Genuine error brought to light by s9A TMA 1970 enquiry

[wamstax]

tom,
5% is even better LOL

[mathsboy]

When responding to a s9A letter, where the enquiry brings to light an error in information provided by the client which affects the tax position should one simply provide the information requested and wait for HMRC to write back with their take on the amended tax position, or should one volunteer an amended computation from the outset ?

Thanks

M

[wamstax]

If you are going to make a disclosure then surely the correct way to do it is :-
(a) discuss with your client and encourage him/her to make a FULL disclosure
(b) if given go ahead then go to HMRC with the disclosure of the error.
(c) if not given the go ahead then does in my view depend on how information given.
If the client has "misled YOU" then up to you If he has misled "HMRC" then it is a dangerous game to sit and wait. Makes it seem that you are inclined to "hide" things
Thats just my personal view after all you can get 20% for early full disclosure 40% max for cooperation and up to 40% for Size & Gravity.
I would also say that any inspector - even with an open mind might not give you the benefit of the doubt if you start playing games.....
regards
bill@wamstaxltd.com
http://www.wamstaxltd.com

[mathsboy]

Thanks Bill. Very helpful.

In this case the client provided incorrect information about the number of days he was in the UK during a tax year and this impacted the income tax treatment of some of his employment income. So he unintentionally misled me.

Client is OK with full disclosure of this as a genuine error.

Would you mention that you are hopeful of nil penalties at this stage or wait for HMRC to raise the subject of penalties at the conclusion of their enquiry ?

Thanks,

M

[wamstax]

I assume that you have excluded days of arrival into and departure from the UK in the count of days inside the UK. OK granny & sucking eggs comes to mind

Otherwise I would wait until HMRC either advises your client of his human rights and/or issues IR160 to show that he/she is going for penalties. He/she might just overlook it if you don't mention penalties
regards
bill@wamstaxltd.com
http://www.wamstaxltd.com

[mathsboy]

Update...

Received a "holding" reply promising a review of the position and a response within 2 weeks.

Letter says..."Additional tax liability has been identified and as a result you may want to discuss payment on account with client. I note that you have set out the reasons which led to the submission of an incorrect return detailing why you consider this was a genuine error and I will take these points into consideration when finalising the enquiry".

And ominously she has enclosed IR160 - does this imply she is about to go for penalties or is the sending of IR160 as a matter of course.

Has anyone used the following as a defence:
http://www.hmrc.gov.uk/manuals/emmanual/EM4805.htm ??

[wamstax]

It follows from the wording of the Section that

the error must have been wholly innocent EM5180+
it must be remedied without unreasonable delay (that is, disclosed promptly), otherwise it is to be treated as having been made negligently. In effect, the Section does not of itself provide relief but creates an offence where there is delay in notifying to the Revenue an error alleged to be innocent
it is not relevant in the case of a fraudulent or negligent taxpayer who wishes to make a disclosure.
The defence is open to a taxpayer who has made an innocent error even where the error is discovered in the first instance by the Revenue.

In any case where an attempt is made by the taxpayer to invoke the Section it is essential to establish the precise facts and, in particular, to ascertain when and in what circumstances the error was discovered.

If you have read the above it doesn't let an individual off. It in fact is saying that even if the original error was not negligent it will be negligent if there is a delay in bringing the irregularity to HMRC's attention once it is identified.

What you would have to prove is that the original error(s) were not negligent. I am curious as to why you would be going down this line as I would have thought that unless there is something I'm missing your client must have been at least negligent if he supplied incorrect dates... that is can you honestly say he took the care that was necessary in the circumstances to get the dates correct.
The following link is where you would have to consider whether a client's actions were negligent etc.

http://www.hmrc.gov.uk/manuals/emmanual/EM5180.htm

I hope this helps but I am available if you need "specialist" advice see my website
http://www.wamstaxltd.com

[mathsboy]

Thanks for your reply.

The issue here is a misunderstanding of the questions that he was being asked. He was corresponding solely by e-mail from overseas and it transpires since speaking to him of late that his English comprehension is not wonderful...

[wamstax]

I think you will gather from the IR160 that she is contemplating penalties of some sort and you seem to have laid out why you thought it was a genuine error (is this the same as an innocent error? - I don't think so) I would basically discuss as she says a general payment on account and if your client is finacially able send a cheque off to her now. It will always stop the interest continuing to run on so much of the unpaid duties that are covered by your client's payment and can be pointed to as a gesture of cooperation in negotiating any penalty. I am afraid that it looks ominous and you'll just have to take it as it comes. You can always ask her how she has arrived at any penalty if she actually goes for it.
regards
bill

[wamstax]

Clearly if a person's command of the language wasn't at all that hot then HMRC might say that he should have taken reasonable care and ensured that he fully understood what he was providing. Clearly this one isn't the usual and it might be that examination of the emails might reveal more to suggest innocent error (or worse that it might be a bit more than simple negligence). This would be a judgement call on the emails and the nature of the client etc.