will be incorrect.
Filing a paper return at this time of the year will normally attract a £100 penalty, unless the client is an excluded case. You cannot remove the penalty by subsequently filing online, so once again, this penalty sticks!
Continued...
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One to add 1 thanks
Thanks for the helpful advice as always Rebecca.
The deadline for coding out tax due of up to £2,000 via PAYE if you file online is 30th December, so it's worth double checking that you have received back all the returns you sent for signing (and that they have been filed), and if not chase them now. It's also worth prioritising work you have in and putting any client with PAYE income at the top of the pile.
Trevor Blackmur ATT
TRB Tax and Payroll Services
Rebecca says
Rebecca says
"It is possible that in checking the 2011 return you spot an error on the previous (2010) return. You are still in time to make an amended return – the deadline is 31 January 2012. However, you will need to consider the penalty implications, as if the inaccuracy gave rise to an underpayment of tax, there may be penalties at stake."
Read in isolation this passage might give the impression that correcting the 2010 return is optional. That this was clearly not Rebecca's intention, and on reading further it seems that the purpose of the passage is to focus intention on the nature of disclosure in the amendment. I have a slight problem with this:
"In order to qualify for the reduction for disclosure, your disclosure must ..
... meet the requirements of telling HMRC that there is an inaccuracy, ..."
Erm, to me it is axiomatic that if you are repairing a return, by definition the earlier return was inaccurate,
"...helping HMRC to quantify the inaccuracy (usually by disclosing the amount), ..."
Erm, the repaired return less the original return is by definition an expression of the quantity of the inaccuracy
"... and allowing HMRC access to the client’s records to check that all is well."
No argument there.
With kind regards
Clint Westwood
a couple of replies
Thanks for your comments. And good point about coding out!
As far as amending 2010 is concerned - yes deadline is 31 Jan, irrespective of submission date of 2010 return.
Clint - yes of course I meant that amending was not optional - thanks for clarifying. My comments about disclosure are based on experience with VAT and penalties. It may well be that eventually HMRC's approach is found to be incorrect - I have mixed feelings but am probably 70% in favour of HMRC's view, which is that correcting an error (particularly on a VAT return) is not the same as making a disclosure which is statutorily defined in FA 2007 Sch 24. I would probably accept the same argument in relation to amended SA returns - particularly in the light of Langham v Veltema. I do accept that others may hold a different view but wanted to prompt the thought process. Essentially HMRC would like to know that there have been careless errors as it may affect the taxpayer's risk score and if the inaccuracy was "careful" you will make no disclosure - so the ability to discriminate is important. None the less, it may be your view that HMRC will not "see" white space disclosure on an amended electronic return - but that's not our problem!
Some comment on "provisional" returns may be in order
Nothing much has changed in the legal position regarding provisional returns since the introduction of self assessment some 15 years ago, but it may be useful to consider the impact of the new penalty regime on such returns. To recap: If you have adequate grounds you can file a provisional return, but HMRC guidelines require that you specify (1) which figures are provisional, (2) why they are provisional and (3) by when you expect to repair. As HMRC have some powers to reject a provisional return these guidelines while not statutory are best observed.
While the legal background (apart from the penalty regime) remains largely unchanged we do at least now have some years' experience of how this works in practice. It is not uncommon in my experience that with the best will in the world, lack of co-operation from the client results in a failure to comply with item (3) above, and indeed often an entire year goes by, beyond the repair window, without ever repairing the provisional figures. What I find somewhat surprising is that in the vast majority of such cases (in my experience) no enquiry notice is served by HMRC. It is in my view a design flaw in the legislation that HMRC's enquiry window expires on or before the expiry of the repair window, but so be it.
A point that has been stressed to me by lecturers in the circuit is that entering a provisional return provides no protection from the penalty regime as regards whether it is "careless".
It is I think another flaw in the legislation that the penalty regime appears to discourage the filing of a provisional return in favour of filing the return deliberately late but in final figures. That said, the late filing penalties are ratcheting up this year if filing very late, so that may make it less appealing.
With kind regards
Clint Westwood
Rebecca well done (again)
Under Correcting past mistakes will this date be determined by date 2009/10 return submitted rather than 31 Jan 2012?