HMRC Stand off -How to resolve?

HMRC will not amend tax return owing to changed agent?

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A Husband wife Company paid a dividend of £100k in Tax year. The previous agent does the Company Accounts and did the Husband and Wife Tax returns. In the filed tax returns for the shareholder/owners the dividend was reported £70k:£30k. Wife (£30k) had no knowledge of the dividend nor did she receive anything. I became agent to the Wife as a divorce is pending. The original tax return filed by the agent triggered tax on the (unreceived) dividend and then a student loan repayment resulting in a £6k HMRC bill (which has been paid to avoid interest and penalties). I asked the previous agent to amend my clients tax return to take off the dividend never received. The situation now is, HMRC will not all the previous agent to correct the return as they are no longer the agent for her and I cannot amend the return as agent as it was not filed by me and does not show as a prior year return on my agent filing page. Any advice as to how to resolve please?

 

Replies (37)

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By johngroganjga
31st May 2024 08:39

It seems to me that the question to ask is not about the tax return, which is correct, but about who received the dividend that should have paid to the wife.

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By SXGuy
31st May 2024 08:44

First thing you do, is not be so A*#l about last year's tr not showing in your whatever your using.

Your appointed agent, assuming the client has instructed you, file the amendment.

For the record if a new accountant asked me to go back and file amended return based on info I didn't have but apparently you now do, I'd also be refusing.

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By taxdigital
31st May 2024 08:45

What is this question about? Without going in to the rights and wrongs of it, if the amendment window is still open, can’t you just key in the numbers in to the software and click the ‘file’ button?

(I don’t do much of form filling though)

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By johngroganjga
31st May 2024 09:33

I say again that the tax return is not wrong and does not need amending. As an aside, if it was amended it would be essential to ensure that the return of the person who actually received the dividend was also amended.

How was the wife’s dividend accounted for? Paid into a joint bank account? Credited to a joint loan account in the company’s books? Paid into someone else’s bank account - presumably the husband’s? What is stopping the wife getting it redirected to her? That is the question.

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By Tax Dragon
31st May 2024 09:38

I agree with John. Ignorant agents may be dangerous and could cost their clients money. Maybe the wife's divorce lawyer wants to claim the money on wife's behalf and amending tax returns to say the money isn't hers would not help the case.

I am not a lawyer and don't know what I'm talking about, but maybe nor is (and nor does) the OP. That's the danger.

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By bernard michael
31st May 2024 09:46

Is only one year in question or is she also not recognising dividends declared for previous years??

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By Paul Crowley
31st May 2024 10:07

If you alter the return, then think about an SAR. Discuss it with the solicitors involved as they, both of them, also need to submit SARs

This sounds like a nose cut face position. The joint pot is reduced if the 30K is moved from W to H.

Have you explained any of this to your client and her legal advisor?

What about other prior dividends? How long has this tax fraud been going on? Where did the money really go?

You are asking about submitting an amended return (which if you cannot do, suggests that you should not be acting) but missing what is the bigger picture.

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Replying to Paul Crowley:
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By More unearned luck
31st May 2024 11:00

"If you alter the return, then think about an SAR. Discuss it with the solicitors involved as they, both of them, also need to submit SARs"

An accountant who aids and abets tax fraud must grass themselves up?

Are you allowed to discuss your suspicions with other people? How can you be sure that what you think won't get back to the suspect?

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Replying to More unearned luck:
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By Paul Crowley
31st May 2024 11:15

If OP alters one of the returns, then he should discuss the consequences of doing so with his client and her advisor.

Someone needs to declare £30K. OP is acting so as to make dividends drawn evaded for tax.

You do not discuss SARs with anyone. But you do discuss the problem that tax is being evaded, and those registered for AML should know what needs to be done.

'An accountant who aids and abets tax fraud must grass themselves up?'
That is exactly what AML is about

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Replying to Paul Crowley:
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By More unearned luck
31st May 2024 11:32

Your words sounded like "I'm going to submit an SAR so you should too".

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By paulwakefield1
31st May 2024 10:10

I think it is difficult to say categorically that the returns are correct based on the information available. What are the shareholdings? Are there alphabet shares?

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By Paul Crowley
31st May 2024 10:21

Based on prior history
OP will, as usual, remain silent.

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Replying to Paul Crowley:
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By Brendan246
31st May 2024 11:03

Hi Paul,

I am not sure what you mean by this?

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Replying to Brendan246:
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By Paul Crowley
31st May 2024 11:42

I think is says exactly what it says.

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By Brendan246
31st May 2024 11:10

Thank you all for responding for the input.

I am not a**l about who files what, just seeking to get back the £5k tax that HMRC has for £30k of the £100k dividend as they already have all the tax on the whole dividend paid now the agent has corrected the Husband return.

70:30 split is per the shareholdings.

I believe it is a one off situation with a bumper year in the Company regarding dividends being reported and not paid.

