Share this content

Client with many years tax returns overdue

Client not submitted returns for over 10 years. Trying to get himself 'legitimate'.

Didn't find your answer?

Hello - My client has not submitted any tax returns for at least 13 years.  In that whole time he was only worked on building sites and has been taxed at source under the CIS.  I'm no expert but I think that drug taking, losing his home, prolonged period of homelessness, sofa- hoppimng etc, a fear of creditors and being mentaly unwell have all played a part in him choosing to go off radar.  Obviously this has cost him money as he has made no use of personal allowances.

After years of persuasion on my part, he agreed to let me try to sort out his affairs - helped by the fact that he now has an address and a relationship.  We have completed the forn "Authorising your agent".  This has boxes to be ticked for e.g. TRust, Corp Tax, Tax Credits etc but nothing for CIS and so the HMRC helpline advised me to ink it in (!).  This was submitted (twice) and eventually processed for self-assessment purposes.  Howeverl 4 months and many phone calls later the CIS office still tell me that I am not authorised to deal with his CIS affairs.  

Unless I can deal with the CIS office I don't see how I can get any record of what his earnings were or what tax he has paid, and without that, I can't start on his self-assessment forms.  My client has not kept payslips and he estiamtes that he's worked for dozens of contractors in that period. What CIS have told me is that "If you're telling us that he hasn't done his tax returns as he's required to then he will face a penalty".  I'm worried that if I pass that message on my client will again disappear.  

My client already had penalties totally about £20k at the highest point, about 2 years ago. They are now down to about £6k.  HMRC debt management tell me this is because returns have been submitted.  However, they most definitely have not been but as it's a movement in my client's favour perhaps I won't try to unpick it.  Let me repeat, he has NOT done any tax returns for 13 or more years.   He does not have a bank account.  His pay has gone into the accounts of  family members who then find ways to get it to him.

The end result is that my client has been off-radar for many years but now want to legitimise has position.  His income has always been modest - perhaps £20k pa - and he has no assets apart from a bag of tools.  In terms of family committments he now has three children and so repayment of any tax penalties is going to have to be at extremely modest rates per week 

Perhaps even worse is that his accountant - me - has no expertise in this area.  I'd be grateful for any advice on how to get his affairs sorted out and especially how to get the CIS section to provide me with any details they hold of his earnings and tax deducted at source

Thanks in advance 

 

Replies (23)

Please login or register to join the discussion.

My photo
By Matrix
10th Apr 2020 13:13

The CIS helpline is for contractors and the agent authorisation is through PAYE for employers. They don’t provide details of tax deducted from sub-contractors.

Assuming you are now agent for self assessment then you will have to sort it out at that end. Maybe come up with a resolution, can you at least file 2018-19 so he can get the help and maybe extrapolate that in a letter to HMRC for all past years where they require a return and if HMRC disagree according to their records then they need to provide the data you requested?

See also this recent thread:

https://www.accountingweb.co.uk/any-answers/cis-deductions-21

Thanks (0)
the sea otter
By memyself-eye
10th Apr 2020 13:13

If he has worked for one or two or three? companies, they should have his earnings and CIS deductions. Try them first.

Thanks (0)
avatar
By Open all hours
10th Apr 2020 13:18

HMRC seem determined to obstruct your progress. They should welcome all prodigals back to the tax fold. I don’t have all the answers but I would go back to HMRC nce more (and by the way I would be surprised if they actually have accurate records) tell them that they have 30 days to give your client the details, or at least their version of the truth, (call them when he is with you so the 64-8 drops off their excuse list) and make it clear that if you are not happy with their progress then your MP will become involved.

Thanks (0)
Replying to Open all hours:
My photo
By Matrix
10th Apr 2020 13:23

But he is agent for SA so can and should call them. How will calling the CIS helpline help, they must think it is the CIS returns that are outstanding? Whereas the client is a sub-contractor and not a contractor.

