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SA late filing penalties

SA late filing penalties

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I have a client who ceased self employment on 31 March 2011 and then set up a ltd company with himself being director. The IR wrote to him saying that he did not need to complete a SA return for 2012 and so he never. He recently received notice to say he now needs to complete a tax return and today received a penalty notice for £1200 for not filing a 2012 return. He received a basic salary and no dividends during the tax year. I have phoned the Inland Revenue and was told that the penalties stand as there was a failure to notify them that he was a director and not to bother appealing as there are no grounds to do so.
Is there any tax law which I can use to appeal this?
Thank you in advance for any help on this.

Replies (17)

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By ACDWebb
20th Nov 2013 22:41

When did HMRC require a return to be made for 2012?

 

While HMRC might say on their site that being director is a requirement to notify for SA there is nothing in legislation, so if there is no liability for the year and a return was not required as a matter of course I would appeal.

It would also be interesting to hear exactly what part of tax law HMRC believe backs up they're claim that there has a failure to notify.

Have they now issed a 2012 return for completion and is there any tax to pay? If they have issued a return but after 31 Oct 2012 then the client has three months from the date of issue to file on paper or electronically. If there's no liability, then there can be no late notification penalty, and so long as the return is in within the three months no filing penalty either.

Sounds like a call centre drone reading from a script, and on the face of it the script being wrong. Somewhat alarming for the unrepresented who might just accept something that is plain wrong because a government department said so!

Edited for spelling failures from the Tablet :(

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Replying to Tim Vane:
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By stokeslole
22nd Nov 2013 10:04

Hi thank you for your reply. Neither my client or myself have ever received notification of a 2012 Tax Return being issued and I check all my clients as a matter of course online just before 31 January to make sure none have slipped through the net and he had definitely not been issued one then. I have just now checked online and it says it was issued on 6 April 2012!!! I have a copy of the letter they sent him stating he did not need to complete a 2012 Tax Return and it's strange that they wrote to him on 24 October 2013 stating that he now needs to complete a Tax Return. So very frustrating dealing with them! Grrrrrr

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By techpro
20th Nov 2013 21:43

filing penalties

can't give legal comments on these matters but was always of the belief that there was a ' 90 day ( 3month ) ruling ' that  stipulated that 'you must notify the relevant HMRC office ( you have to find the area office yourself ) of any change of circumstances- similar to your own -as well as 'newcomers to self-employment and limited co setup......so that early registration can be seen to .....you have commented that your client ' ceased self-employment on the 31st march 2011....so this must have been known at the time of submittal of the 2011 SA tax return.......why did you not report the circumstances in the INFORMATION pages in the SA....I myself, use these pages as often as necessary to report client ill-health / business troubles / family matters which have affected the transactions of the year etc......in fact, anything I feel is relevant to changes in trading throughout the tax period.........I should mention that I also have had the unfortunate experience of similar HMRC issues regarding client letters advising that  'xxxx' was not necessary.......HMRC has a copy of their letters sent.....and it is always best that you have your copy at hand as well........always ask to discuss matters with 'MR BIG' of the department.....he / she is the one you are not allowed to talk to directly.......they phone you a fortnight later when you've forgotten what you rang them for in the first place.....tell them you have your copy of the letter......someone will eventually find their copy.......and like mine.....cases will be put on the bottom shelf.........

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By ACDWebb
21st Nov 2013 09:07

to go on

s7 TMA makes no mention of directors in setting who has to notify and when, and HMRC's own manuals at EM4551 say "There is no requirement to notify chargeability where there is no liability to IT or CGT or where sufficient tax has been deducted at source to meet the net liability for the year."

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By andrew55
21st Nov 2013 12:18

RTI

It occurs to me that from this year on if you draw a salary and file an RTI report you have presumably notified HMRC you're a director!

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Replying to Matrix:
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By ACDWebb
21st Nov 2013 13:30

The taxpayer hasn't notified in that case (RTI)

andrew55 wrote:

It occurs to me that from this year on if you draw a salary and file an RTI report you have presumably notified HMRC you're a director!

...the employer has. A subtle distinction HMRC would be bound to run with.

The fact remains that there is nothing in legislation that requires directors to register for SA if all tax is paid and no additional liability arises for the year, so as above you need to be certain when HMRC actually required a return to be made for 2011-12, and whether it was submitted within three months of that requirement if that was after 31 Oct 2012, or by the normal due date.

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By pauljohnston
21st Nov 2013 12:58

Probally should have used

Form SA1. 

I suggest that the 2012 tax return be completed and submitted in time scale and an appeal against the penalty on the basis that it has no statutory backing.  THe sum is big enough to appeal.

