Amending a Tax Return

SA302 for mortgage purposes

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I submitted a 2023 SA Tax Return for a CIS sub-contractor and during that year he purchased a van.  As a result of the Capital Allowances this reduced the client's profits to £15,000.00 and he recieved a tax refund of circa £10,000.00.  The client has now applied for a mortgage but requires a profit of £40,000.00.  I had advised that I could amend the CA claim and this would provide a profit of £40,000.00, however he would have to pay £7,000.00 back to HMRC as an overstated refund.  The client did not want to repay any part of his refund.  He asked if I could amend the CAs to show a profit of £40,000.00 and once he had the mortgage, change the figures back to the original so that he would have his mortgage and not have to repay any CIS tax.  I refused to do this.  He has now changed accountants (I am no longer his agent at HMRC) and is asking for a copy of his 2023 SA Return.  I believe he is going to manipulate my SA Tax Return to get his mortgage.  Do I just give him the SA Tax Return to do as he wishes as I am no longer his agent or should I report my concerns?  Thank you in advance.

 

Replies (37)

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RLI
By lionofludesch
22nd Feb 2024 19:44

At one time, mortgages were based on proper accounts, based on centuries old accounting principles, and weren't affected by capital allowances claims.

This is a modern problem caused by under-qualified folk being in jobs to which they are unsuited. Modern practice has not improved the mortgage scenario.

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By David Ex
22nd Feb 2024 19:52

Hastings1066 wrote:

Do I just give him the SA Tax Return to do as he wishes as I am no longer his agent or should I report my concerns? 

 

Does he not have a copy of the return he approved for submission?

Would have thought a report might be required. Have a word with your professional body.

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Replying to David Ex:
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By Hastings1066
22nd Feb 2024 20:02

Thank you for the reply, as usual the client has misplaced the tax return, so I have the only copy.

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Replying to Hastings1066:
By Ruddles
22nd Feb 2024 20:17

His new agent will be able to get a copy from HMRC. (Or has the new agent not asked you for a copy?)

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Replying to Ruddles:
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By Hastings1066
22nd Feb 2024 20:57

His accountant is his ‘mate’ who works on the sites as an electrician/accountant, so unlikely to hear from him.

Can’t help but feel I’m better giving the client the SA Return and allowing him to do what he wants, as my name has been removed from the Return and as an agent with HMRC.

Life is never easy

Thanks again for your time.

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By williams lester accountants
23rd Feb 2024 08:50

Give him the tax return. It is no longer your client, so he can do with it as he/his new accountant wishes.

Whether you file a SAR is another matter for you to consider.

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By Paul Crowley
23rd Feb 2024 09:42

A digital copy of the return is not unreasonable to request.
After that, he is no longer your problem.

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By rmillaree
23rd Feb 2024 09:46

"The client did not want to repay any part of his refund. "

without tax year overview confirming tax is paid there close to zero chance their cunning plan will work even if enacted as lenders pretty much always demand tax is paid up to date per tax year overview.

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Replying to rmillaree:
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By Roland195
23rd Feb 2024 09:54

For a 2022/23 Return, this would almost definitely be the case especially as interest and shortly, surcharges will appear on the overview so it is not the cunning plan the boy thinks it is.

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Replying to rmillaree:
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By Paul Crowley
23rd Feb 2024 10:06

Agree.
For the plan to work he needs to pay the tax due, and then further amend back to start point and reclaim the tax paid.

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Replying to Paul Crowley:
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By Roland195
23rd Feb 2024 10:08

Hope he isn't reading this.

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By Roland195
23rd Feb 2024 10:07

If the client instructed to amend the initial filing to disclaim the AIA but would accept the resulting tax liability being due, I would admit to being in a quandary.

In this case, the boy is trying to have his cake & eat it so hell mend him. Give him the copy and fire of your SAR for Brownie points on your next inspection.

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By Hastings1066
23rd Feb 2024 10:46

Thank you to everyone for their replies.

As the client may make changes after he has appointed another agent I feel it is none of my business as I am trying to predict what someone who is not my concern may do.

I think I will ignore everything from here on in although it is still playing on my mind.

I think retirement has just got closer!

Thanks again.

