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Balance Sheets. Do you bother sending them?

Do you send the balance sheet on SA tax returns?

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I produce balance sheets for almost every client because the software does it automagically. But I rarely include them on the SA tax return unless the business is of a reasonable size. 

Technically, if there's a balance sheet, it must be submitted even though producing one is voluntary. But do you bother? What's the benefit to most SME sole traders and partnerships?

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By Tax Dragon
15th Oct 2020 17:12

What's the harm?

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By Lee11_1989
15th Oct 2020 17:30

No harm and it barely takes any time. Just thinking that I should start including them on the SA. But is there any benefit to it? I guess a more complete picture for HMRC might give them less reason to suspicious.

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Replying to Lee11_1989:
RLI
By lionofludesch
15th Oct 2020 17:35

Lee11_1989 wrote:

No harm and it barely takes any time. Just thinking that I should start including them on the SA. But is there any benefit to it? I guess a more complete picture for HMRC might give them less reason to suspicious.

Absence of a balance sheet was supposed to be a risk factor which HMRC used to assess which cases to enquire into. I've not noticed that additional risk to be fair. In fact, if anything, I'd have to say the bias was the other way.

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By Tax Dragon
15th Oct 2020 17:43

If no harm, no reason not to.

On the positives (the other side of the balance sheet, if you like), I suspect there are a number of points. A less obvious (only relevant in a small number of cases) one might be: balance sheets may be useful for establishing BPR.

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By bettybobbymeggie
15th Oct 2020 18:34

Lee11_1989 wrote:
I guess a more complete picture for HMRC might give them less reason to suspicious.

Personally I prefer to give them less - the mushroom analogy: feed them s**t and keep them in the dark.

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RLI
By lionofludesch
15th Oct 2020 17:20

I don't do balance sheets for sole traders who don't have a dedicated bank account. I don't need to get involved in recording all their household transactions.

I still do them for the other sole traders though. If I prepare one, I send it in.

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By bettybobbymeggie
15th Oct 2020 17:38

Lee11_1989 wrote:
Technically, if there's a balance sheet, it must be submitted

I'd be interested in seeing the legislation that supports this.

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Replying to bettybobbymeggie:
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By Lee11_1989
15th Oct 2020 17:53

It's what I was always led to believe. Happy to be told I'm wrong.

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By SXGuy
16th Oct 2020 10:01

Are you sure you're not confusing yourself with, if a balance sheet has been submitted before, you must continue to do so?

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Image PN
By Mr Hankey
15th Oct 2020 17:39

Same, I only prepare a balance sheet if there is a business bank account.

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By richard thomas
15th Oct 2020 18:13

There is no requirement to send accounts, with or without a balance sheet, unless that is a requirement on the notice to file (see s 8(1)(b) TMA etc). It isn't on the paper return shown on HMRC's website, so I assume it's not on the online notice to file either.

The SA103F tells you that if you have a BS you should put the figures in box 83 - 99 ff. and if you haven't got one, don't bother. It doesn't ask for it to be sent. They can always ask for it using a Sch 36 notice if necessary.

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Red Leader
By Red Leader
15th Oct 2020 20:37

I've never included the balance sheet.

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By Paul Crowley
16th Oct 2020 17:25

This went straight over my head.

Probably 10 or more years since my firm submitted accounts
HMRC do not look for or read them
No human reads white spaces

If a client is selected for enquiry a request for accounts will probably happen, but more likely to ask details based on the tax return equivalent of accounts

Does anyone really submit accounts?

I stopped soon after tax returns stopped being hand written forms
The old fogies stopped when the ACCA practice society lecturer made the points above and even then it took a partnership meeting to force the issue

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Replying to Paul Crowley:
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By lionofludesch
16th Oct 2020 17:40

Accounts, no.

Standard Accounts Information, yes.

And if you examine the return form closely, you'll see that there is indeed a section to report a Balance Sheet. Virtually unchanged for the last 23 years.

