So long Steeden v Carver, It was fun while it lasted

In her recent round of tax lectures, Rebecca Benneyworth warned that reforms to the penalty system brought in by the Finance Act 2011 have taken away two of the profession’s favourite safety nets. John Stokdyk presents his interpretation.

Perhaps the biggest change for advisers and their clients for 2010-11 tax returns will be alterations in the penalty regime that will remove some of the most useful tricks of the tax adviser’s trade.

It’s not just those who file late paper returns who are going to suffer. More significantly, amendments to the Finance Act 2011 removed the subsection that held that a tax penalty was capped by the “relevant” amount - being the amount of tax outstanding on 31 January.

In previous years, Rebecca explained, you could advise a client them to pay an estimated amount for what’s due to clear the liability and the associated penalty. “That’s ended. They will now be liable to a £100 penalty if a return is not filed by 31 January 2012.”

The other victim of the penalty rationalisation is our old friend Steeden v Carver, the 1999 Special Commissioners ruling that exposed a drafting mistake that effectively gave advisers a “free shot” to file returns on 1 February. Rebecca explained that under the legislation the period of default started at midnight at the end of the day the return was due (31 January). But the default ended - instantaneously - on midnight the day before a return was filed, so if a return was filed on 1 February, there was no period of default.

HMRC didn’t like it, but could do nothing about the loophole - aside from lobby for a change in legislation. That has now happened and the definition has been revised to make Steeden v Carver redundant.

There are winners and losers under new penalty regime, but who these people will be depends on the circumstances of their individual cases. There is more certainty for errant taxpayers (and a welcome £3,000 cap on some filing penalties such as PAYE and CIS), but as Rebecca has pointed out, fewer escape routes to mitigate the impact on some clients.

She wondered, however, whether the new hard line was going to be such a long-term success for HMRC. “Little old ladies stuck with a return who are owed a modest repayment will also be fined £100,” she warned. “Does anybody in HMRC have any idea what the PR disaster will be? How long will it take Bill and Sian to have one of these ladies weeping on their sofa?”

For further updates on filing issues and penalties, be sure to keep an eye on AccountingWEB's new Self Assessment Zone.

Comments
MarionMorrison's picture

Oo-er    1 thanks

MarionMorrison | | Permalink

Thanks for that John - this had escaped my notice.  Doesn't make a huge amount of difference - I used to spend 1 Feb checking with Very Stupid People who had failed to get an authority back to us.  "Figures OK?", "Er, yeah", "Well sign the sodding thing and get it back and I'll push the button this end."  

Our latest prepared Return got done one year when we all went to the pub on Feb 1st, and returning to the office around 4pm, we found someone had faxed some stuff to us.  Did the accounts in about 20 mins, the Return in about 5.  Rang punter who said he was happy to approve anything we were submitting and it went down the wire before 5pm.  Perhaps online filing should be fitted with a breathalyser.

Now I'll just pop in the office and do the phone calls on the night of Jan 31 and I can start tidying up a day earlier than normal, which is all good - I'm on my way to Montego Bay on the 3rd. 

CrowtherP's picture

April 30th 2012 is the last day before

CrowtherP | | Permalink

I hope you good people are not all on holiday on May 1st.  That Tuesday is the first day when the new daily penalties can strike under Schedule 55.   Of course everyone knows [don't they] that under Paragraph 4 of the schedule, the £10 per day penalties can be levied in arrears.    In other words in June 2012, or in July, they can levy a [non-negotiable] daily penalty that started on May 1st 2012 for those old ladies who have not filed their 2011 tax rebate form.

It seems to me that non-res. UK landlords [used to filing in arrears if their net rents are less than their personal allowances], the very ill, and those severely in arrears will be in some hot water.

Sometimes HMRC can be very difficult for those wanting to exit the SA tax system; for instance some UK emigrants.   Those people might be caught too.

Best for now.

 

Peter Crowther CTA

Penalties    1 thanks

rogtuf | | Permalink

Isn't it time there was a penalty regime in place for the HMRC?  Say £100 to a tax payer for more than a 90 day delay in processing a repayment claim and then £10 per day?

johnjenkins's picture

Rightly or wrongly

johnjenkins | | Permalink

I have made sure every client tax return is in by 31st jan using estimated figures.

It stops the automatic penalty. The problem then is playing catchup.

I have advocated for the deadline to be 31st March, with on account payments end of march and end of september. Far more logical and sensible.

HMRC are determined to collect as much money as they can by whatever means possible. Whether this is to fund Government future spending in EU is unclear but eventually, as you quite rightly said, it will backfire on them big time.

carnmores's picture

how did that song go

carnmores | | Permalink

what a difference a day makes....24 hours......

 

http://en.wikipedia.org/wiki/What_a_Diff%27rence_a_Day_Made

 

johnjenkins's picture

I Prefer

johnjenkins | | Permalink

the Beatles "8 days a week".

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