File an incomplete tax return?

Is it better to file an incomplete self assessment return and adjust it later to avoid penalties?

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My new client is facing a £900 late filing penalty in a few days. I have yet to receive professional clearance or requested information from the old accountant. So I must either submit the self assessment return now and make any adjustments at a later date or wait until I have all of the relevant information and appeal for a reasonable excuse against the fine.
Do you have any thoughts about which way I should go?
Thanks.

Replies (41)

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RLI
By lionofludesch
13th Aug 2018 15:57

Normally, I'd say file - with some information in the white space.

However, in your case, it sounds like you're thinking about filing a return with entirely made up numbers. Which is a step too far for me.

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By K81
13th Aug 2018 16:15

How incomplete?
What are the grounds for appeal against the late filing penalties?

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Replying to K81:
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By Is this name taken
13th Aug 2018 17:27

I have the books and records to do the cessation accounts but nothing from prior year at this stage.

Illness.

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Replying to Is this name taken:
RLI
By lionofludesch
13th Aug 2018 17:51

Is this name taken wrote:

I have the books and records to do the cessation accounts but nothing from prior year at this stage.

Illness.

Do you need the prior year ? When's the year end ?

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Replying to lionofludesch:
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By Is this name taken
13th Aug 2018 19:13

It is not essential though would be useful to ensure adequate consistency. April 5 according to the client but he doesn't have any accounts available for me to confirm.

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By johngroganjga
13th Aug 2018 16:30

Without professional clearance you can’t even accept the appointment, and the person you say is your client is no such thing. So your question is irrelevant.

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Replying to johngroganjga:
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By Is this name taken
13th Aug 2018 17:26

johngroganjga wrote:

Without professional clearance you can’t even accept the appointment, and the person you say is your client is no such thing. So your question is irrelevant.

Strictly speaking yes though there's provision to act for a client if the old accountant does not respond I believe. But yes I may be pushing it to go ahead after just two contacts with the old ones.

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Replying to Is this name taken:
By johngroganjga
13th Aug 2018 17:57

Yes but you have to go through a process.

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Replying to johngroganjga:
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By richardterhorst
15th Aug 2018 16:18

johngroganjga wrote:

Without professional clearance you can’t even accept the appointment, and the person you say is your client is no such thing. So your question is irrelevant.

So if I read this right that although there is no law that says you must get professional clearance, just an Institute's requirements, you allow a taxpayer to be held hostage to a recaltant or slow prior accountant.

You dont need prior year. File it and appeal the penalty if you think you would suceed.

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Replying to richardterhorst:
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By Agutter Accounts
22nd Aug 2018 12:53

I'm currently dealing with a couple of cases where a dodgy "tax agent" went out of business without telling its clients. Penalties and other negatives are affecting my new clients.

I have simply filed the outstanding tax returns at the earliest opportunity to stop the penalty clock ticking, and I am now arguing the various fall outs with HMRC.

In this case "professional clearance" was totally irrelevant.

I ALWAYS put the interests of the client first. I have never been impressed with "professional" niceties. HMRC often take no prisoners where penalties are concerned. One acts accordingly.

If you have provisional figures only, then mark that box on the return, and explain the circumstances in a note.

Think priorities. Stop the HMRC penalty clock ticking. Sort out the details later.

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By Matrix
13th Aug 2018 18:16

The client has had 18 months to file their tax return so I wouldn't be bending over backwards to file the return.

However I would not let professional clearance hold me up. It sounds like there is handover info which is missing. I would not file an estimated return.

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Replying to Matrix:
By johngroganjga
13th Aug 2018 19:33

Professional clearance is not optional. It is a pre-requisite for the OP to be able to act for the “client” at all.

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Replying to johngroganjga:
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By Matrix
13th Aug 2018 20:21

The OP has requested prof clearance, if the accountant has not filed a tax return for said client in 18 months then I doubt they will reply to this request contemporaneously.

If I could save the client £900 then I would not let this hold me up, I could write to say that if I do not receive a response by 31 Aug then I will assume silence means that clearance has been given.

But these are not the facts anyway since there is outstanding handover info.

I take a pragmatic approach and try and be commercial with clients but I would not file incorrect returns with HMRC.

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Replying to Matrix:
By johngroganjga
14th Aug 2018 07:22

Matrix wrote:

If I could save the client £900 then I would not let this hold me up, I could write to say that if I do not receive a response by 31 Aug then I will assume silence means that clearance has been given.

Exactly. That is what the Institute’s rules say the OP’s next step should be. Then when the timescale set out in the letter has elapsed he can accept the appointment and move on to help the client.

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Replying to johngroganjga:
RLI
By lionofludesch
15th Aug 2018 12:15

johngroganjga wrote:

Matrix wrote:

If I could save the client £900 then I would not let this hold me up, I could write to say that if I do not receive a response by 31 Aug then I will assume silence means that clearance has been given.

