arthurallan
Blogger
Share this content
0
2101

Getting round Self Employed Income tax payments on account

Getting round Self Employed Income tax payments...

I carelessly failed to submit a tax return for a client before 30th December which meant we missed the deadline for the client to choose to pay his tax for 14/15 of £1200 via his tax code for 16/17 (he has employment as well as self employment income).

Worse still of course he also has to pay 600 on account in January 16 and July 16.

My client isn't very happy and whilst I have explained he won't actually be paying any extra tax obviously he is having to find lump sums he wasn't expecting to.

I have spoken with HMRC and they categorically refuse to amend his tax code in this situation and are basically saying its tough luck. I have pleaded that the client will struggle to pay the January and July lump sums but HMRC are not sympathetic.

I feel largely to blame for this and will meet the cost of any penalties and interest charges the client suffers.

Has anyone else had this situation but managed to get round it or get HMRC to be more understanding?

Why do they set this December 30th deadline rather than just using the 31st January deadline?

The other frustrating thing is that out Tax Return software doesn't reject tax returns submitted after 30th December which to make this election to pay via the Tax Code. So the first I hear about the error is from a very irate client who has had a tax demand.

Replies

Please login or register to join the discussion.

05th Mar 2016 17:29

POAs

Firstly, congratulations for having the guts to come on here and say you're at fault.

Secondly, what's the client's likely liability for 2016/17 ?   Is he likely to be paying anything or do you have a valid reason to reduce payments on account to zero ?  Or at least less than £600 apiece.

Thanks (3)
avatar
05th Mar 2016 17:56

Is it valid

Is it vald to claim that payments on account will not be required for 2015-16 on the grounds that any tax for that year will be collected through his tax code?  That way you can reduce the POAs to nil.

Thanks (0)
05th Mar 2016 19:14

Invalid claim

I raised a query some time ago on the consequences of reducing to nil regardless.

Theoretically HMRC could apply penalties if you reduced payments on account to nil even though you know that was incorrect. At the time I raised that query, no-one had come across HMRC doing it in practice. There would still be interest from the due dates of the payments on account anyway.

Thanks (0)
avatar
05th Mar 2016 19:36

But that is in different circumstances

- the query implies that there will be tax payable so reducing POA to nil would not be correct

In this case, if the tax for 2015-16 can be collected through coding, there would be nothing due.

Thanks (0)
06th Mar 2016 09:42

Not sure that's true

Cloudcounter wrote:

- the query implies that there will be tax payable so reducing POA to nil would not be correct

In this case, if the tax for 2015-16 can be collected through coding, there would be nothing due.

I haven't time to look it up at the moment but I reckon that only applies to the balancing payment, not the POAs.

Thanks (0)
06th Mar 2016 09:49

Try your luck on asking for the tax to be collected through coding. I've been lucky on occasion and they have done it.

Failing that, request a payment plan and you foot the bill for any interest.

Thanks (0)
avatar
06th Mar 2016 14:20

Not quite sure what is being suggested here?

Re cheekychappy I have spoken to HMRC and they categorically say they will not adjust the tax code because we missed the 30th December deadline; so you did well if you managed to get them to change a tax code in the same situation.

Re cloudcounter is your suggestion that if I get the 15/16 tax return done by 30th December 16 then the 15/16 tax could be collected via the 17/18 tax code so payments on account should not be needed for 15/16 and so I should apply for payments on account for 15/16 to be reduced to nil?

stepurhan suggests that if we did reduce the payments on account for 15/16 to zero but this was invalid it is unlikely HMRC would impose penalties.

So should I get the client to pay the 1200 now and apply for the payments on account (600 in January 2016 and 600 July 2016) to be reduced to nil?

Can we apply to reduce the January 2016 payment on account even though we are passed the 31 January date?

Thanks (0)
07th Mar 2016 12:07

Application to reduce re 2015-16

arthurallan wrote:

Re cloudcounter is your suggestion that if I get the 15/16 tax return done by 30th December 16 then the 15/16 tax could be collected via the 17/18 tax code so payments on account should not be needed for 15/16 and so I should apply for payments on account for 15/16 to be reduced to nil?

stepurhan suggests that if we did reduce the payments on account for 15/16 to zero but this was invalid it is unlikely HMRC would impose penalties.

So should I get the client to pay the 1200 now and apply for the payments on account (600 in January 2016 and 600 July 2016) to be reduced to nil?

Can we apply to reduce the January 2016 payment on account even though we are passed the 31 January date?

You are applying to reduce the payments on account not just January. Until you have information to complete the tax return they will always be a moving target and the client's best estimate of the liability for the year.

That said I do not believe that this will make any difference regarding payments on account for 2015-16.

POA's are set by TMA s59A as half the PY liability. You might apply to reduce payments on account on the basis that there will be no liability for 2015-16 because the return will be made before 30/12/2016 and the 15-16 underpayment coded out. I do not believe that that will work as Reg 186 dealing with the coding adjustment is of the balance of the liability given by TMA s59B. That is the difference between the SA liabiity for the year and tax deducted at source + POA's. The POA's would, or should come back into play based on the actual return for 15-16 with an interest charge from the normal POA due dates plus the outside chance of a penalty - as noted by stepurhan

Thanks (0)
07th Mar 2016 18:27

Assumption ?

Paul D Utherone wrote:

That said I do not believe that this will make any difference regarding payments on account for 2015-16.

