(i) For the avoidance of doubt, when you say that "HMRC's response was that no amendment would be made", was that response given by HMRC in WRITING or by PHONE ?
I shall assume that the answer to (i) is "in writing" - on that assumption:-
(ii) May I ask the FIGURE for the Income Tax underpaid as a result of the error.
If the response to (ii) is relatively low (and especially if it is under £200 - I can explain the significance of that figure) I surmise that HMRC have advised you that no action will be taken simply BECAUSE it is insignificant: if such be the case, then frankly (1) NO ACTION should be taken by you and (2) it is very unlikely that HMRC will take any action.
Any subsequent attempt by HMRC to pursue the matter further would be foolhardy action by HMRC, which should be "jumped on" (by referring them to their incorrect initial advice, compounded by their belatedly pursuing a matter of insignificance).
If the amount at issue is NOT "relatively low", then the appropriate further action would depend on (a) the amount and (b) its nature: if such be the case, please therefore advise of (a) and (b).
In any event, ANY attempt by HMRC to impose Penalties should be appealed.
(1) I endorse earlier posters' comments re accessing information (from HMRC ) NOW re the "client", who could claim (possibly correctly) that his advising you last Friday that another accountant was to take over, since such comment could be construed as his having ALREADY dismissed you (or at the very least that you should not undertake ANY work until such time as a new accountant was appointed).
(2) Regardless of whether, in the overall picture, the client's expressions of concern are due to his being in some financial difficulty, which has impacted upon his being able to pay the January 2024 First Payment on Account, one has to consider whether such be the case, and therefore whether perhaps, in the 2023/24 tax year, the nature of his business operations was different from 2022/23, especially since a "self-employed driver" role often indicates its being of a temporary nature.
That leads to whether his 2023/24 tax liability might be less than that for 2022/23, perhaps due to his self-employment income in 2023/24 (if indeed he was self-employed throughout that tax year) being less than in 2022/23. You mention that in September 2023 you notified him of the 2023/24 Payments on Accounts but did you then, or have you subsequently, mentioned the possibility of reducing those Payments on Account ?
(3) As regards submitting a report to NCA, I can see no valid reason for such submission - I can see no element of criminality at all in the actions of the client (without such element there is nothing to report).
May I advise you that your understanding of the legislation is incorrect since, in the circumstances which you describe, you ARE entitled to the Trading Allowance on your partnership income.
I have no doubt that you are a victim of incorrect guidance: here is a link to a previous thread which hopefully will explain further and put your mind at rest.
Leaving aside the question of whether the now former client's intentions are fundamentally dishonest (whether in relation to taxation breaches or more generally - those aspects have been discussed at length some years ago on AWEB) may I comment upon the requirement or otherwise to submit an SAR to NCA. May I respectfully suggest that IMHO there are currently no grounds for your making that Report. My reason for such comment is that currently your suspicion is ONLY that a crime WILL BE committed: the legislation in my view imposes a higher bar, ie that you have a reasonable suspicion that a crime HAS BEEN committed.
The fact that you are reasonably certain that a crime WILL BE committed is not, I believe, relevant. Hence, as you no longer act, you have no dilemma as to whether to submit a Report (and indeed, since this a former client, it is unlikely that you will in future receive any information which results in your holding a reasonable suspicion).
Of course, if exceptionally you DO in future receive information, eg from the former client; from HMRC (incorrectly if they have not deleted your name form their systems); or from any other source, that the client has acted in the manner which you currently fear, then (regardless of whether he has or has not committed a crime) if you hold a reasonable suspicion of criminality, then you should report.
The above is my understanding of the legislation and I would of course defer to anyone, with greater knowledge (especially David Winch, of this parish) who holds a contrary view.
Just to add to my last post, you should of course, show to your accountant (and/or taxation advisor) and solicitor (if and when appointed) a copy of the "tenancy agreement" (per your initial question): you MAY, as a consequence, receive a recommendation that an amended agreement would be wise (ie to reflect the correct status of your partner in that agreement).
I concur previous posters’ recommendations that you should obtain professional advice, in view especially of the possibly anomalous taxation aspects of the arrangement between you and your partner.
Frankly, overall, if handled correctly, the facts which you provide, if complete and accurate, should ensure that neither you nor your partner are in beach of any taxation legislation. The circumstances, however, being abnormal, require experienced handling by a professional. In making those comments, I am mindful of the timing factor, ie the fact that the rents only commenced on or around August 2022 (your having advised that your partner has already timeously declared his “rental income”, if such it technically be, presumably on a 2022/23 Self-Assessment Tax Return or by other means).
In making the above comments, I do not dismiss the possibility of HMRC’s challenging the arrangement under which you have effectively let the property, to your partner, such that your partner has “sublet” it to the tenant, hence your own net income from the property being Nil (which is fundamentally what I understand you believe anyway).