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By Tax Dragon
16th Oct 2020 17:58

Paul Crowley wrote:

No human reads white spaces

(last try :-))

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By Tax Dragon
16th Oct 2020 17:59

Nope, Sift software too clever for my spaced out joke:-)

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By lionofludesch
16th Oct 2020 18:08

Tax Dragon wrote:

Paul Crowley wrote:

No human reads white spaces

To be fair, that was never the issue. The point was that it was there to be read and HMRC couldn't claim that they hadn't been told.

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Replying to lionofludesch:
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By Tax Dragon
16th Oct 2020 18:14

OK, putting my software-defeated attempt at flippancy aside.... yes, fair comment. You could say the same about the balance sheet part of the SAI. If you've told them, they've been told. If you haven't told them, maybe it leaves a bigger door open for a discovery assessment to get through.

Just tell 'em - as someone said somewhere in here, what's the harm?

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Replying to Tax Dragon:
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By lionofludesch
16th Oct 2020 18:32

I recall that there was a big debate about disclosure, particularly as the SAI included a lot less boxes than the entries normally appearing on typical 1990s typed accounts. There was also the issue that the SAI was considered too standard and a business that, for example, sold labour in some way (manufacturing business, accountancy practice, whatever) still put its wages costs below the gross profit line.

What we didn't realise in the years leading up to 1997 was that HMRC would virtually abandon its enquiry programme, rendering the disclosure debate fairly pointless. But it was a genuine concern at the time.

Hard to say when I stopped sending accounts in as a matter of course - probably when we started submitting returns electronically. I wasn't at the forefront of that; I waited until someone else had dealt with all the bugs in the system, so I'd guess 2005, 2006, somewhere round about there.

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Replying to lionofludesch:
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By Paul Crowley
16th Oct 2020 22:01

Reply to 18.08

Suggested by some but rubbish if the point of debate was not referred to directly.
Accounts can hide anything
(if I remember correctly all this time wasting was based on a Corporation tax case that the tax payer won having submitted accounts)
Others suggested that HMRC would consider mere submission an attempt to hide and increase risk of enquiry
There was no consensus
Before electronic submission accounts could go in with the return. At all times HMRC stated clearly that they did not want accounts and would ignore them.
All our firms tax enquiries back then asked for the accounts, whether or not they had been submitted with the returns.

And yes they were not HMRC back then
Customs were a different organisation

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By Homeworker
19th Oct 2020 11:55

Paul Crowley wrote:

And yes they were not HMRC back then
Customs were a different organisation


Ah those were the days! I was a TOHG when it was still Inland Revenue. Took me several years to realise they were only promoting the men and I was going nowhere (I was even asked if I planned to start a family!).
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By David Gordon FCCA
19th Oct 2020 16:29

Whether or not a B/sheet is filed, it is a useful check on the client's affairs,
money balances, drawings to cover personal expenses and so on.

What you should not do is one year on one year off, that will raise questions.

What is necessary is to consider the original question:
Is it necessary for the understanding of the client's affairs?

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By Mr_awol
19th Oct 2020 17:19

If i have prepared it, i send it (well the software does it automatically and i dont clear it down).

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By David Gordon FCCA
21st Oct 2020 14:25

Dear AWOL
You with every accountant should take Ferguson v British Gas to heart.
When the QC for BT argued that the customer should not have been upset because "She knew (The ridiculous bill) it must must be a computer error"
The learned judge in his summing up opined, at the end of any computer keyboard is a person with fingers. He awarded her, I think, £10,000 damages.
Your software, as does mine, may well compute a balance sheet.Nevertheless the voluntary, non statutory decision whether to submit it to HMRC, remains your professional responsibility on behalf of your client.
Apologies to software suppliers, but the entity which submits stuff to HMRC is you, not the machinery used in the production process.

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Replying to David Gordon FCCA:
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By Tax Dragon
21st Oct 2020 14:42

Hold on hold on.... if the data is relevant to your tax, HMRC can ask for it, the form asks for it, so aren't you supposed to supply it (if you have it) - OR ELSE explain in the white space that you have the information but are withholding it because [state reason here]?

If the data is not relevant to your tax, a) why does the form as for it b) [I ask again] what harm is there in disclosing it? [And c) how much does it matter if you carelessly disclose incorrect information?]

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