Lawyers dealing with the divorce are aware and could be resolved on the asset split but husband has now declare all the dividend and wife another £30k worth and impasse with getting the correct position reflected by HMRC.

I was just looking to see if anyone had a situation where HMRC refuse to talk either to the current agent or the prior agent to resolve such an issue.

Thanks

Brendan

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Replying to Brendan246:
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By Matrix
31st May 2024 11:14

You are complicating matters by not using third party software. Pass her to someone who can file it and stop blaming HMRC.

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Replying to Matrix:
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By More unearned luck
31st May 2024 16:55

I'm not convinced that the wife's TR is wrong. But if it was software of any kind is not needed to amend it. Amendments can be made in writing. Mr Cotter's antediluvian accountants amended his TR by letter, IIRC.

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Replying to More unearned luck:
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By Matrix
01st Jun 2024 07:23

More unearned luck wrote:

I'm not convinced that the wife's TR is wrong. But if it was software of any kind is not needed to amend it. Amendments can be made in writing. Mr Cotter's antediluvian accountants amended his TR by letter, IIRC.

Yes I was responding to the problem the OP thinks he has in completing the work agreed, hopefully OP will consider Basil’s post before proceeding.

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Replying to Brendan246:
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By Tax Dragon
31st May 2024 11:38

Why has husband paid tax on his wife's dividend? HMRC lost Arctic Systems.

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Replying to Brendan246:
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By Paul Crowley
31st May 2024 11:48

Are you now claiming that the prior agent has filed an amended tax return for for all the dividend?
You failed to mention that.
I would want evidence.
Difficult to describe that as an error, so what exactly is the explanation for the change?

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Replying to Paul Crowley:
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By Tax Dragon
31st May 2024 12:52

Paul Crowley wrote:

I would want evidence.

Maybe you would; I doubt you're entitled to it though. And what would it prove anyway? Husband overpaying tax doesn't of itself change wife's tax position. Or... persuade me that I'm wrong.

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Replying to Tax Dragon:
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By Paul Crowley
31st May 2024 13:05

I very much doubt that any paperwork exists. Genuinely recorded, honestly dated.
But HMRC are only going to be interested if the dividend is not taxed, or dubiously passed around to evade tax.

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Replying to Paul Crowley:
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By Tax Dragon
31st May 2024 19:17

That's not true. H paying more tax than he needs to does not relieve W from paying the tax that she should, and HMRC will happily go after her.

But this is a distraction from the real issue, which John described in the very first reply and several other contributors have repeated since.

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Replying to Brendan246:
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By FactChecker
31st May 2024 15:11

"now the agent has corrected the Husband return" ... that's the first time you've mentioned that (presumably by 'corrected' you mean the full £100k is allocated to him as a dividend?) - but not relevant to you as you are not agent for husband or for company.

There is nothing to stop you filing an amended return for wife (your client) - but, as with any client, you're going to want to see supporting documentation for her figures before you file ... aren't you?

Putting it bluntly, it's not relevant to you what company or husband have reported or how much tax they've paid or whether HMRC has received too much/little tax. What matters is helping your client to submit correct figures for her and to pay/reclaim the correct tax.

At the moment you appear neither to have certainty regarding what she did or did not receive, nor what she (possibly on the advice of her lawyers) wants to present to you as a statement of her finances. THAT is what should be holding you up - not whether or how to submit an amended return.

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By paulwakefield1
31st May 2024 13:18

I am confused (easily done) but I'm struggling to see how the Husband received and has (now) declared all of the dividend on a 70:30 shareholding split.

Is the husband holding £30k on behalf of and due to the wife? (original tax returns correct but H's apprently amended return wrong)
Are they alphabet shares with no dividend declared on wife's shares? (Assuming £100k total dividend, H amended return is right, W wrong)
Was the original total dividend £142,857 (H return now right, W wrong)
Did the wife validly waive her dividend & £100k paid on H shares? - sounds highly unlikely

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By Roland195
31st May 2024 13:31

You are a braver man than me in accepting this appointment from a disgruntled spouse & blundering around half cocked.

Have you discussed any of this with the solicitor representing the wife? Do you understand that in cases like this, you will not necessarily improve the wife's position by worsening the husband's?

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DougScott
By Dougscott
31st May 2024 14:07

Am I missing something here. Shouldn't the wife be asking for the £30,000, which must be a lot more than her tax bill?

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By [email protected]
03rd Jun 2024 13:58

Wouldn't one start with the company accounts?

If H has 70% of the votes he can pass the dividend resolution after which all shares of the same class need be paid proportionally. If that's the case (and W didn't sign a waiver in advance) W is entitled to the dividend (alphabet share point noted). It should be on her return and the question is where's the money? That would mean the tax return is correct (it was legitimately declared and payable), and her lawyer should be pressing for the money from the company?

