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Where Taxpayers and Advisers Meet

Do I need to Amend Tax Return

CG
Posts:194
Joined:Wed Aug 06, 2008 3:33 pm
Do I need to Amend Tax Return

Postby CG » Wed Jan 27, 2021 10:50 am

A self employed client has just amended the dates he received payment for 2 invoices. He had originally dated the payments in May 2019, whereas they were actually received in March 2018. He uses the cash basis.

Can I just make an adjustment for this in his accounts to be declared on his 2020 Tax Return or do I need to adjust his 2018 Tax return?

pawncob
Posts:4608
Joined:Wed Aug 06, 2008 4:06 pm
Location:West Sussex

Re: Do I need to Amend Tax Return

Postby pawncob » Wed Jan 27, 2021 12:11 pm

Depends on his year end, and whether they've been treated incorrectly.
With a pinch of salt take what I say, but don't exceed your RDA

CG
Posts:194
Joined:Wed Aug 06, 2008 3:33 pm

Re: Do I need to Amend Tax Return

Postby CG » Wed Jan 27, 2021 12:34 pm

His year end is 31 March. It was a genuine mistake in inputting the dates.

pawncob
Posts:4608
Joined:Wed Aug 06, 2008 4:06 pm
Location:West Sussex

Re: Do I need to Amend Tax Return

Postby pawncob » Wed Jan 27, 2021 1:13 pm

In preparing the accounts the amounts must have shown on the bank statement, so surely they were included? How is it possible for them to be misdated by 14 months without being picked up?
With a pinch of salt take what I say, but don't exceed your RDA

CG
Posts:194
Joined:Wed Aug 06, 2008 3:33 pm

Re: Do I need to Amend Tax Return

Postby CG » Wed Jan 27, 2021 1:25 pm

His main business is a partnership but he does some illustration work which he reports his income to me for.

someone
Posts:445
Joined:Mon Feb 13, 2017 10:09 am

Re: Do I need to Amend Tax Return

Postby someone » Wed Jan 27, 2021 2:39 pm

Here's my worthless opinion...

Provided that the earlier tax return was submitted in good faith at the time then there is no obligation to inform HMRC that you have subsequently found it to be in error.

However, failing to inform HMRC leaves you potentially open to penalties (as I'm presuming tax was underpaid) if they discover it.

If you want to put it right then the old return has to be amended - which will itself trigger interest due at least and possibly penalties but I'd hope these would be zero unless there is a history of incorrect tax returns and underpaid tax.

However, if it's a very small amount of tax at stake then including it on the current tax return is perhaps "the right moral thing to do" and I'd hope that HMRC would be reasonable should they discover the earlier error subsequently.

bd6759
Posts:3518
Joined:Sat Feb 01, 2014 3:26 pm

Re: Do I need to Amend Tax Return

Postby bd6759 » Thu Jan 28, 2021 9:14 pm

Here's my worthless opinion...
You should have quit when you were ahead.

You say there is no obligation, but also say that he will incur penalties if he doesn’t. That is a bit contradictory.

If the inaccuracy was neither careless nor deliberate there won’t be a penalty, but it will be treated as careless if he doesn’t inform HMRC - para 3(2) Schedule 24 Fa 2007.

someone
Posts:445
Joined:Mon Feb 13, 2017 10:09 am

Re: Do I need to Amend Tax Return

Postby someone » Sun Jan 31, 2021 9:02 am

Yes, exactly.

It will be careless if he doesn't inform HMRC and they subsequently discover the mistake

But it will not be criminal if HMRC are not now told - which it potentially would be if the payments were deliberately/knowingly omitted from the return originally.

That's not to say that if HMRC discover it in 10 years time they won't try to claim it was deliberate with all the problems that will entail.


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