@Techpro.  Are you sure that HMRC keep copies of all letters?

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By julian.sims
21st Nov 2013 13:12

Notice to File and HMRC Letter

If HMRC issue a notice to file a Tax Return you have to do so unless you can persuade them to withdraw that notice.  If they do not issue a notice, then there is no late filing penalty, but might be a failure to notify penalty.  As ACDWebb says the obligation is to notify chargeability not that you fall within the categories HMRC might like a Return for.  If no liability, then no notification needed.

Also, the two different penalties need to be considered separately.  A late filing penalty cannot just stand, because there should have been a failure to notify penalty.  One needs to be cancelled and the correct one raised if due.

It sounds to me as though there is either a problem with HMRC computer or HMRC did issue a Notice after they had previously written to say no return due.  If the timing was wrong and the letter saying no return due was after the Notice, it might be worthwhile arguing that your client had reasonable excuse for not filing the Return.  Only problem is if he had previous chase/penalty notices, the Tribunal would probably take the view that the reasonable excuse ended when he should have realised a Return was still needed.

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By Alexdon
22nd Nov 2013 12:27

When was letter

When was your client advised by HMRC that a return was not required? The penalty and any subsequent appeal may well hinge on that.

I agree with ACDWEBB, this sounds very much like a call centre script. The "persons" on the end of your calls do not have sufficient knowledge to determine whether there are, or are not, grounds for appeal. Go further up the chain.

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By ACDWebb
22nd Nov 2013 12:33

This sounds like dubious practice on HMRC part

Perhaps you need a FoI request to have sight of the full HMRC record for the client to see the trail of issue of the notice to file a return. Or at lest ask HMRC to prove that they issued a request for a 2012 return in April 2012 bearing in mind that they only wrote putting him back into SA in Oct 2013 having previously advised there was no future need to make SA returns.

The letters taking him out of SA and more to the point of Oct 13 saying he now needs to complete sound damnig to HMRC claim.

Lesson for your 31 Jan 2014 check of Online Services notes re clients ... take a screenshot of status per HMRC Online for the client. Of course that doesn't help you where you were not acting for the client at the time. Perhaps you need to do a screenshot as soon as a new client is linked to your agent code!?

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Replying to DJKL:
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By stokeslole
22nd Nov 2013 12:42

Thank you for that, I will request full sight of HMRC's records for the client to see the proof/trail of the notice to file a return.

You're right a lesson learnt and a screenshot is a great idea, I will certainly take that on board.

I find lately that dealing with HMRC becomes more and more like a joke!

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By ACDWebb
22nd Nov 2013 13:08

Also

it would be interesting to know how issue of the return for completion on 6 April 2012 stacks up with the comment that the penalty was for failure to notify!?

It was either

a failure to notify - which if there was no liability for the year is incorrect - and he now has three months from HMRC deciding to issue a return for completion to submit the return to avoid a filing penalty, ora late filing penalty because they did issue the return for completion on 6 April 2012 in the normal run, in which case failure to notify is not in point

They need to decide what it is and then you can appeal accordingly

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Replying to squay:
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By stokeslole
22nd Nov 2013 14:10

Yes very interesting to know. It's a complete cock[***] up on their part. Letter is written and posted will let you know the outcome.

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By Alexdon
22nd Nov 2013 19:36

Failure to notify

The opening post states that it is a penalty for non sub mission. not for non notification. However it then brings in non notification, what is the penalty exactly for? This goes to the heart of the problem!

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Replying to sparish:
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By stokeslole
22nd Nov 2013 19:54

The penalty is for non submission of the 2012 tax return and amounts £1300. However, when I phoned the revenue I was told that because there was no notification the penalty was correct and stood despite the fact that they had written to my client saying he didn't need to submit one. I have since looked back at his 2011 tax return and although he had ceased as a sole trader he had ticked box 3 on page 5 which states that there was a liklihood there would be income other that salary and pension in 2011-12, which I understood prompted the Revenue to issue further tax returns.

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By ACDWebb
28th Nov 2013 13:57

When did HMRC write

to the client requiring him to submit a return?

Was it as part of the 6 April 2012 run, or at a later date and if so what date

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By nogammonsinanundoubledgame
28th Nov 2013 09:41

I would complain ...

Regardless of the ultimate merits of the appeal, HMRC are not the arbiters of whether or not there are grounds for an appeal.  Where the taxpayer has the right of appeal it is outrageous that one party to the litigation advise the other not to exercise that right, placing themselves in the shoes of those who would rightfully consider such appeals.

They are not (yet) judge, jury and executioner.

With kind regards

Clint Westwood

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