A bit odd to pay an exceptional dividend, possibly impacting the share valuation, if matrimonial proceedings are in the offing...

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By Brendan246
31st May 2024 17:56

Thanks to all those that constructively replied to the posting looking for help, 25 posts is far more than I was ever expecting.

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By lionofludesch
31st May 2024 21:17

I thought it was a post about rugby.

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By fawltybasil2575
31st May 2024 22:43

@ Brendan246 (OP).

In intending no offence, I am concerned that you asked the previous accountant to amend the Tax Return after they had ceased to act (such action would have been malpractice, and your requesting them to do so could have impacted adversely on you for asking them to do so).

Before commenting further on your position, I am compelled to ask you the one question which must be resolved at the very start. Have you asked your client whether they AUTHORISED the previous accountant to submit the 2022/23 Return ? If not, then do so now.

If the answer was/is "Yes", then you must ask the client WHY they have changed their mind as to whether they received £30K or not in Dividends. That question MUST be answered before you proceed.

If the answer is "No", and if that answer is established to be true (ie if the previous accountant acted improperly in submitting the Return without authority) then you should ask the client to request their solicitor (do not yourself do so - you should keep out of it) to quiz the previous accountant as to the reason for that malpractice. Establishing that the previous accountant submitted the Return without the client's authority could assist in defending any contention by HMRC, or by any other party, that you had acted improperly in submitting an incorrect amended Return.

I make the above comments with reluctance since, in again not intending offence, I believe that you are probably not equipped to defend yourself against contentions by any of the parties, especially so given the frequently fractious circumstances of a contested divorce.

Just to add to your personal risk exposure, you will be aware that an accountant should not submit any Tax Return without taking due care to ensure that there are no errors therein or omissions therefrom: hence, quite regardless of the dividends factor at issue, you are obliged to take steps to ensure there are no OTHER errors in, or omissions from, the AMENDED Return (it will be no valid defence to say that you were only tasked to deal with the amendment -if you ask the client to authorise the Return then your obligations are the same as if you were tasked with preparing and submitting the original Return).

In essence, tread very carefully; and preferably IMHO decline any and all requests to become involved: if ultimately you do believe the "no Dividends" stance of the client, and decide to submit the Return, then at the least you should obtain a letter from the client's solicitor to the effect that, for example, "after comprehensive investigation and enquiries, with our client and all other relevant parties, we have established for certain that our client received no Dividends, in any form, from xxx Ltd in the year to 5 April 2023" (taking heed of my above comments re the other entries on the Return).

Basil.

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Replying to fawltybasil2575:
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By Tax Dragon
01st Jun 2024 06:52

Sound advice, this. Very sound.

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Replying to fawltybasil2575:
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By Brendan246
03rd Jun 2024 14:24

All duly noted.
The Company accounts, and the two original tax returns were all completed previous agent. Without wishing to appear dated or sexist the Husband only dealt with the accountants. The spousal involvement was to click on a link on a computer screen, without reading what was being clicked on so yes she approved the original return before submission by the prior agent
The previous agent when made aware by solicitors decided to amend the dividend split to 100:0 from 70:30, and my request was to amend the return for the spunse at the same time.
Sadly despite them amending their return via the medium of submission HMRC has not been willing to so amend for their records.
Solicitors are seeking where the funds went to tie up in the matrimonial settlement.
My involvement was for the following tax year when the large bill showed up on a client statement and sought POA's for income never actually received but declared on a tax return by the prior agent.
Again thank you all for the further comments received.

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Replying to Brendan246:
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By KTS
03rd Jun 2024 14:40

The above advice is very sound. I would, however, expand beyond “received” and ask whether she was ENTITLED to the dividend. Not receiving it isn’t the same as not being due. I would suggest that your client needs copies of the original minutes declaring the dividend to see if the company should have paid her the £30k and she needs to get a copy of the original accounts to see how it was accounted for. Also check with Companies House records to see if they have been amended after the fact. If the dividend declaration in the company did show a £30k dividend to her then her solicitor should be chasing this rather than the much smaller tax liability that you are looking to recover. Definitely check all of this before blindly amending her Return as you don’t want to be the patsy at the end of the line when she looks at who to sue if she coukd have been £30k richer.

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Replying to Brendan246:
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By paulwakefield1
03rd Jun 2024 14:47

"decided to amend the dividend split to 100:0 from 70:30"

Do the Articles allow this (it would be rare)? There is a risk that the dividend on that revised split is unlawful. It also sounds like the revised split was a rewrite of history.

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By JD
03rd Jun 2024 09:58

Who are the shareholders of the company and why did the wife sign a tax return, without understanding the income included on it.

Is it not the individual's own responsibility to take reasonable care when approving these things, not just to change things because of the direction of the wind that week.

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Replying to JD:
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By Brendan246
03rd Jun 2024 14:25

Stupity and trust.

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