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Possible penalty on 2020 SA return

Property income not declared

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A new client was not notified by HMRC to send in a return for 2020.

He has brought to my attention property income and expenses from 2 properties that should have been declared on a 2019-20 return. One property had a loss and the other a gain.

Would there be late filing penalties on any 2020 tax return filed now if there was no notification to complete a return?

 

Replies (16)

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By MJShone
21st Jan 2022 16:04

Your client should have told HMRC of the new source of income by 5 October 2020 - s7 TMA 70?

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Replying to MJShone:
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By More unearned luck
21st Jan 2022 17:54

What income? Owing to the dearth of data in the question we don't know if there is a net profit or a net loss. If these two possibilities are equally likely then the 50% chance that your advice is relevant.

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Replying to More unearned luck:
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By D V Fields
21st Jan 2022 23:04

The advice is spot on, totally relevant and very informative.
From this the OP can deduce that if there isn’t untaxed income all is good; but if there is it should have been reported - and follow up on consequences.

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Replying to More unearned luck:
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By Wanderer
23rd Jan 2022 14:23

Don't you need to take your argument a step further?
i.e. is it whether it's a net profit that's relevant or whether a tax liability exists?

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By cohen
21st Jan 2022 16:04

You have 3 months from the date of issue of the return in which to file, where this falls later than the usual filing deadline.

There may be a late notification penalty, and there may be late payment penalties if tax is due.

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Brunel
By Brunel
21st Jan 2022 16:31

Let Property Campaign

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By ireallyshouldknowthisbut
21st Jan 2022 17:15

is there any tax? If its losses I would just stick them on the 20/21 with a note on the white space.

if there is a profit, and you have a UTR I would file it and advise payment of any tax due sharpish. Clearly there will be interest and probably a tax geared penalty for late payment if the sum due is enough for HMRC to bother with. Penalties for failure to notify are largely theoretical in my experience.

Let property campaign wont accept 19/20 until I think April (?) and is often more hassle than its worth for one year. The only time I would do is if you think the penalties will be lower than filing the missing return and the extra admin costs of going down that route.

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Replying to ireallyshouldknowthisbut:
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By More unearned luck
21st Jan 2022 18:13

The ability to file or to amend an already filed 2020 TR electronically expires in ten days' time, so I'd think that the cut off date is more likely to be then than 5/4/22. Otherwise for two months or so, there would be one year that can't be dealt with electronically, which doesn't seem likely for a tax authority that aims to be the most technologically advanced in the world (and sod the people it likes to call 'customers' with plans like MTD) .

But this gives rise to a dilemma. If a taxpayer is ready to submit his 2019/20 omissions now, does he do so by filing a (n amended) TR now or wait until whichever cut-off date it is and then file via the LPC? The former would incur automatic late payment penalties of 10%, the latter might incur higher penalties than otherwise as HMRC might take a dim view of the deliberate delay in disclosure.

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Replying to More unearned luck:
By ireallyshouldknowthisbut
21st Jan 2022 18:26

the OP's question does not concern an amended return and agree the penalties situation can be perverse depending on the circumstances of course. Still think its and April cut off as we have done stacks of these.

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By Hugo Fair
21st Jan 2022 20:06

Everyone has been too polite to answer OP's actual question ... "Would there be late filing penalties on any 2020 tax return filed now if there was no notification to complete a return?"
As it appears to be my God calling, I would simply respond that the lack of a notice to file (from HMRC) doesn't absolve the client from any obligations to notify or file.
Everything else is as per the observations above made by my learned colleagues!

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Replying to Hugo Fair:
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By johnjenkins
24th Jan 2022 09:56

You're spot on, although I have had occasion to submit earlier returns where no notification to complete has been sent (due to HMRC not knowing of the rental income) and there was no penalty (no tax due)(maybe luck?).

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Replying to johnjenkins:
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By More unearned luck
25th Jan 2022 18:12

There can't have been late filing penalties, as they weren't filed late.
Any late notification penalty is based on the tax unpaid as at the relevant 31 January, so paying on time = no late notification penalty.
Having an RE for late notification = no penalty, but such REs acceptable to HMRC seem thin on the ground.
Otherwise your clients have been lucky.

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By Matrix
22nd Jan 2022 07:39

Assuming this is a single business then you need to work out the overall profits. What are they?

Depending on the amount and if your client pays tax through PAYE, the client could call up and get the figures put through their tax code. If not possible as probably too late then HMRC may require a return which the client would usually have 3 months to complete so no late filing penalties which was your question.

As mentioned I believe the last day to do this is 31/1/22 so it will depend if your client already has a UTR.

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By ourpetsheadsarefallingoff
24th Jan 2022 10:37

I've submitted a few late returns where there had been no notice to file and I haven't seen penalties issued (late filing or late payment) for any of them, only interest.

It's always rental income and it's usually for the first year or two of a new letting - seems to take some clients that long to come around to the idea of paying tax on it!

As others have said, HMRC would be within their rights to issue penalties, so I wouldn't promise the client they won't be applied.

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By ABD
24th Jan 2022 11:03

There are no late filing penalties, the return wasn't issued. Instead a failure to notify penalty of at least 10% will be due. If you file the return rather use the let property campaign HMRC may not charge the failure to notify penalty.

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By Paul D Utherone
25th Jan 2022 23:45

If no return was required by HMRC then No, so long as a return (if actually needed because there is a profit and tax to pay) within 3 months of HMRC requiring a return.

There could however be a tax based late notification penalty.

Alternatively use the Let Property Campaign where relevant, and on the assumption that it is an unprompted disclosure, go for the maximum reduction when making an offer - I believe that HMRC are loth to go below 5%, but on the outside chance there is a good reason for late notification, the tax due is low, it's only the one year; and the disclosure is unprompted, then you might make an opening bid for 0%, just interest

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