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Is this innocent error?

clients own return for overseas income

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I have a client who filed their own 14/15 and 15/16 returns

He was UK resident with a swiss payroll, and did the classic of putting the income on the foriegn pages, but not reporting on the employment pages and as a result has underpaid his taxes.  Him and about every other DIY tax return on the planet, and more than one agents return too I dont doubt.

HMRC are arguing this was careless to not have read the notes, which I understand to a point, but to be fair to the client this is far from obvious and HMRC are coming to this very late in the day.  They had all the data on the original tax return in order to make the correct assessment, albeit in the wrong boxes.

Any words of wisdom, suggestions, an in particular any cases I could quote in my clients favour?  It seems no longer to be accepted that people make mistakes.

I cant seem to find anything directly on this which has been contested. I was wondering if there was anything where the client had put the right information on the return, but in the wrong boxes and it having been found as a mistake and not a careless one.

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By jonharris999
24th Nov 2020 15:19

I would also like to hear about any such successful challenges.

I have a number of complaints/adjudications re SEISS which involve correctly reported earnings in the wrong boxes.

In some of these there is evidence of poor advice from HMRC, which is helpful to my cases. In others I am more reliant on the kinds of arguments you express in the OP.

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By paulwakefield1
24th Nov 2020 18:50

Very different circumstances but there is quite a lot of discussion about the right information in the wrong places in HMRC v Raymond Tooth.

https://files.pumptax.com/wp-content/uploads/2019/05/17143935/Tooth-v-HM...

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By gillybean04
24th Nov 2020 23:05

As I understand it, honest mistake is one where reasonable care was taken but a mistake was still made. While careless is still an unintentional error, but one which was made because reasonable care was not exercised.

I would advise the best way to argue against careless is to demonstrate that the client wasn't just guessing, assuming that what they had done was correct.

This might involve dates he asked his then agent or hmrc for help, what materials he consulted such as the guidance notes available online etc. Then summarise how this led to your client arriving at the wrong answer.

If your client didn't check anywhere and just blindly assumed it was correct, I would imagine that is a textbook example of careless.

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By unearned luck
25th Nov 2020 02:12

Perhaps you could put your dispute with HMRC in context. Have HMRC opened valid enquires into either or both years?

Have HMRC issued (or intend to issue) DAs to recover the tax?
Have HMRC issued or intend to issue penalty assessments? If so, failure to correct penalties or ‘normal’ penalties?
How did the errors come to HMRC’s attention? Unprompted disclosure, prompted disclosure or no disclosure?

Things to note:
*A 14/15 DA issued after 5/4/19 requires HMRC to prove bad behaviour by the taxpayer or someone acting on his behalf. Carelessness is sufficiently bad.
*To avoid the draconian FTC penalty (if that is in point) the taxpayer will need a RE or to successfully argue that this isn’t an offshore matter.
*A suspended normal penalty is almost as good as no penalty.

See recent FTT case of Dolan. TP was an a/cant. Completed his TR wrongly as he thought he knew want he was doing. It was held reasonable not to have taken steps to ascertain the correct position as he did not know that he should have taken such steps because he was under the mistaken belief that he already knew the correct position. You too could get a kindly judge.

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Replying to unearned luck:
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By jonharris999
25th Nov 2020 07:22

Do you have a link for Dolan? Apols if I am being dim but I can't find it on the page of FTT decisions.

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Replying to jonharris999:
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By gillybean04
25th Nov 2020 17:06

https://www.bailii.org/uk/cases/UKFTT/TC/2020/TC07924.pdf

I would disagree with the wording that the FTT held it reasonable though. They accepted it as proof the error wasn't deliberate. Then went on to class the assumption as a careless mistake, stating the taxpayer had not taken reasonable care.

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Replying to gillybean04:
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By unearned luck
26th Nov 2020 00:22

Indeed.

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By ireallyshouldknowthisbut
25th Nov 2020 10:12

Thanks for the thoughts above.

RIght now its a fishing letter to which I need to frame an answer as to why we don't plan on correcting earlier returns, and await HMRC to dispute our claims of innocent error.

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