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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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.
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 ?
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.
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.
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.
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.
Professional clearance is not optional. It is a pre-requisite for the OP to be able to act for the “client” at all.
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.
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.
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.
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.
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!
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.
I suggest you refresh your memory on what the Institute’s rules say about professional conduct on a change of appointment.
Easy for academics in ivory towers to come up with crazy, impractical rules.
As we have so often seen ..........
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.
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.
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??
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.
OK - well good luck with that.
I suspect you may have misinterpreted what HMRC are saying.
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.
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.
-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.
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?
Not doubting you or your client but anticipating a response from HMRC
Has your client been ill from 06/04/17 through to date?
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).
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.
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?HMRC are not the enemy but telling them what is going on will help considerable.
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.
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.
£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.