I would have to respectfully express doubts re the comments by OldParkAcct, in relation to AML regulation requirements. Whilst not professing any formal knowledge of the legislation, I understand that for a relatively small managing agent role, your partner’s income from the property would fall materially below the threshold above which registration under AML is mandatory, as per the following link from GOV.Uk guidance (except in the unlikely event that the property at issue generates rental income of over 10,000 Euros per month):--
Looking to the (possibly imminent, re the expectation of selling the property) future, there may also be legal (as opposed to accountancy) aspects which require action, re the ownership of the rented property, prior to its being sold, to reduce the impact of CGT on the disposal of the property, but an accountant should (if not able to deal with those strictly legal aspects) be able to obtain such legal advice from a suitably qualified person.
Overall, the essence of my answer is that, as previous posters have said, a suitably qualified accountant and/or taxation advisor, should be engaged ASAP (notwithstanding my advising, as above, that if your initial question and later comments are correct and complete, then there should not ultimately be any adverse consequences from the manner in which you and your partner have dealt with this property income thus far - except the important, albeit IMHO relatively small, possibility of HMRC's challenging the interpretation of the facts and, if HMRC maintain that challenge, the FTT's accepting such HMRC stance).
As ever, Ruddles imparts accurate and succinct responses to your questions. You are not, by a long way, the first to believe that “Land” is restricted to the land on which premises are built.
For a definition of “Land” see Schedule 1 to the Interpretation Act 1978, here:-
Interpretation Act 1978 (legislation.gov.uk)
" Land " includes buildings and other structures, land covered with water, and any estate, interest, easement, servitude or right in or over land.
You are far too kind. Your post was substantially more important than mine, in identifying the "danger" - I just added a few bits of information to add "a little flesh to the bone".
To pick up on stepurhan's important cautionary words, I would respectfully suggest that, as a matter of priority, you obtain formal legal advice on the exposure (of all directors who authorised the application for strike off; and of the company itself) to action against them arising from breaches of Companies Act 2006).
In preparation for your so obtaining that advice, please refer especially to S.1000 onwards of that Act, and specifically S.1006, S.1010 and S.1011. In acknowledging my having no specialist knowledge in that field (let alone any legal qualifications in general) and thus requesting your considering my words with caution, I would hazard a guess that a withdrawal (under S.1010) of the application might be recommended so as to reduce that exposure.
S.1006 (1)(c), taken with S.1011, appears IMHO very relevant.
My answers
@ charlb (OP).
(i) For the avoidance of doubt, when you say that "HMRC's response was that no amendment would be made", was that response given by HMRC in WRITING or by PHONE ?
I shall assume that the answer to (i) is "in writing" - on that assumption:-
(ii) May I ask the FIGURE for the Income Tax underpaid as a result of the error.
If the response to (ii) is relatively low (and especially if it is under £200 - I can explain the significance of that figure) I surmise that HMRC have advised you that no action will be taken simply BECAUSE it is insignificant: if such be the case, then frankly (1) NO ACTION should be taken by you and (2) it is very unlikely that HMRC will take any action.
Any subsequent attempt by HMRC to pursue the matter further would be foolhardy action by HMRC, which should be "jumped on" (by referring them to their incorrect initial advice, compounded by their belatedly pursuing a matter of insignificance).
If the amount at issue is NOT "relatively low", then the appropriate further action would depend on (a) the amount and (b) its nature: if such be the case, please therefore advise of (a) and (b).
In any event, ANY attempt by HMRC to impose Penalties should be appealed.
Basil.
@ 0098087.
(1) I endorse earlier posters' comments re accessing information (from HMRC ) NOW re the "client", who could claim (possibly correctly) that his advising you last Friday that another accountant was to take over, since such comment could be construed as his having ALREADY dismissed you (or at the very least that you should not undertake ANY work until such time as a new accountant was appointed).
(2) Regardless of whether, in the overall picture, the client's expressions of concern are due to his being in some financial difficulty, which has impacted upon his being able to pay the January 2024 First Payment on Account, one has to consider whether such be the case, and therefore whether perhaps, in the 2023/24 tax year, the nature of his business operations was different from 2022/23, especially since a "self-employed driver" role often indicates its being of a temporary nature.
That leads to whether his 2023/24 tax liability might be less than that for 2022/23, perhaps due to his self-employment income in 2023/24 (if indeed he was self-employed throughout that tax year) being less than in 2022/23. You mention that in September 2023 you notified him of the 2023/24 Payments on Accounts but did you then, or have you subsequently, mentioned the possibility of reducing those Payments on Account ?
(3) As regards submitting a report to NCA, I can see no valid reason for such submission - I can see no element of criminality at all in the actions of the client (without such element there is nothing to report).
Basil.
@ Rory Moreton (OP).
May I advise you that your understanding of the legislation is incorrect since, in the circumstances which you describe, you ARE entitled to the Trading Allowance on your partnership income.
I have no doubt that you are a victim of incorrect guidance: here is a link to a previous thread which hopefully will explain further and put your mind at rest.
https://www.accountingweb.co.uk/any-answers/trading-allowance-st-and-par...
Basil.
@ Hastings1066 (OP).
