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Self assessment late filing penalty

Self assessment late filing penalty

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We have a client that set up their own limited company and informed us some time later??. The company was set up Aug 2017, the directors tax return was filed 31st January 2020, on the tax return was salary £40k plus dividends of £10k, there is now a late filing penalty raised by the HMRC of £1,300, the tax due on the dividends was only £1,229 to levy a tax burden in excess of the tax seems harsh, besides appealing the penalty as unconscienable are there any other grounds that I could use, first time director unaware of their responsibilities etc. Any ideas gratefully received.

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By Wanderer
09th Jul 2020 12:04

CW2012 wrote:

the directors tax return was filed 31st January 2020, .

Okay, slow down, most of the information in your OP is irrelevant.
1. Which tax return?
2. When was it issued?
3. Why was it late?
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Replying to Wanderer:
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By Paul Crowley
09th Jul 2020 12:16

How many tax returns?

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By CW2012
09th Jul 2020 12:20

It was the 5/4/18 return that was late and it was issued 6/4/18 apparently, it was late because the client didn't inform us of having set up a company, I love tax surprises.

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Replying to CW2012:
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By Wanderer
09th Jul 2020 12:30

CW2012 wrote:

it was late because the client didn't inform us of having set up a company

Sorry but that's not an explanation. The setting up of the company doesn't explain why the personal tax return was late.
Divorce the company from the tax return situation and explain why the personal tax return was late.
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Replying to Wanderer:
By Paul D Utherone
10th Jul 2020 11:41

Wanderer wrote:

CW2012 wrote:

it was late because the client didn't inform us of having set up a company

Sorry but that's not an explanation. The setting up of the company doesn't explain why the personal tax return was late.
Divorce the company from the tax return situation and explain why the personal tax return was late.


Presumably 1 year - 17/18 - and the SA record was set up, and return issued on time, because of the notification of company set up by CoHo to HMRC.

Can HMRC show that the requirement to make a return was issued on 6/4/2018 and to the client at the correct address?

Did the client ever receive it?

When were you appointed and was your client on your Agent list in 2017-18 for you to be able to check to see if a return was issued, or was your appointment only the result of the client getting penalty notices?

So many questions!

IF HMRC cannot prove that a return was required back in 2018, and/or the client can show that HMRC issued to the wrong address and they never received the notice, then you might be looking at late notification (as a %age of tax) rather than late filing daily penalties. But that will likely require an appeal to FTT (and how do you prove something wasn't received) and luck with the judge appointed

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By Tim Vane
09th Jul 2020 12:28

Think of it as an idiot tax on your client. Perfectly fair IMO.

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By SXGuy
09th Jul 2020 12:29

Sounds to me like the directors failed to notify hmrc of the dividend tax in time. If the company formed Aug 17. You'd have had dividends declared uto April 18 which needed filing by Jan 19.

You say it was filed Jan 20, which is 12 months late. And hense the 1300 penalty.

Wouldn't be surprised if there's further penalties as I'd imagine returns for 18/19 needed filing at the same time.

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Replying to SXGuy:
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By Paul Crowley
09th Jul 2020 12:44

Well if he did file 2019 at same time he knew he was late

Head in sand by taxpayer?

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Replying to Paul Crowley:
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By SXGuy
09th Jul 2020 14:33

Perhaps. I don't think we'd ever know the truth by now.

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By Ruth75
09th Jul 2020 12:31

Check the penalty against what should be charged by HMRC and then try an appeal. May get reduced at least. Sounds like HMRC have considered this to be deliberate evasion rather than carelessness.

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Replying to Ruth75:
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By Wanderer
09th Jul 2020 12:34

And what would be your grounds of appeal? I'm trying to tease information out of the OP but at this time am struggling to find any grounds of appeal. What is your suggestion?
And NO they are not considering this deliberate evasion based on what the OP has told us so far.

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Replying to Ruth75:
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By Paul Crowley
09th Jul 2020 12:40

Disagree
Client just did not file in time
Ignore successful tribunal appeals as the rules have changed such that the HMRC computer is now deemed to be an Inspector.
100+900+300 equals 1300.
What possible excuse for 12 months late

Edit
and avoided another 300 by less than 24 hours

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Scooby
By gainsborough
09th Jul 2020 12:43

Agree with Paul and it also sounds like the director received a notice to file at the correct time as well. Can't see any grounds for appeal here.

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By CW2012
09th Jul 2020 12:46

Sorry but that's not an explanation. The setting up of the company doesn't explain why the personal tax return was late.
Divorce the company from the tax return situation and explain why the personal tax return was late.

Fair comment, the client was employed by one of our other clients no need to be in S A , from our point of view we didn't know they had set up a company so never considered why they'd need to file an SA Return, they were simply an employee with no BIK's etc. We found out after they'd had a go themselves, in answer to why it was late, they didnt know what they were doing, everythings up to date now thankfully, anyone got the slimmest of grounds to appeal, it does seem a bit unfair to raise a penalty in excess of the tax bill

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Replying to CW2012:
Stepurhan
By stepurhan
09th Jul 2020 13:08

Your only chance is the

"my client is an idiot. We have now brought everything up to date and will ensure it is kept that way in future"

I have occasionally had HMRC accept this and cancel the penalties, but it is not guaranteed.

