Notification to HMRC of error made in accounts

[DonaldF]

I am treasurer of a small church, which is a trust and a registered charity. Its income (mainly donations) is under £15,000. There is no trading income and all income and expenditure is for a charitable purpose.

This year, for the first time, the church was asked to submit a Tax Return and financial accounts for the year ended 5th April 2017.

In one section of the Return, it asks for the value of the church building.

In previous accounts, independently examined and submitted to OSCR, the balance sheet does not include fixed assets (building and fixtures and fittings). No one knew how much the building was worth.

Could this be a problem when the accounts are submitted to HMRC?

If so, what would be the best means to minimize possible consequences?

I was thinking: 1) have the building professionally valued; 2) include the valuation notice with the accounts on submission; and 3) notify HMRC that an error has been made in preparation of accounts for previous years, in that fixed assets were omitted, but that they will be included in future years.

Can anyone think of a better course of action?

What might be the reaction of the HMRC? Could there be a penalty to be paid and/or an investigation?

[greybags1]

If I can be so bold HMRC are the least of your worries re omitting an asset from the accounts - I would be more worried about OSCR. May I ask why/how has the building has been omitted?

[DonaldF]

The buildings were omitted due to lack of foresight and bad accountancy practice.

[DonaldF]

What action might OSCR take?

[greybags1]

Is the church an 'independent' or part of the national church ie C of S? Reason I ask is whether the church actually owns the building? Anyway, on what basis have the accounts been prepared please accruals or R & P? Have you spoken with your examiner about this?

[DonaldF]

The church is an independent. It owns the building. The accounts are prepared on a receipts and payments basis. The examiner is aware of the issue.

[greybags1]

What I would do is amend the accounts by including the building (and its fixtures & fittings) at cost or valuation in the Statement of Balances then amend the trust tax return and resubmit it along with revised accounts to HMRC. I doubt they will do anything.

As for OSCR I personally would resubmit 'amended' accounts stating clearly they are 'amended' (ie on the front cover) perhaps enclosing a covering letter explaining the reason for them assuming your examiner is happy to do this. OSCR may ask questions.

[DonaldF]

Thank you for your advice.