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Replying to Hastings1066:
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By leeanthonyblackshaw
23rd Feb 2024 11:08

Remove the worry from playing on your mind:

- if it is a "vague feeling of unease" note why you are not making a SAR;

- if it is more of a suspicion or "possibility, which is more than fanciful, that the relevant facts exist", you could make a SAR (the bar is quote low, from R v Da Silva)

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By lesley.barnes
23rd Feb 2024 11:01

Cunning plan may not work if the mate/electrician/accountant doesn't have any proof they are a practicing accountant when the mortgage company start to request info from them.

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Replying to lesley.barnes:
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By Roland195
23rd Feb 2024 11:17

That depends on the lender - some care about nothing else other than the SA302 Form from The Inland Revenue sic and the Tax Overview, while some insist on an Accountant's Certificate with varying acceptable signatories.

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By bendybod
26th Feb 2024 10:13

Ah, the old "I need my profit to be...". Closely followed by "I want my tax to be...".
Give him the return and hope that it all backfires horribly on him, at which point he may come crawling back and you can have the satisfaction of saying no!
The new process of filing SARs leaves me losing the will to live if it is a suspicion with no concrete amount of loss.

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Replying to bendybod:
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By Roland195
26th Feb 2024 10:30

bendybod wrote:

The new process of filing SARs leaves me losing the will to live if it is a suspicion with no concrete amount of loss.

If the client does as suggested & amends the return to disclaim the AIA, pays the tax & downloads his Overview, then changes his mind & amends the amendment back where he started, I'm not sure what offence he may be committing.

The tax position is correct (assuming everything else is on order), it can't be false accounting as the accounts will be unchanged even if actually produced.

All I can see we are left with is obtaining a financial advantage by deception but I'm not even sure that would be the case.

I'd still be completing the SAR & I wouldn't go along with it myself, but I'd struggle to articulate why, other than it doesn't feel right.

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Replying to bendybod:
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By More unearned luck
26th Feb 2024 18:34

you seem to misunderstand the purpose of SARs; they are not there to alert the authorities to possible money laundering; their purpose is to keep the professional out of jail. An early case involved someone who bought a house with several suitcases of readies. His lawyer and the estate agent made SARs. The vendor's solicitor didn't and was prosecuted. A high price to pay for laziness.

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By fawltybasil2575
26th Feb 2024 11:04

@ Hastings1066 (OP).

Leaving aside the question of whether the now former client's intentions are fundamentally dishonest (whether in relation to taxation breaches or more generally - those aspects have been discussed at length some years ago on AWEB) may I comment upon the requirement or otherwise to submit an SAR to NCA. May I respectfully suggest that IMHO there are currently no grounds for your making that Report. My reason for such comment is that currently your suspicion is ONLY that a crime WILL BE committed: the legislation in my view imposes a higher bar, ie that you have a reasonable suspicion that a crime HAS BEEN committed.

The fact that you are reasonably certain that a crime WILL BE committed is not, I believe, relevant. Hence, as you no longer act, you have no dilemma as to whether to submit a Report (and indeed, since this a former client, it is unlikely that you will in future receive any information which results in your holding a reasonable suspicion).

Of course, if exceptionally you DO in future receive information, eg from the former client; from HMRC (incorrectly if they have not deleted your name form their systems); or from any other source, that the client has acted in the manner which you currently fear, then (regardless of whether he has or has not committed a crime) if you hold a reasonable suspicion of criminality, then you should report.

The above is my understanding of the legislation and I would of course defer to anyone, with greater knowledge (especially David Winch, of this parish) who holds a contrary view.

Basil.

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By Husbandofstinky
26th Feb 2024 11:22

Don't you just love subbies.

Mate down the pub.....

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Replying to Husbandofstinky:
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By philaccountant
28th Feb 2024 14:19

I expect for his 2023/24 return his mate will recommend a new extension and kitchen as a tax saving strategy. After all, you need a kitchen to eat.

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By Charlie Carne
26th Feb 2024 11:56

Of course you should give him a copy of his tax return. As for a report of your concerns, as others on here have said, you may wish to take advice from your professional body.

On a pedantic note and, as we are accountants for whom the significance of decimal places is important as a means of expressing both reliability and necessity in conveying a particular quantity, terms like "circa £10,000.00" don't make sense. It's either circa £10,000 or it's £10,000.00 (which reflects the number to the exact penny). This seems to be an increasingly common error, even amongst members of our profession who should know better.