Alternative would be to go back in time to when penalties were limited to the tax due and somehow prevent that change coming in. Probably not a viable one.

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Replying to stepurhan:
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By Rgab1947
15th Jul 2020 10:23

Like the quoted comment. How many times have we been there. He, he, he.

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Replying to CW2012:
By SteveHa
09th Jul 2020 13:08

It's a bit late, but with the benefit of hindsight, was the Return required?

If not, you would have been better asking for S8B withdrawal, but if the Return has been filed, that ship has sailed, too.

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Replying to SteveHa:
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By Wanderer
09th Jul 2020 13:18

SteveHa wrote:

It's a bit late, but with the benefit of hindsight, was the Return required?

Probably bearing in mind the OP says "the tax due on the dividends was only £1,229"
( oh and that the client was a company director :), :) )
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Replying to CW2012:
By northernmonkey
09th Jul 2020 14:07

But it isn't really to do with what you did or didn't do. HMRC must have issued him with a Notice to file a Tax Return for 2017/2018 - and it appears he's simply ignored that. They will have then issued him with a £100 Late Filing Penalty - and it appears he ignored that too! And so on - so if he has continually ignored notices from HMRC, he has no hope of appeal whatsoever. There are tons of cases on the tribunal website where you can verify this. However, the only hope I would say he has is if he changed address, updated HMRC but they still sent post to old address. But i'm guessing you've already explored that? Proportionality has been consistently tested at tribunal and is not a reason for appeal and fails every time due to precedent set at UT.

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By Crouchy
09th Jul 2020 13:12

The penalty is for late filing - nothing unfair about that as the penalty regime is pretty clear here

only a penalty that is linked to an error in tax declared would be based on a percentage of the error made.......your client may have that to come

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Scooby
By gainsborough
09th Jul 2020 13:19

Dividends of £10,000 so tax return would have been required.

Appealing tax geared penalties can be successful but the £1300 (as Paul mentioned) look like the standard late filing penalties, which would be due anyway even if there was no tax or a repayment due.

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Replying to gainsborough:
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By CW2012
09th Jul 2020 13:53

Thanks, harsh but I suspect that's were we are at, I'll give it ago, you never know I might get a sympathetic hearing. Anyone tried the unconscionable grounds

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Replying to CW2012:
Oaklea
By Chris.Mann
09th Jul 2020 14:09

Any links to mental health issues; depression, anxiety etc? Worth asking the question. Those circumstances are always looked on kindly, by HMRC. Rightly so.

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Replying to Chris.Mann:
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By Wanderer
09th Jul 2020 14:20

Agreed. I successfully argued against 15 years+ failure to notify prompted penalties on this basis. Very genuine case, lost of hard work in bringing client up to date, sympathetic (proper) Inspector.

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Replying to CW2012:
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By Paul Crowley
09th Jul 2020 14:11

No and never will without the fee upfront.

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panda ketteringUK
By ketteringUK
09th Jul 2020 19:31

I would like to raise a completely different issue here - a failure of the practicioner to keep up with the kyc requirements and due diligence.

When we take on a new client apart from the usual interview and new AML checks, we do check Google check (we found some amazing details for few wannabe our clients inc. previous arrests, gang association and drug dealing).
Companies House check is a must.

If it's an existing client then veriphy365 annual check shows directorships.

In opinion there is no excuse for accountancy practicioner not to picked up on it.

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Replying to ketteringUK:
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By SXGuy
10th Jul 2020 07:33

Except this company was formed by an existing client during a year in which the practitioner hadn't had their annual appointment with them yet. Is how I've read it. So in this case it wouldn't have been spotted.

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Replying to SXGuy:
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By CW2012
10th Jul 2020 07:49

Thanks yes sort of, they are an employee of a firm that we act for, they set up their own company and then came to us when things went wrong, hence we are picking up the pieces, you've just reminded me I need to try putting in an appeal, you never know it might find favour.

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Replying to ketteringUK:
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By Rgab1947
15th Jul 2020 10:26

Oh no! Judgement day. Should read the OP first. Its a staff member of a client.

Heaven forbid we must now monitor what clients staff do.

Oh another one. Beware of throwing stones in a glass house.

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By pauljohnston
15th Jul 2020 10:54

Can you not ask for the penalty to be deferred and wiped out for good behaviour. One of the cleverer persons on this forum will point you to the correct legislation my head is on strike today

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Replying to pauljohnston:
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By Paul Crowley
15th Jul 2020 11:03

Thought that was for incorrect tax return penalties, not late filing.

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Replying to Paul Crowley:
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By CW2012
15th Jul 2020 11:35

Is that possible, if there is a mechanism for deferring the penalty until good behaviour is proven I'd like to pursue it. Thanks

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By Ian Lawrence
15th Jul 2020 12:02

I have not read all the replies (wish I had time) but I have been successful in quite a few requests/appeals to remove sizable SA penalties even without formal appeal grounds. Explain the situation and say that the penalty seems too high for the size of the tax liability. It has worked for me on several occasions.

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Replying to Ian Lawrence:
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By CW2012
15th Jul 2020 12:21

Thanks I will do

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