Elderly client's Attorney has appointed me to complete the SA Returns.
It turns out that an occupational pension of some £40kper annum has not been paid to the client for the last two years because the bank account was changed and the pension provider was not notified of that change.
The pension company are paying all the arrears this month from which they will deduct Paye which will be based on the current months tax code.
Could someone advise on what figures for the pension do I put on the tax returns for the last two years? If I put the gross figures on as the client was due to receive the pension I cannot show any Paye as none has been deducted in the past two years.
Any observations gratefully received!
Replies (13)
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You've got one, possibly two overdue self-assessment returns and so your client is likely to have penalties.
I'm slightly puzzled about how your client can have been capable of closing a bank account yet not noticed the non-receipt of a pension.
If they used the current account switching scheme, I would have expected one or other bank to have informed the pension provider. Even if that didn't happen and the payments were returned, the pension provider would surely have contacted your client to request a new instruction.
You don't specify when the attorney was appointed. If any the above was under their watch, then they are likely to be liable for what looks like neglect. And if that's the case, you could be on the hook if you allow the client to fund penalties.
I realise that none of this actually answers your question, and you may have thought through those things. You could be in for a lot more work and risk than anticipated.
I suggest that you seek some ethical guidance from your professional body. Having done so, you should discuss with the attorney and consider whether you want to proceed.
Are any SATRs overdue OP doesn't mention the tax return side of things? In the circumstance if you can't argue your way out of any penalties that may arise, I would be surprised.
I suspect that the bank account issue arose when a new account was opened for the POA to use. Attorney must be a bit dozey not to have noticed, and how come there wasn't a huge cashflow issue?
As for checking the ethics with your professional body, I suggest that you don't waste your time and focus on putting things right, avoiding any penalties, checking nothing else has gone off piste and making sure that the POA gets it right in the future.
Are you sure you can file if the client has not appointed you? Surely you need to have authorisation from the client not the attorney.
Er, that's that the point of POAs.
The OP didn't mention POAs. I assumed the word attorney was being used loosely.
@Anonymous (OP).
Your problem is not insurmountable, and indeed, as explained below, TAX RETURNS will very probably NOT be required for 2017/18 and 2018/19.
Given that the Pension Income arrears are strictly taxable in the years in which they were accrued, the best course of action is a very slight modification of the HMRC guidance [including their guidance at EIM74103, to which an eminent member has provided a link above]. Under that HMRC guidance, the taxpayer submits details of Pension Income arrears to HMRC, who would themselves then “do the maths” [to ensure that, taking the years 2017/18, 2018/19 and 2019/20 together, no tax underpayment or overpayment arises].
The “slight modification” referred to above is that when you write to HMRC, YOU (i) enclose full Tax Calculations for the three aforementioned years, but ALSO (ii) indicate to HMRC the PAYE CODE NUMBERS which you believe they should apply to the Pension Payments in 2019/20 (I assume in that regard you are comfortable with preparing such PAYE scheme calculations).
You may wish to advise HMRC, in the letter, that they will have obtained a “cash flow benefit” from the high PAYE deductions in 2019/20, which they should regard as a “quid pro quo” against their not receiving PAYE in the two previous tax years.
MOST IMPORTANTLY, your letter should draw the attention of HMRC to the paragraph in their manual, at SAM121160, as follows:-
“Many individuals who receive these payments will not be SA cases. An SA return should not be issued because of a one-off payment of arrears of pension or pay unless a return is required to be issued for other reasons”.
I assume that there were indeed (as appears implicit in your question) no “other reasons” for your client to submit Tax Returns for 2017/18 and 2018/19. On that assumption, and as mentioned above, the matter should be RESOLVED, WITHOUT ANY DIFFICULTIES, relatively quickly.
Basil.