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Where Taxpayers and Advisers Meet

Genuine error brought to light by s9A TMA 1970 enquiry

mathsboy
Posts:180
Joined:Wed Aug 06, 2008 3:28 pm

Postby mathsboy » Thu Oct 19, 2006 12:42 am

I have a client who has just received a s9A TMA 1970 enquiry letter into his 2003-04 tax return (filed Sept 2005 so just within the enquiry window as far as I can see).

HMRC has raised a couple of questions relating to a foreign earnings deduction figure shown on the employment pages. A foreign earnings deduction is applicable to this client but on discussion of the calculation with him it appears that there had been miscommunication from him at the time of the preparation of the return and the calculation therefore needs re-working.

He has so far received a tax repayment for 2003-04 of £11k per the return that was filed, but the amendment is likely to mean that he owes HMRC around £4k of this back to them.

The question: I assume that HMRC has no discretion where interest charges are concerned but can one mitigate/reduce to nil the penalty position on the basis of genuine unintended error in the original return ?

Thanks

M

King_Maker
Posts:6538
Joined:Wed Aug 06, 2008 3:22 pm

Postby King_Maker » Thu Oct 19, 2006 1:24 am

HMRC do have discretion on applying interest charges - but, IMHO, this is unlikely in this case. And I cannot see any reason why it should be mitigated/waived.

The question of penalties will depend the exact nature of the error.

wamstax
Posts:2019
Joined:Wed Aug 06, 2008 3:39 pm
Location:Operate Nationally but based in Aberdeen
Contact:

Postby wamstax » Thu Oct 19, 2006 1:39 am

You are chancing your luck to think that the HMRC would even contemplate mitigating ot waivign the interest in this case as clearly whatever way you look at it your client has (whether by his mistake or yours - or a mixture of both ) had the HMRC's money in his hands for a time that he wasn't entitled to it.

As to penalties -assuming that HMRC can point to negligence and therefore get a penalty position this can truly be mitigated by qualifying for
(a) Full disclosure - max possible mitigation 20%
(b) Full Cooperation - max possible compliance with the enquiry and payment on account of duties to HMRC incorrectly obtained or due as soon as error recognised or acknowlwdged by you -Max 40%
(c) Size & Gravity - try and convince HMRC that a simple "innocent" mistake with no intention to deceive to obtain nearer the max abatement of 40% - possibly 35%

This would give a 5% penalty and 5% of £4,000 is £200 which would be below the de minimus limit for seeking penalties and would be waived. 10% will be above £400 and a penalty would be sought normally. Do what you can and hope HMRC can see it your way....
See my website if you want links etc or need to contact me about this type of thing i.d.c.
bill@wamstaxltd.com
http://www.wamstaxltd.com
regards and hope this helps
http://www.wamstaxltd.com
Operates Nationally with competitive costs
and email and phone contact (mob 07751720507) can be obtained from websites

mathsboy
Posts:180
Joined:Wed Aug 06, 2008 3:28 pm

Postby mathsboy » Thu Oct 19, 2006 1:47 am

I did say that "I assume that HMRC has no discretion where interest charges are concerned..." ! The question was more about the penalty position.

Bill - most helpful, thank you. Are the mitigation suggestions based on precedent or are they enshrined in HMRC Manuals somewhere ?

M

mathsboy
Posts:180
Joined:Wed Aug 06, 2008 3:28 pm

Postby mathsboy » Thu Oct 19, 2006 1:49 am

How much in £ is the de minimus limit ? £250 ?

M

Instinctive
Posts:1797
Joined:Wed Aug 06, 2008 3:15 pm

Postby Instinctive » Thu Oct 19, 2006 2:32 am

You should read HMR&C manual at at EM6065 - Contract Settlements: Penalties: Abatement: Factors. The link is as follows:
http://www.hmrc.gov.uk/manuals/emmanual/em6065.htm

Ramnik

mathsboy
Posts:180
Joined:Wed Aug 06, 2008 3:28 pm

Postby mathsboy » Thu Oct 19, 2006 3:17 am

Thanks to all. And please excuse the knowledge gap - this is the first client of mine to be the subject of a formal enquiry in over 3 years.

M

wamstax
Posts:2019
Joined:Wed Aug 06, 2008 3:39 pm
Location:Operate Nationally but based in Aberdeen
Contact:

Postby wamstax » Thu Oct 19, 2006 6:43 am

Hi Maths...
if you have a look at my website ..

http://www.wamstaxltd.com

you will see that it was all from precedent and practice "on the other side" up to July 2006. Now of course I am an angel helping out society. Ok for a well earned fee of course.
regards and hope this helps
http://www.wamstaxltd.com
Operates Nationally with competitive costs
and email and phone contact (mob 07751720507) can be obtained from websites

tom 7000
Posts:820
Joined:Wed Aug 06, 2008 3:30 pm
Location:Farnborough Hants
Contact:

Postby tom 7000 » Thu Oct 19, 2006 8:31 am

send the info in fast be very helpful and polite to the tax inspector, grovel a lot and youll get 10%..works for me every time....

explain to the client he could get a 100% fine so when its only 10% hell think you are a star...

works for me ;o)

tom

mathsboy
Posts:180
Joined:Wed Aug 06, 2008 3:28 pm

Postby mathsboy » Thu Oct 19, 2006 11:52 pm

Thanks to all who contributed. Very helpful as always.
M


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