POA's are set by TMA s59A as half the PY liability. You might apply to reduce payments on account on the basis that there will be no liability for 2015-16 because the return will be made before 30/12/2016 and the 15-16 underpayment coded out. I do not believe that that will work as Reg 186 dealing with the coding adjustment is of the balance of the liability given by TMA s59B. That is the difference between the SA liabiity for the year and tax deducted at source + POA's. The POA's would, or should come back into play based on the actual return for 15-16 with an interest charge from the normal POA due dates plus the outside chance of a penalty - as noted by stepurhan

Do you make the assumption that tax will be due for 2015/16 ?  There may be none.

Thanks (0)
08th Mar 2016 05:49

Sorry, yes I did

lionofludesch wrote:

Paul D Utherone wrote:

That said I do not believe that this will make any difference regarding payments on account for 2015-16.

POA's are set by TMA s59A as half the PY liability. You might apply to reduce payments on account on the basis that there will be no liability for 2015-16 because the return will be made before 30/12/2016 and the 15-16 underpayment coded out. I do not believe that that will work as Reg 186 dealing with the coding adjustment is of the balance of the liability given by TMA s59B. That is the difference between the SA liability for the year and tax deducted at source + POA's. The POA's would, or should come back into play based on the actual return for 15-16 with an interest charge from the normal POA due dates plus the outside chance of a penalty - as noted by stepurhan

Do you make the assumption that tax will be due for 2015/16 ?  There may be none.

If you can run calculations that, after deducting only anticipated tax deducted at source, show

no net liability for 15-16  then reduce POA's to Nil.a net liability but less than POA's due then reduce the POA's to half that each instalment, and check again after 5/4/16 to firm up the numbers.a net liability greater than the POA's due then that will be by POA's first and then balancing payment

Thanks (0)
avatar
By drknot
06th Mar 2016 21:27

From The Other Side's Point Of View

When I used to deal with queries like these, it was quite simple. 

Based on the attitude and query of the original poster, I would do the following:-

I wanted an easy life, if the return wasn't submitted by the 30/12 Deadline then provided is was queried in Jan / Feb / March, I would do it.

April onwards - no chance (the software would not allow it.)

The instructions though are quite explicit, the return has to be submitted by Dec 30th. My manager was old school, and on the notes I would put something on like "In order to avoid customer complaint, agreed to collect via code, code issued, POA adjusted." He would be happy,

Unfortunately these days there are a higher proportion of newer managers, that simply follow the rule book.

Of course if an agent came on demanding something should be done, when they had made a mistake, that was a different matter.

Regarding reducing the POA's to zero.

It can be done at any time, up until the time that the return is submitted.

A certain high volume agent would regulary phone up and say "I have reviewed my clients situation and there are no POA due based on the information I have." This would be enough to reduce the POA's to zero, of course when the return popped up the following year, POA's were due, but the only charge for these was interest. No penalties, no fines.

If this was done every year, then the notes would be visible, so might be refused over the phone, (a written request with evidence would be required.)

All I can say is thank goodness I do not have to do that job anymore, and I feel sorry for friends that work there.

 

Thanks (6)
07th Mar 2016 10:46

Thank you

drknot wrote:

When I used to deal with queries like these, it was quite simple. 

Based on the attitude and query of the original poster, I would do the following:-

I wanted an easy life, if the return wasn't submitted by the 30/12 Deadline then provided is was queried in Jan / Feb / March, I would do it.

April onwards - no chance (the software would not allow it.)

The instructions though are quite explicit, the return has to be submitted by Dec 30th. My manager was old school, and on the notes I would put something on like "In order to avoid customer complaint, agreed to collect via code, code issued, POA adjusted." He would be happy,

Unfortunately these days there are a higher proportion of newer managers, that simply follow the rule book.

Of course if an agent came on demanding something should be done, when they had made a mistake, that was a different matter.

Regarding reducing the POA's to zero.

It can be done at any time, up until the time that the return is submitted.

A certain high volume agent would regulary phone up and say "I have reviewed my clients situation and there are no POA due based on the information I have." This would be enough to reduce the POA's to zero, of course when the return popped up the following year, POA's were due, but the only charge for these was interest. No penalties, no fines.

If this was done every year, then the notes would be visible, so might be refused over the phone, (a written request with evidence would be required.)

All I can say is thank goodness I do not have to do that job anymore, and I feel sorry for friends that work there. 

Jolly interesting.  I wish more HMRC employees or ex-employees would give us their views.

Thanks (3)
avatar
By rainbow
14th Mar 2016 17:32

I don't understand the original question about missing a deadline for including tax due in coding notices.   In the tax return software I use you actually have to tick boxes if you do not want tax to be collected through tax codings.   In other words, if my client wishes to pay tax under self assessment in January and July and I forget to tick the boxes, then if the amounts of tax are within the limits, it automatically goes in coding notices. 

Thanks (0)
14th Mar 2016 17:53

Unaware of this ?

rainbow wrote:

I don't understand the original question about missing a deadline for including tax due in coding notices.   In the tax return software I use you actually have to tick boxes if you do not want tax to be collected through tax codings.   In other words, if my client wishes to pay tax under self assessment in January and July and I forget to tick the boxes, then if the amounts of tax are within the limits, it automatically goes in coding notices. 

In the very first post, the OP says he sent the return in after 30th December 2015,

Miss that deadline and there's no coding out.

Thanks (1)
Share this content