Exactly. That is what the Institute’s rules say the OP’s next step should be. Then when the timescale set out in the letter has elapsed he can accept the appointment and move on to help the client.

So professional clearance is not a prerequisite after all.

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Replying to lionofludesch:
By johngroganjga
22nd Aug 2018 12:58

lionofludesch wrote:

So professional clearance is not a prerequisite after all.

Receiving a response is not a prerequisite. Requesting it, and then going through the prescribed procedure in the event of no response is what is the prerequisite.

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Replying to Matrix:
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By sammerchant
15th Aug 2018 09:55

In a similar situation I sent a recorded delivery letter to my predecessor saying that my client would pursue him/them for any further penalties levied after a given date.

I had the information within the next three days!

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Replying to johngroganjga:
RLI
By lionofludesch
13th Aug 2018 22:38

johngroganjga wrote:

Professional clearance is not optional. It is a pre-requisite for the OP to be able to act for the “client” at all.

I can't agree with that. Taxpayers cannot be barred from professional advice just because some professional isn't professional enough to respond to another professional's letter.

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Replying to lionofludesch:
By johngroganjga
14th Aug 2018 07:23

I suggest you refresh your memory on what the Institute’s rules say about professional conduct on a change of appointment.

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Replying to johngroganjga:
RLI
By lionofludesch
14th Aug 2018 08:23

Easy for academics in ivory towers to come up with crazy, impractical rules.

As we have so often seen ..........

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Replying to lionofludesch:
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By Andy L
15th Aug 2018 10:01

I think the Institute would also look at the facts and accept that you were acting in the best interests of the client having not had a response to professional clearance plus reminder. It would be different if no professional clearance had been requested at all and the tax return was still within time.

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Replying to Andy L:
RLI
By lionofludesch
15th Aug 2018 11:38

The ICAEW advise you to at least write to the previous incumbent. If you don't get a reply, they don't say you can't act. It's merely a factor to take into consideration.

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By bernard michael
14th Aug 2018 09:49

Questions
And what do you say to the client when HMRC acting on the return start an investigation because the figures are b*****s
Why are you bending over backwards when the client has allowed his tax affairs to get out of order?
Why is the penalty going to be £900?
How late is he and for what??

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Replying to bernard michael:
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By Is this name taken
14th Aug 2018 16:04

I would not submit figures that I could not justify.

I'm trying to do the best I can for the client who has been unwell.

90 days at £10 per day.

Self assessment due January 31, 2018.

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Replying to Is this name taken:
RLI
By lionofludesch
14th Aug 2018 16:23

Is this name taken wrote:

I would not submit figures that I could not justify.

I'm trying to do the best I can for the client who has been unwell.

90 days at £10 per day.

Self assessment due January 31, 2018.

Surely you're too late.

£100 on 1st February.

£10 a day from 1st May to 30th July.

£300 on 1st August.

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Replying to lionofludesch:
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By Is this name taken
14th Aug 2018 16:28

Yes for sure but the £10 per day penalty is not due to be issued until September and the August penalty has not been prepared for issue yet.

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Replying to Is this name taken:
RLI
By lionofludesch
14th Aug 2018 16:33

OK - well good luck with that.

I suspect you may have misinterpreted what HMRC are saying.

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Replying to lionofludesch:
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By Is this name taken
14th Aug 2018 17:20

Thanks.

They have not said anything yet, but are planning to raise the penalty in September. Of course the penalty period is up already and if HMRC choose to issue it then of course they can.

However I know that my client has good grounds for a reasonable excuse based appeal and I just wish to do everything I can to help him avoid penalties. Mainly at this point that involves submitting the SA return as soon as possible without taking excessive shortcuts.

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Replying to Is this name taken:
RLI
By lionofludesch
14th Aug 2018 17:42

Is this name taken wrote:

Thanks.

They have not said anything yet, but are planning to raise the penalty in September. Of course the penalty period is up already and if HMRC choose to issue it then of course they can.

How do you know they're planning to issue the penalty if they've said nothing ?

The penalty notices will be issued. Concentrate on reasonable excuse. You say the guy's been ill. For how long ? If it's even a few months, you're struggling to justify not submitting accounts and returns six months after the due date and sixteen months after the tax year end.

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Replying to lionofludesch:
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By Is this name taken
14th Aug 2018 19:19

lionofludesch wrote:

Is this name taken wrote:

Thanks.

They have not said anything yet, but are planning to raise the penalty in September. Of course the penalty period is up already and if HMRC choose to issue it then of course they can.

How do you know they're planning to issue the penalty if they've said nothing ?

When I access the client on HMRC it says that the penalty will be issued early September.

