A PAYE client who hasn't been asked to file a return wants to claim expenses for 2020/21, so I sent an appropriate letter to HMRC at the end of June. In record time, I received a reply dated 25 October. It tells me that the taxpayer must have paid tax in the year they spent money on the expenses. It says how much they can claim depends on the rate they pay tax. For example-if they spent £60 and pay at a rate of 20%, they can claim £12. Good to know that HMRC can explain these tricky points to us agents. But the final sentence says "as your client has to complete a tax return for 20/21, they must make the claim for expenses using that form.
And when I checked, the notice to file was issued today, the 28th
I should be pleased to receive a reply within 4 months given the other claims I am still waiting on.
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Replies (16)
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"Oh dear, it was more than that. My bad, I suppose, I should have simply asked them to issue a Notice to file. Oh well"
You will be far from being alone in having beeen caught out by that sneaky rule.
I'd be interested to hear what your client says when he's told he now has to file a return and be charged for it. Will the expenses tax benefit cover your fee??
As the notice to file has been triggered by expenses of £2.5k you'd hope there would be more than £500 in it. In fact youd hope an e'ee with *genuine* expenses over £2.5k was probably a HR taxpayer so perhaps a grand.
If their income was over 100k (to affect their personal allowance) then a return was required in any event and (if not already in SA for 20/21) then they had an obligation to notify hmrc by 5th October that they were required to file.
It is one of the reasons on SA100
But in fairness to client HMRC already knew from P60 and took no action?
Could you imagine if HMRC were issuing failure to notify before giving the taxpayer the opportunity to notify?
If their income was over 100k (to affect their personal allowance) then a return was required in any event and (if not already in SA for 20/21) then they had an obligation to notify hmrc by 5th October that they were required to file.
Ermm, care to quote the legislation to support that view? Or are you just perpetuating HMRC's misguided view?
My mistake & apologies. For some reason I thought dividend income was also received but that appears to have been another thread. I'll try to remember and reread the original post before responding, if coming back to a thread later.
The legislation is simple - TMA 1970 S7. Anyone doing personal tax work should familiarise themselves with it. HMRC clearly don't, and need to be corrected frequently.