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Out of time Tax Return - options please?

Tax Return submitted after 4 years - HMRC not accepting - being chased for Payments on Account

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Client's 2012/13 POA's were set following submission of her 2011/12 Tax Return (submitted on time).

Client then goes AWOL for a number of years, until she gets back in contact again recently saying that she's being chased by HMRC for tax for 2012/13 (her unpaid Payments on Account - doh!). It turns out that she became employed in 2012/13 and so no further tax is due (her 2012/13 payments on account total £4000'ish). HMRC will not accept her 2012/13 Tax Return because it is out of time, so they can't displace the POA's, nor have they made a Determination (so Special Relief will not apply). It is obviously too late to retrospectively claim to reduce the POA's.

I don't know what other options are open to her. I've looked at the Higgs case which would have provided assistance were it not for HMRC closing this 'loophole' in 2016.

Has anyone come across this situation before and managed to overcome it?

Thanks.

Replies (18)

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By SXGuy
13th Jun 2019 20:30

Was there absolutely no income other than paye in 12/13?

I don't have expert knowledge in the area of POAs but has the question been put to hmrc that your client was in employment in that year and so POAs would have beeen refunded? Ask exactly where payments on account will be allocated since there were no other taxable income?

It seems ludicrous to me that they can demand POAs for a year in which they are being told the only income was taxed at source.

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Replying to SXGuy:
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By mail.taxperfect.co.uk
14th Jun 2019 10:45

SXGuy wrote:

Was there absolutely no income other than paye in 12/13?

I don't have expert knowledge in the area of POAs but has the question been put to hmrc that your client was in employment in that year and so POAs would have beeen refunded? Ask exactly where payments on account will be allocated since there were no other taxable income?

It seems ludicrous to me that they can demand POAs for a year in which they are being told the only income was taxed at source.

Thanks, and I agree, it does seem ludicrous. But from the legislation this is the position the client finds herself in. HMRC won't process her 2012/13 Tax Return (which would assess the correct liability) because it is out of date. Special Relief won't apply because HMRC did not issue a Determination. The POA's cannot be reduced (on a back-dated basis). Hence, she's stuck with the POA's.

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Replying to mail.taxperfect.co.uk:
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By SXGuy
15th Jun 2019 08:47

Sounds to me like they are wanting to pocket the interest which would become due then, Because in theory if it was paid, a repayment could be requested shortly after but the interest would remain owed, or rather offset the repayment.

Really shocking. Take me back to the days where you could squash things like this based on there being no actual loss.

Thanks (1)
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By Justin Bryant
14th Jun 2019 10:09

Can't she notify HMRC of some (small?) undisclosed liability for that year so that HMRC then have to send her a notice to file a tax return. From memory the FTN penalties are tax geared and the late filing penalties from that year may be less than the POAs. (If she was sent a 2012/13 notice to file then I can't see how a 2012/13 tax return she sends HMRC can be rejected as being out of time in the absence of a CN or DA etc.)

That may be a rubbish suggestion however and you would need to check all that.

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Replying to Justin Bryant:
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By mail.taxperfect.co.uk
14th Jun 2019 10:47

Justin Bryant wrote:

Can't she notify HMRC of some (small?) undisclosed liability for that year so that HMRC then have to send her a notice to file a tax return. From memory the FTN penalties are tax geared and the late filing penalties from that year may be less than the POAs. (If she was sent a 2012/13 notice to file then I can't see how a 2012/13 tax return she sends HMRC can be rejected as being out of time in the absence of a CN or DA etc.)

That may be a rubbish suggestion however and you would need to check all that.

Thanks, and yes she was sent a Notice to File (presumably on 6 April 2013), but HMRC will not process if it is over 4 years late.

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Replying to mail.taxperfect.co.uk:
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By Justin Bryant
14th Jun 2019 11:12

HMRC need to tell you the legislative justification for this purported 4 year time limit, as in the absence of a discovery assessment, determination or closure notice etc., I am not aware of any such SA100 filing time limit following the issue by HMRC of a notice to file.

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Replying to Justin Bryant:
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By mail.taxperfect.co.uk
14th Jun 2019 13:59

Justin Bryant wrote:

HMRC need to tell you the legislative justification for this purported 4 year time limit, as in the absence of a discovery assessment, determination or closure notice etc., I am not aware of any such SA100 filing time limit following the issue by HMRC of a notice to file.

S34(A) TMA1970

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Replying to mail.taxperfect.co.uk:
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By Justin Bryant
14th Jun 2019 16:23

Yes; sorry, this problem issue has come up here before and I thought that that had that effect but was too busy to check. It looks like you might be snookered here.

Maybe if your client did a DDS disclosures for some (minor) undeclared income you could see if that produces a way to get HMRC to raise a discovery assessment or whatever and then appeal that (due to the POA or whatever) and if necessary get the tribunal to correct the overall tax due (a long shot though)?

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By SteLacca
14th Jun 2019 09:39

TMA S8B(6)(b) may provide a way out.

Thanks (1)
Replying to SteLacca:
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By mail.taxperfect.co.uk
14th Jun 2019 10:49

SteLacca wrote:

TMA S8B(6)(b) may provide a way out.

Thanks, I'll try that.

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By JCresswellTax
14th Jun 2019 16:21

payments on account eventually become the SA liability so as she is out of time she is screwed (unless special relief applies which according to you doesn't).

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By Cathy Milligan
17th Jun 2019 10:53

I had a similar situation but going back to 1996/7 - yes really. HMRC will not budge. Her small 2018 tax refund was used to reduce 1997 POA (client had emigrated) Have spent far too much time chasing it.

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By Bruce Roberts
17th Jun 2019 11:32

This seems to be another incidence of HMRC essentially stealing somebody's money because the rules for administering of tax allows them (or assists them) to do exactly that. We have found similar issues with PAYE overpayments, CIS refunds and VAT refunds. Once HMRC has the cash they seem to use every excuse under the sun to hold onto it even when everybody accepts (HMRC included) that it is not owed. We have been told more than once that 'the system' is at fault.

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By milesbw
17th Jun 2019 11:52

This looks so Catch-22. Unless you find another way through the legislation, it is probably best for you and her to talk to her Member of Parliament and seek their help.

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By David Gordon FCCA
17th Jun 2019 12:27

Apply to the tribunal for HMRC to issue a Determination.
Submit a return- yes I know they may send it back, but this is "For the record".
Appeal against the Determination.
As far as I know HMRC were required to issue a Determination.
P.O.A are what they say. They are not Assessed tax.
See and employ a tax counsel. If it costs £1000 she has got away cheap.

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By Homeworker
17th Jun 2019 13:18

There used to be something called "equitable liability", where if HMRC were (validly) pursuing a totally unreasonable debt you could ask for it to be cancelled. It was never widely publicised but you can still find articles about it online (I just did!).

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By Tim Robinson
17th Jun 2019 13:40

Might a different approach be possible - tell HMRC to take the taxpayer to County Court to enforce the 'debt'? Judges normally have the common sense to deal with issues like this.

Just a thought.

Tim

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By cfield
17th Jun 2019 14:37

Whatever happened to the principle of "paying the right amount of tax"? Or is that just for tax avoidance?

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