Leaving aside the question of whether the now former client's intentions are fundamentally dishonest (whether in relation to taxation breaches or more generally - those aspects have been discussed at length some years ago on AWEB) may I comment upon the requirement or otherwise to submit an SAR to NCA. May I respectfully suggest that IMHO there are currently no grounds for your making that Report. My reason for such comment is that currently your suspicion is ONLY that a crime WILL BE committed: the legislation in my view imposes a higher bar, ie that you have a reasonable suspicion that a crime HAS BEEN committed.
The fact that you are reasonably certain that a crime WILL BE committed is not, I believe, relevant. Hence, as you no longer act, you have no dilemma as to whether to submit a Report (and indeed, since this a former client, it is unlikely that you will in future receive any information which results in your holding a reasonable suspicion).
Of course, if exceptionally you DO in future receive information, eg from the former client; from HMRC (incorrectly if they have not deleted your name form their systems); or from any other source, that the client has acted in the manner which you currently fear, then (regardless of whether he has or has not committed a crime) if you hold a reasonable suspicion of criminality, then you should report.
The above is my understanding of the legislation and I would of course defer to anyone, with greater knowledge (especially David Winch, of this parish) who holds a contrary view.
Basil.
@ Family 2024 (OP).
Just to add to my last post, you should of course, show to your accountant (and/or taxation advisor) and solicitor (if and when appointed) a copy of the "tenancy agreement" (per your initial question): you MAY, as a consequence, receive a recommendation that an amended agreement would be wise (ie to reflect the correct status of your partner in that agreement).
Basil.
@ Family2024 (OP).
I concur previous posters’ recommendations that you should obtain professional advice, in view especially of the possibly anomalous taxation aspects of the arrangement between you and your partner.
Frankly, overall, if handled correctly, the facts which you provide, if complete and accurate, should ensure that neither you nor your partner are in beach of any taxation legislation. The circumstances, however, being abnormal, require experienced handling by a professional. In making those comments, I am mindful of the timing factor, ie the fact that the rents only commenced on or around August 2022 (your having advised that your partner has already timeously declared his “rental income”, if such it technically be, presumably on a 2022/23 Self-Assessment Tax Return or by other means).
In making the above comments, I do not dismiss the possibility of HMRC’s challenging the arrangement under which you have effectively let the property, to your partner, such that your partner has “sublet” it to the tenant, hence your own net income from the property being Nil (which is fundamentally what I understand you believe anyway).
I would have to respectfully express doubts re the comments by OldParkAcct, in relation to AML regulation requirements. Whilst not professing any formal knowledge of the legislation, I understand that for a relatively small managing agent role, your partner’s income from the property would fall materially below the threshold above which registration under AML is mandatory, as per the following link from GOV.Uk guidance (except in the unlikely event that the property at issue generates rental income of over 10,000 Euros per month):--
https://www.gov.uk/guidance/money-laundering-supervision-for-letting-age...
Looking to the (possibly imminent, re the expectation of selling the property) future, there may also be legal (as opposed to accountancy) aspects which require action, re the ownership of the rented property, prior to its being sold, to reduce the impact of CGT on the disposal of the property, but an accountant should (if not able to deal with those strictly legal aspects) be able to obtain such legal advice from a suitably qualified person.
Overall, the essence of my answer is that, as previous posters have said, a suitably qualified accountant and/or taxation advisor, should be engaged ASAP (notwithstanding my advising, as above, that if your initial question and later comments are correct and complete, then there should not ultimately be any adverse consequences from the manner in which you and your partner have dealt with this property income thus far - except the important, albeit IMHO relatively small, possibility of HMRC's challenging the interpretation of the facts and, if HMRC maintain that challenge, the FTT's accepting such HMRC stance).
Basil.
Yes indeed - even better (for SDLT matters, as in the OP's case).
Basil.
@ sarahJR (OP).
As ever, Ruddles imparts accurate and succinct responses to your questions. You are not, by a long way, the first to believe that “Land” is restricted to the land on which premises are built.
For a definition of “Land” see Schedule 1 to the Interpretation Act 1978, here:-
Interpretation Act 1978 (legislation.gov.uk)
" Land " includes buildings and other structures, land covered with water, and any estate, interest, easement, servitude or right in or over land.
Basil.
@ stepurhan.
You are far too kind. Your post was substantially more important than mine, in identifying the "danger" - I just added a few bits of information to add "a little flesh to the bone".
Basil.
@ Hugh D (OP).
To pick up on stepurhan's important cautionary words, I would respectfully suggest that, as a matter of priority, you obtain formal legal advice on the exposure (of all directors who authorised the application for strike off; and of the company itself) to action against them arising from breaches of Companies Act 2006).
In preparation for your so obtaining that advice, please refer especially to S.1000 onwards of that Act, and specifically S.1006, S.1010 and S.1011. In acknowledging my having no specialist knowledge in that field (let alone any legal qualifications in general) and thus requesting your considering my words with caution, I would hazard a guess that a withdrawal (under S.1010) of the application might be recommended so as to reduce that exposure.
S.1006 (1)(c), taken with S.1011, appears IMHO very relevant.
The legislation is here:-
https://www.legislation.gov.uk/ukpga/2006/46/contents
Basil