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Replying to charliecarne:
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By Roland195
26th Feb 2024 12:50

This place sounds more like a "One Foot In The Grave" fan page everyday.

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Replying to Roland195:
By Charlie Carne
26th Feb 2024 18:10

Well, clearly I'm not the only Victor Meldrew as I just checked with a senior economics professor at a major university and she said that she'd pick up any student who made the same error. As she said, "there is no greater specificity than to the nearest penny" and that holds true whether one is an economist or an accountant. Sure, it's pedantic, but pedantry when it comes to numbers is at the heart of our profession.

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Replying to charliecarne:
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By rmillaree
26th Feb 2024 21:07

i think your timing is exceptionally poor here though - the whole point of this thread is that the quoted number are completely meaningless - they are simply there to evidence the principles involved - this being the case the accuracy or lack of accuracy ref rounding or indeed the wording used ref those numbers and their rounding is a complete irrelevance as the numbers simply dont matter - probably one of the very few threads i would say that is the case.

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Replying to rmillaree:
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By Tax Dragon
27th Feb 2024 07:35

OP should have said "circa £x".

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Replying to Tax Dragon:
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By Tax Dragon
27th Feb 2024 07:37

But of course not "circa £x.00".

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Morph
By kevinringer
26th Feb 2024 12:50

"The client did not want to repay any part of his refund."

Maybe lenders are getting wise to this because I've had a case where the lender wanted a Tax Year Overview that showed the tax as being paid.

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Replying to kevinringer:
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By Roland195
26th Feb 2024 13:22

It's another thing that varies from lender to lender but they will definitely need to see overdue balances settled as in this case but often will want to see them paid before actually due in other situations.

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Replying to kevinringer:
DougScott
By Dougscott
28th Feb 2024 11:05

kevinringer wrote:

"The client did not want to repay any part of his refund."

Maybe lenders are getting wise to this because I've had a case where the lender wanted a Tax Year Overview that showed the tax as being paid.

But the solution is easy! File the amended tax return, pay the tax, and then once he's got his mortgage, file another amended tax return and reclaim the tax. Simples! Accountants are sooooo dum sometimes.

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Replying to Dougscott:
Morph
By kevinringer
28th Feb 2024 11:32

Dougscott wrote:

Accountants are sooooo dum sometimes.

Who is dum; me, OP or you? I quoted OP saying his client didn't want to repay any part of the refund. I pointed out that lenders are now asking for proof of payment of tax. Therefore OP's client is going to have to change their mind. That's not dum accountants; that's the client.

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Replying to Dougscott:
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By DKB-Sheffield
28th Feb 2024 11:48

Doug

You cunning plan, were the OP's (ex) client to follow it through, pay the tax, and reclaim... is all well and good.

However, getting a single refund from HMRC can be hard work. Getting a second one - following an 'overpayment' of a corrected and re-corrected return... without a compliance check... and the resulting
cost? Good luck on that one! It certainly seems slightly dum if it can be avoided.

Of course, there are lenders, and there are lenders. Some will still accept full explanations for one-off irregularities (such as high CA claims) if they can see it is a true 'one-off' based on historical figures (and YTD - it is Feb 24 after all). The biggest issue for borrowers is that they often come at a premium... and may be best suited to the use of a broker. However, swings and roundabouts.

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All Paul Accountants in Leeds
By paulinleeds
26th Feb 2024 12:57

Send him a password projected PDF Tax Return which he cannot them manipulate.

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Replying to paulinleeds:
By Ruddles
26th Feb 2024 16:56

How would that help? Any "manipulation" would be done online, with a PDF of the manipulated, sorry amended, return downloadable.

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By Andrewmoore777
26th Feb 2024 16:43

If the period within which the CA claim would first be abandoned and then reinstated all fell within the period during which one can submit an amended tax return (there is no limit to the number of amendments that can be made so long as they are all timeous) all fell within the time limit for submission of amended returns then I'm not surprised the client left you. I should pass the return over quickly to avoid getting sued for failing to act on a client's legal instructions and putting him to additional expense.

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Replying to Andrewmoore777:
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By Roland195
26th Feb 2024 21:04

"It's a bold move Cotton, let's see if it pays off"

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