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Refusual to sign a partnership tax return

Nominated partner refuses to sign accounts and partnership tax return

A situation has been developing for some time in that the partnership (fairly large > 12 partners, professional firm) refuses to sign off on the accounts and resulting tax return for 5th April 2017 and now likely 2018. I do not act in anyway for the firm and have no notion as to what the dispute is about however it seems it divides the firm.

Although I have since filed my own client's return for 5th April 2017 on a provisional basis and probably will do the same for 5th April 2018, the penalty notices are becoming a source of increased worry & frustration - I have written to HMRC many times but they are either unable or unwilling to do anything until the Partnership Return is submitted.

Can anyone suggest how this might be resolved?

 

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to gainsborough
23rd Jan 2019 14:44

gainsborough wrote:

CIOT did try to make representations to the Public Bill Committee a couple of years ago, but apparently the Government did not take on board all the points raised.

HMRC not listening ?

Not like them, is it ?

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to lionofludesch
23rd Jan 2019 15:07

Sigh....so true. Was just hoping for a bit more this time as the consultation was going on for well over a year...should've known better....

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By JST007
24th Jan 2019 09:13

The issue here is not that the tax return is not filed or the accounts not sign off. That's a consequences of the behaviour of one or more of the partners. What does the partnership agreement say about negligence, dereliction of duty, acting in self interest, etc. Your client could seek to remove the partner(s) from the partnership or indemnify your client for losses. Without having any hold over someone one cannot force them to act. A review of the partnership agreement will establish where the teeth are in the agreement - due to personal unlimited liability all commercial partnership agreements have such provisions.

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to JST007
24th Jan 2019 12:05

I would imagine it has all the usual boilerplate in this regard however it is more than one partner (not sure if a majority) and they are in dispute - I can't see how this could extend to negligence, dereliction or self interest.

I assume had the accounts been agreed by the partners, the tax return would have been prepared, signed & submitted by the Nominated Partner (via agents)- he has discharged his duties to the limit of his authority so far although ignoring the point that the NP could legally file whatever he likes so long as he believes it is accurate.

That sort of raises another question as to what would happen if the NP requested the accountants to change the return to whatever he prefers and files that.

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24th Jan 2019 09:21

Surely the NP can be identified by looking at the last set of accounts/tax return that were signed & submitted? Won’t you /your client have a copy of these on file? If not your client can request them from the accountants.

The chances of it having changed are pretty slim as mentyby others.

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24th Jan 2019 12:10

With thanks to all the replies, it has become evident that there is nothing I can do to help my client in this regard, other than to recommend legal action.

Some of you have more faith than me in the ability of our colleagues in the legal profession to resolve this, with or without bloodshed but then as many have suggested, the firm is perhaps hopelessly frustrated anyway and needs to be put out of it's misery.

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24th Jan 2019 13:09

@ Roland195 (OP). I refer to your post at 16.49 yesterday, and your post today at 12.05.

Forgive me, but it is ESSENTIAL that you obtain immediate legal advice not just in the interests of your client, but also in your own interests (if, as would seem likely without causing offence, you are not qualified to provide that legal advice).

You have an obligation to protect your client’s interests, and allowing his exposure to Penalties to increase yet further is simply not an option (I shall explain below other financial losses which your client may incur, if a proactive line is not taken).

At worst, YOU could be accused of allowing that “exposure” to continue unchecked, if you do not give proactive advice NOW to your client. Strongly advising him to consult solicitors (to give guidance to your client on the action required, in relation to the ongoing clear breaches of the Partnership Agreement) could be a vital defence against (i) any negligence claim against you, and indeed against (ii) a complaint to your accountancy body (if of course you are a member of such body) for failing to advise your client correctly.

There are VERY MANY questions which the Solicitor would ask of your client, to enable him to provide the correct legal advice as to how the continuing breaches of the Partnership Agreement, and of taxation legislation, should be resolved.

JST007 has correctly given you (in their post today at 09.13) an insight into some of the legal aspects.

The comment, in your post at 16.49 yesterday (similar comments have been made by other posters) that, in relation to the Partnership, the “future may be in question anyway” is another factor which supports my urging you to advise your client to take legal advice (e.g. he could contend in the future that your failure to take a proactive line, in trying to resolve the Partnership dispute, resulted in his having to leave the partnership, and thereby resulted in a potential substantial reduction in his income).

I would urge you to read my first post (at 13.36 yesterday) again, and henceforth adopt the proactive line which I have strongly advised.

Basil.

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to fawltybasil2575
24th Jan 2019 13:44

I wholeheartedly agree that I am not qualified to provide this advice and would be well out of my depth to attempt to advise further.

I note your comment with interest regarding my obligation to my client. I had not considered it in that way but what you say unfortunately makes sense.

I am left with the feeling that when my client receives the first fee note from his chosen legal advisor, and the fallout thereafter, he will wish he had just paid the penalties but a line has to be drawn somewhere.

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24th Jan 2019 14:51

@ Roland195 (OP).

Thank you for your 13.44 post.

May I respectfully disagree your view that your client would later wish that he had paid the Penalties at the outset. Whilst this would have resolved the relatively minor matter of the Penalties themselves, it would have have left entirely unresolved the substantially more important matters, ie:-

(i) The requirement to later submit an amended Personal Tax Return for 2016/17 and (very probably) an amended Personal Tax Return for 2017/18; and (even more importantly),

(ii) The requirement to ensure that the Partnership Accounts are agreed by the Partners for the Accounting years upon which the 2016/17 and 2017/18 Tax Returns are based.

Since you have, throughout this thread, not made reference to solicitors acting for at least another eleven partners ( you would clearly have done so if you had been aware thereof) clearly those other partners have NOT been proactive in seeking to resolve matters. Your client’s now hopefully accepting your advice to appoint solicitors, progress should now be made in resolving the dispute (to the benefit of ALL partners).

Frankly the dispute has been dragged out far too long already. If the Partnership Accounts relevant to the 2016/17 Tax Return are for the year to 31 March 2017, that is nearly two years ago (and of course if the Partnership Accounts year-end is earlier than 31 March, the time delay could be longer than two years).

Your client’s taking the proactive line which you will be recommending to him SHOULD in due course receive the strong approval of the other partners (it’s time to be the shepherd, not move aimlessly with the sheep).

Good luck in your endeavours.

Basil.

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