The penalty notices will be issued. Concentrate on reasonable excuse. You say the guy's been ill. For how long ? If it's even a few months, you're struggling to justify not submitting accounts and returns six months after the due date and sixteen months after the tax year end.

He's been ill for several years. The information from the HMRC website shows that the previous accountant was able to successfully appeal against all fines (including the £900 one) for the previous year's return.

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Replying to Is this name taken:
RLI
By lionofludesch
15th Aug 2018 09:22

Is this name taken wrote:

He's been ill for several years. The information from the HMRC website shows that the previous accountant was able to successfully appeal against all fines (including the £900 one) for the previous year's return.

You've answered your own question, then.

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Replying to Is this name taken:
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By Andy L
15th Aug 2018 10:08

-Send one more professional clearance reminder with a time limit.
-Call the current accountant on the deadline day or day before if no response received, just in case there are reasons. Although they should respond if so.
-Get a 64-8 in place, contact HMRC an explain the situation i.e. that the client has been ill, the incumbant accountants have been unresponsive etc. They will usually soft pedal on these daily penalties. They are used more as an incentive to bring things up to date than a punishment in my experience. Tell them the tax return will be in asap.
- Then gather the info and submit a complete return.

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By Tax Dragon
15th Aug 2018 07:23

Just a thought but, if filing an incomplete tax return (presumably easier than filing a complete one) would be enough to prevent penalties, wouldn't that undermine the reasonable excuse on which you will have to rely?

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By bernard michael
15th Aug 2018 09:31

Not doubting you or your client but anticipating a response from HMRC
Has your client been ill from 06/04/17 through to date?

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By Justin Bryant
15th Aug 2018 10:29

I recall seeing old Inland Revenue guidance (many years ago - possibly now in the Manuals archives) saying you should use provisional figures and state as such (so they can be adjusted later with more accurate figures) if you want to avoid late filing penalties, but I have heard the "new" HMRC argue late filing penalties as they may reject it as a valid return (there should be no penalties for negligence, especially if figures are over egged so there is no PLR).

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By pauljohnston
15th Aug 2018 10:32

OK Now that professional clearance problem has been sorted.

Next is data, if a Ltd Co can you get a copy of submission to Companies House.

If this is not applicaple a letter to HMRC.

Despite what others have said you must have some idea of the profit that the client has made. So I would consider calculating the profit as if it were a start up. Submitting the details in the appropriate tax return completing the white space and sending a letter of explanation.

Once you have done this you can then appeal the penalties.

HMRC are not the enemy but telling them what is going on will help considerable.

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Replying to pauljohnston:
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By Tax Dragon
15th Aug 2018 10:56

pauljohnston wrote:

HMRC are not the enemy but telling them what is going on will help considerable.

And that is all I would, personally, do in the OP’s circumstance. Let them know the previous accountant is hibernating, let them know I have been instructed, let hem know I am awaiting clearance (indeed, am going through the process to enable me to act in the absence of clearance), let them know that, because of this I will not be able to act before September, let them know that, once I can act, I’ll supply the missing return within two weeks. Please hold off on issuing the penalties. Doesn’t this approach tick all the boxes, rather than making a late, provisional, incomplete (frankly pointless) return that implies I am already in a position to act?
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Replying to pauljohnston:
RLI
By lionofludesch
15th Aug 2018 11:40

pauljohnston wrote:

OK Now that professional clearance problem has been sorted.

Next is data, if a Ltd Co can you get a copy of submission to Companies House.

Sure - but there's so little information, it's little or no use.

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By Marlinman
15th Aug 2018 11:12

I've always found responses to professional clearance letters very slow and have rarely had a reply at the first request. Threatening to report them to the Institute usually produces the required information by return.

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By Mr J Andrews
16th Aug 2018 10:04

£900 ? I suppose that's Brexit for you.
Anyway , don't think about which way you should go . Just don't become pig in the middle.

Without professional clearance and handover bumf, best way forward is to subtly suggest to [ ? potential ] new client that he files a provisional return based upon PY figures and pay whatever liabilities are due immediately.

Then try and sort out the secondary mess.

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By Is this name taken
17th Aug 2018 15:48

Thanks for the replies. There's much to mull over.

I have an update. The old accountants have replied giving me what I need, more or less. However, they have also said that the client and the client's spouse were removed from their business for non payment of fees. Also their latest tax computation is slightly at variance with HMRCs account.

So I have written to the client advising him to pay the payment demand which would cost more for me to investigate than the payment amount, plus who knows what I might find. I have sent the client draft accounts and my fee note and advised that I will finalise the accounts and submit the tax return when I get my payment.

Until then I will not work further on this one.

The lesson of all this for me is not to buck the system and instead go stage by stage as some have indicated above and it is also my normal way of working. Also to get payment up front from all clients, or at least all small and start up clients.

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