Thanks (0)
avatar
By legerman
10th Apr 2020 13:47

Hi RJM

You will need to write to

PT Operations North East England
H M Revenue & Customs
BX9 1BX

and ask for a complete history of contractors and cis deductions for the periods you are needing. Quote the UTR no and NI no of the client. Make sure the client's address is up to date at HMRC and include his address in the letter, just in case they write to him with the information.

Presumably you can look at the history in his SA account? Look at each year and see if a return has been submitted. It may be that HMRC have closed off some years.

Thanks (0)
Replying to legerman:
avatar
By rjm
10th Apr 2020 18:10

Hi Legerman - Thanks for your very useful response. I'll write to that address. I'm 100% certain that my client has not sent in any SAs for many years and so perhaps HMRC have closed off some earlier years. If I can get the earnings and deductions figures then the SA returns will be a piece of cake and these are bound to show a refund due for each year - because of applying his personal allowances. Do you think he has a realistic chance of claiming a refund for many or indeed any of the previous years?
Thanks again

Thanks (0)
Replying to rjm:
avatar
By legerman
11th Apr 2020 13:32

rjm wrote:

Hi Legerman - Thanks for your very useful response. I'll write to that address. I'm 100% certain that my client has not sent in any SAs for many years and so perhaps HMRC have closed off some earlier years. If I can get the earnings and deductions figures then the SA returns will be a piece of cake and these are bound to show a refund due for each year - because of applying his personal allowances. Do you think he has a realistic chance of claiming a refund for many or indeed any of the previous years?
Thanks again

You should be able to go back 4 years but will probably out of time for the rest. Much will depend on HMRC at the time. Refunds will be available if profit is within the realms you stated but could be wiped out by penalties, so I would also raise an appeal for each year based on the circumstances you've outlined here.

Good luck and hope you're successful.

Thanks (0)
Replying to legerman:
avatar
By sammerchant
20th Apr 2020 09:40

Two years ago I submitted eight years of Tax Returns for a client with anxiety issues. He had been under medication for some time and the client agreed that HMRC could check with his surgery as to the medication prescribed. HMRC accepted all appeals, rescinded the penalties (as I requested) and set payments made against his liabilities. He is now on the straight and narrow thanks to his wife and children. A good result.

Remember: you don't ask, you don't get!

Thanks (0)
avatar
By Refs1
10th Apr 2020 23:14

We have undertaken lots of these types of cases over the years. I would call the agent priority line and just tell them the situation, maybe ask to speak with an expert in this area. HMRC are not normally interested in anything over 4 years ago. I would work out the numbers for last 4 years and then claim any refund assuming it is a refund position. Have you tried to electronic authorise him as a client? This avoids sending in a paper 64-8. If you feel this is not your area of expertise might be better to engage someone local to you to do the work on the clients behalf, I have sometimes felt it better to decline work for another professional even if I oversee the PR side of things for the client. Good luck !

Thanks (1)
Replying to Refs1:
avatar
By rjm
11th Apr 2020 12:20

Hi Refs1. Yes - I'd love to pass this to someone more experienced than I am -but I'm the only one my client will work with. Useful advice - thanks

Thanks (0)
Replying to rjm:
avatar
By Refs1
11th Apr 2020 13:01

Difficult one. We have clients like this and this person clearly trusts you. Hope it goes well

Thanks (0)
avatar
By fawltybasil2575
11th Apr 2020 13:49

@rjm (OP).

(1) Your priority must be the submission online, by 23 April 2020, of the 2018/19 Tax Return: this deadline arises from the recently introduced “Self- employed Income Support Scheme” (SEISS). Failure to submit that Return by that deadline will almost certainly prevent your client from receiving the SEISS Grant [I assume therefrom that your client will qualify for SEISS, as seems highly probable from your question).

(2) ONLY Tax Returns for 2016/17 and 2017/18 will, if you handle the matter correctly, be then required to be submitted at this stage (albeit sensibly one would, if possible, normally prepare the 2019/20 Return at the same time, whilst matters are relatively fresh in mind).

