Accountant forgot overlap taxation - what to do?

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So my accountant of many years has failed to realise that joining of a partnership should result in overlap charge being made due to differing year end dates.  This is now two tax returns ago and they are suggesting refiling these returns which will have substantial negative cash flow implications due to additional tax and its efffect on payments on account. They have held up their hands but obviously this doesn't really help me.  I want to do the right thing but all income will be taxed regardless. I am very annoyed at this and may want to change accountants but don't want to trigger an audit through changing my accountant. Any advice on how to handle it?

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By SXGuy
13th Jul 2020 16:06

Why would changing accountants trigger an audit? Never heard such nonsense. Unless you mean the new accountant would want to do an audit? In which case why wouldn't you if they find an error?

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By Wanderer
13th Jul 2020 16:21

Understand your annoyance however it's probably the case that you will just need to pay the tax you should have paid anyway + possibly a little interest.
How much is 'substantial'.

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By lionofludesch
13th Jul 2020 17:13

Joining a partnership doesn't affect overlap. Having a year end other than 31 Mar/5 April is the trigger.

I don't know what you're wanting us to say.

If you think your accountants have provided you with a poor service, you need a solicitor, not another accountant.

If you want us to check the figures, we need some figures to check. What exactly have they done ? Understated your profits ? How ?

If you just want a good moan, fine. I agree with you. It doesn't sound like your accountants have done a good job. But I can't be sure about that from what you say.

Either way, you can't sweep it under the carpet by saying HMRC will get their money one day. Not going to happen.

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By jinuk
13th Jul 2020 17:28

Thanks all. Yes I suppose it was more a moan. They just forgot about it so didn't tax the overlap piece twice. My concern on changing accountants is whether that looks bad straight after refiling some returns. I guess HMRC doesn't care but I will be making sure the letter advising them of the change makes it clear it was their mistake.

While I know taxpayers are responsible, this is a rather obscure rule that only accountants will know (or at least should know).

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Replying to jinuk:
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By lionofludesch
13th Jul 2020 17:37

jinuk wrote:

Thanks all. Yes I suppose it was more a moan. They just forgot about it so didn't tax the overlap piece twice.

Forgot ?

Yes, I'd be changing my accountants. This is basic. It's not something easily "overlooked".

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Replying to lionofludesch:
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By Tax Dragon
13th Jul 2020 17:39

Well, it looks odd, but we're getting a limited view.

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Replying to Tax Dragon:
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By lionofludesch
13th Jul 2020 17:42

True - but it's hard to overlook.

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By Tax Dragon
13th Jul 2020 17:38

The holding up of hands was presumably proactive. In which case, IMHO you have yourself a good accountant already - one that recognises his/her mistakes and rectifies them.

You're not out of pocket (unless there's interest and penalties, and to that extent the accountant might cover your cost anyway) - you're just paying tax now you should have paid a year or two back (your liability, not the accountant's).

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By Paul Crowley
13th Jul 2020 17:55

Your accountants also dealing with the partnership? If not was there a communication shortfall?
I had an outrageous level of refusal to communicate from a DIYer with an LLP. I only acted for the non admin partner, who had not a clue what was needed

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By jinuk
13th Jul 2020 20:23

Thanks all. Let me set out the facts as I would appreciate any input as assess what they are telling me.

LLP1 is the trading entity generating profits for its partners. It has a 31 Dec Accounting year end.

Up until 31 Dec 17, LTD1 was a partner of LLP1. It paid corporation tax on the profits of LLP1 allocated to it up until 31 Dec 17.

On 1 Jan 18, LLP2 became a partner of LLP1. LLP2 has an accounting year ending 31 August. For the year ending 31 August 18, it declared no income from LLP1.

The individual partners of LLP2 hence declared no income from LLP2 in their personal returns in the tax year ending 5 April 2019.

The accountant was the accountant for LTD1 and LLP2. They knew what was going on.

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Replying to jinuk:
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By Paul Crowley
14th Jul 2020 20:58

Waited a complete day for the your accountants are useless responders, but nothing.

Assumed that there are accountants dealing with LLP1. If so they should have advised all partners the relevant details from LLP1 tax return sufficiently timely to deal with their own tax returns.

LLP2 different date. Why?

All a bit convoluted for me but trip wires set and successfully worked in tripping up.

Tax dragon is spot on. Actual tax was due, no tax damage to partners, bar interest and late payment penalty and fair play to the existing accountants for holding up hands.
If you think they have integrity, why change?

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