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New Client, prev accountant SA303 error

New client, Old Accountant submitted SA303 to 0 in error, how do i rectify?

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Never had this issue before, some advise is needed please.

Just took on a new client with a year end July 20. prev accountant submitted TR for 18/19 and put a SA303 in to reduce POA to 0.00. They had completed the accounts up to 31/7/19 but hasnt submitted the TR for 19/20 so its fell on me to do it.

Looking at the accounts, its clearly obvious that the SA303 shouldnt have been submitted. Clients tax is way above 1k.

Whats the best way to rectify? given January has already passed, he should have paid the 1/2 Estimate, im guessing he will incur insterest now? From what i can gather, July POA has been deffered to Jan 21, so it should only cause an issue with missing the Jan POA.

Should i just inform client of ex accountants mistake and leave it up to him to decide what action to take, or?

Replies (15)

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By Rammstein1
28th Aug 2020 10:10

Just submit and tell client what to pay. He might have told them to reduce to nil.

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By John Isabel
28th Aug 2020 10:14

Ordinarily it would be quite easy - tell the client that because POAs had been excessively (or incorrectly) reduced, interest would apply and as such they should either pay ASAP or accept the interest.

Problem is that in order to give them that news you'd normally want to quantify the interest - or at least estimate the implications. With the deferral of 2nd POAs I'm not entirely sure what interest will be due now.

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Replying to John Isabel:
Quack
By Constantly Confused
28th Aug 2020 10:24

John Isabel wrote:

Problem is that in order to give them that news you'd normally want to quantify the interest - or at least estimate the implications. With the deferral of 2nd POAs I'm not entirely sure what interest will be due now.

Surely just interest on the January payment missed, given the July one won't be late until 01/02/21?

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Replying to Constantly Confused:
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By John Isabel
28th Aug 2020 12:05

Interest on Jan instalment only would be my assumption, yes. Im not entirely sure though and whilst I would look it up/check if it was my client and the amount made such a task worthwhile, im not going to do it for someone else when the tax bill might only be a couple of grand anyway, making the whole thing pretty irrelevant.

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By jonharris999
28th Aug 2020 10:15

Do you know why the SA303 was filed? Total liability < £1K isn't by any means the only reason why one might do this.

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Replying to jonharris999:
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By Constantly Confused
28th Aug 2020 10:25

jonharris999 wrote:

Do you know why the SA303 was filed? Total liability < £1K isn't by any means the only reason why one might do this.

Why else would one legitimately file a nil SA302 other than if you expect zero tax to be due?

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Replying to jonharris999:
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By SXGuy
28th Aug 2020 10:45

When the client came to me (bare in mind they dont understand the difference between accounting period, and tax return submission periods) he advised me that the old accountants reduced the POA's because they expected his profits to be lower.

When the old accountants handed over the last submitted tax return, i could see they had only filed 18/19 (accounts ending 31/7/18) but had completed the accounts up to 31/7/19. Upon checking their accounts, the tax due is around £2580, but the TR for 18/19 had a claim to reduce POA to £0.00. Which clearly isnt right, and they would have known this, because the following years accounts had been prepared, and client admitted ex accountants didn't submit 18/19 TR until at least October of last year. So they would have had all the relevant info to make an educated guess as to whether the claim should be made.

There are no other sources of income.

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By Paul Crowley
28th Aug 2020 10:54

Not a big deal
Numerous times come across this. Even my former partners would reduce as favour to client if client in difficulty.
HMRC not really interested as they get interest as compensation.
I prefer never to reduce, If client confident that next year less profit then get return in early to stop second POA.
Advise client of situation, let client decide what to do

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Replying to Paul Crowley:
RLI
By lionofludesch
28th Aug 2020 10:59

Paul Crowley wrote:

Not a big deal
Numerous times come across this. Even my former partners would reduce as favour to client if client in difficulty.
HMRC not really interested as they get interest as compensation.
I prefer never to reduce, If client confident that next year less profit then get return in early to stop second POA.
Advise client of situation, let client decide what to do

I agree.

Technically they could penalise but I've never seen it. Or even heard of it.

Interest on the Jan 2020 instalment only. Which you can stop by paying it now. To be honest, I never estimate the interest due. It is what it is, it's not open for debate or mitigation.

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Replying to lionofludesch:
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By jonharris999
28th Aug 2020 11:26

I'm with Lion and Paul.

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By SXGuy
28th Aug 2020 11:50

Thanks for your opinions. Noted. Will advise client of potential interest and leave it to them to decide.

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Replying to SXGuy:
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By petestar1969
28th Aug 2020 16:34

The interest will be piddling anyway....

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Replying to petestar1969:
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By SXGuy
28th Aug 2020 16:50

I thought it might be. But still it's good to inform to at least give a clear picture of what will be due Jan.

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By Matrix
28th Aug 2020 17:07

And always good for new clients to know the historic messes we have to sort out.

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By Vaughan Blake1
31st Aug 2020 17:09

The only decision to consider is "when to submit the return". Send it in now and the January 2020 instalment will be due more or less straightaway, send it in on 31 January 2021 and the tax will be deferred until 31 January 2021.

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