(3) The fact that the HMRC records show that Tax Returns have been submitted, for most of the 13 years which you state are outstanding, is due to the legislation introduced by S168(3) Finance Act 2016, which introduced an amendment to s.34 of the Taxes Management Act 1970, here:-

https://www.legislation.gov.uk/ukpga/2016/24/section/168/enacted

In essence, HMRC have clearly, in view of the “4 years” rule introduced by that legislation, indicated on their systems that those earlier year Returns have been submitted, so as to ensure that they do not pursue your client for their submission: in short, any Income Tax payable or repayable for years up to 5 April 2015 is no longer payable or repayable. HMRC will (almost certainly) shortly, for that same reason, treat the 2015/16 Tax Return as having been submitted.

(4) Penalties. Here is a link to a useful table, produced by Taxaid (albeit perhaps they could “update” the tax years) of how the Penalties are calculated for late Returns:-

https://taxaid.org.uk/guides/taxpayers/tax-returns/late-filing-penalties...

The reduction in Penalties to approx. £6,000, per your question, clearly arises from
HMRC’s having “cancelled” the Penalties for the early tax years [arising from HMRC’s treating the Tax Returns as having been submitted - see (3) above}.

Penalties generally re late Returns. Submit an Appeal against the Penalty re the late 2018/19 Return, if such Penalty Notice received, immediately upon submitting the Return. Consider valid grounds for that Appeal, and for Appeals to be submitted later when the 2016/17 and 2017/18 Returns are submitted, by discussing with your client his personal circumstances, including whether he has received the formal Notices to File (his having moved address often could be a factor) – generally HMRC often accept Appeals currently, so as to “clear their decks”.

(5) Estimates re 2018/19 Tax Return. Whether it is ethical/legal to use “estimated” figures on Tax Returns is a subject in itself. “Guestimates” are out of order normally. In your client’s case, and if you are satisfied that the CIS income represents all his income, and if you obtain your client’s detailed comments on his activities in 2018/19, it is probably acceptable to use “best judgment” figures, largely because the amount repayable will probably be effectively “tax relief on the Expenses and Personal Allowance” (less the Class 2/Class 4 payable)(with further possible increase if some or all of the CIS tax deducted has been at 30%).

(6) Your “goal” is to obtain Repayments for all years from 2016/17 to 2019/20; cancellation of all Penalties; and receipt of the SEISS Grant. Are you comfortable that you have the expertise to deal with this case ? Ensure that your fees are paid at each stage, or (if possible) that you receive payments on account of those fees regularly.

Basil.

Thanks (1)
Replying to fawltybasil2575:
avatar
By Justin Bryant
14th Apr 2020 11:56

#3 above is not quite right. That change was just to stop taxpayers filing (without a prior notice)/amending a return after 4 years. HMRC can still raise a DA after 20 years (or issue a notice to file) due to FTN.

Thanks (0)
Replying to Justin Bryant:
avatar
By fawltybasil2575
14th Apr 2020 12:17

@ Justin.

May I respectfully disagree both elements of your post.

(1) My last post stated the EFFECT of the legislation, and its general purpose. If there was a subsidiary purpose of the nature indicated by you, then so be it, but it has no impact upon the overall purpose, nor on its general effect.

(2) Whilst there can indeed be circumstances under which HMRC can effectively extend the four years to six years and, in exceptional circumstances, to twenty years, there is nothing in the OP’s question which indicates that such extensions apply in his client’s case (it would furthermore be inappropriate to notify HMRC of their rights to look beyond the standard four years).

Basil.

Thanks (0)
Replying to fawltybasil2575:
avatar
By Justin Bryant
14th Apr 2020 13:19

To understand the (limited effect of the) FA 2016 change to s34 (which were wholly in HMRC's and not the taxpayer's favour) you need to read this:

https://www.taxadvisermagazine.com/article/four-year-hitch

https://www.accountingweb.co.uk/tax/personal-tax/tribunal-rejects-hmrc-o...

Thanks (0)
Replying to Justin Bryant:
avatar
By fawltybasil2575
14th Apr 2020 13:47

@ Justin.

With respect again, the articles to which you have provided links (in your last post) in no sense warrant my resiling from the advice which I conveyed to the OP in my original post.

Seeking to extend the OP's client's case beyond the normal four years would be in the interests of neither party (neither HMRC nor taxpayer) given the amounts at issue - as ever, one should consider practicalities, not the remote possibility of either party's wishing to escalate the matter at grossly disproportionate cost.

Basil.

Thanks (0)
Replying to fawltybasil2575:
avatar
By Justin Bryant
14th Apr 2020 15:40

What the parties (or indeed you) may or may not want re HMRC's DA time limits is neither here nor there. What matters is the law and s 34 does not affect HMRC's usual DA powers and HMRC's 4 year DA time limit only applies where there is no carelessness as explained at para 115 here:

http://financeandtax.decisions.tribunals.gov.uk/judgmentfiles/j11345/TC0...

Thanks (0)
Replying to Justin Bryant:
avatar
By fawltybasil2575
14th Apr 2020 17:22

@ Justin.

You say:-

"What the parties (or indeed you) may or may not want re HMRC's DA time limits is neither here nor there".

To the contrary, both parties have RIGHTS, ie they have the right to decide what action they "want" to take (unless exceptionally, of course, they are compelled by the law to take a particular action).

Since you direct me to para. 115 of a Tribunal case, here it is:-

'The Tribunal is not satisfied that HMRC have proved that the Appellant acted carelessly. The careless actions which are referred to in section 29(4) are those which result in the underassessment of tax, not the circumstances which result in a liability to tax. This is confirmed in the first instance decision of Atherton v. Commissioners for HMRC [2017] UKFTT 0831 (TC) at paragraph 116: “In other words, the carelessness must be the cause of the insufficiency in the assessment”. In the case of Anderson v. Commissioners for HMRC [2009] UKFTT (TC), carelessness was further considered. At paragraph 22, Judge Berner states: “The test to be applied, in my view, to consider what a reasonable taxpayer, exercising reasonable due diligence in the completion and submission of the return, would have done.”'

It would be an over-zealous (and foolish) HMRC officer who would seek to go beyond the normal four years in the OP's client's case. Again, I must respectfully ask you to consider not the extremities of law, but the PRACTICALITIES of a case very very low down in the pecking order for HMRC to pursue, even disregarding the exceptional circumstances, in the context indeed of a highly likely (albeit probably insubstantial) Tax Repayment case.

Basil.

Thanks (0)
Replying to fawltybasil2575:
avatar
By Justin Bryant
23rd Apr 2020 09:44

A better explanation of DA time limits is at para 43 here: https://assets.publishing.service.gov.uk/media/5e9d7aae86650c03205ccd4e/...

Para 61 et seq are especially interesting re carelessness when an adviser is instructed (re implicit reassurance). This is similar to the reasonable excuse argument re NRCGT penalties (where the solicitor should advise of any such issues).

See also: https://www.accountingweb.co.uk/tax/hmrc-policy/tax-evasion-case-a-fair-...

Para 208 et seq is a pretty good summary re DA requirements: http://financeandtax.decisions.tribunals.gov.uk//judgmentfiles/j11104/TC...

Thanks (0)
avatar
By paulhammett
11th Apr 2020 14:58

As usual, excellent detailed advice from Basil.

Thanks (0)
avatar
By rjm
14th Apr 2020 17:24

Many thanks to Basil who has provided very useful advice privately. Thanks also to the several on here who have responded with helpful insights

Thanks (1)
avatar
By Calculatorboy
16th Apr 2020 23:00

Seriously take a large advance for these type.. otherwise invariably you won't get paid, and don't be tempted with promise of tax refund to settle fees , often they get gobbled up with penalties

I've been caught a few times ..never again .

Still got a late 2019 outstanding , because client hasn't paid 2018 , now he's worried about losing his 3 month subsidy .. I'm sorry .

Thanks (0)
avatar
By pauljohnston
20th Apr 2020 09:44

Mr Legerman suggests you write to an address and I concur. I would however include a signed 64-8 as this often makes it easier for the office to find a way to deal with you directly.

Thanks (0)
Share this content