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Where Taxpayers and Advisers Meet

HMRC "check of your self assessment tax return" received

Eck
Posts: 26
Joined: Fri Oct 11, 2013 12:14 pm

HMRC "check of your self assessment tax return" received

Postby Eck » Sat Sep 13, 2014 5:43 pm

Received a check letter today, from P14 team, pointing out that there is a discrepancy between the figures on my tax return and that provided by my employer (also my own Ltd Co).

My accountancy firm (a large expensive firm) do all our tax returns, business and personal, so I was astonished to discover after a quick review of the paperwork, that the mistake appears to be a simple case of whoever completed the return mistakenly recording a tax rebate as tax paid instead. So the tax figure from the tax return reads "£838" and the figure from payer reads "-£837". Not surprisingly the Revenue feels I am now owe them £1675.

My query is this - what do I say to the Revenue? Their letter asks for evidence of how the discrepancy occurred presumably so they can judge whether any intent to defraud was involved, but it's impossible to prove someone just made a mistake. Do I get my accountant to write to me confirming they completed the return on my behalf (they will doubtless refuse to accept liability in writing)? What will the Revenue want to see from us other than a payment of the amount owe (which I absolutely do not dispute they are due)? And of course, finally, that old chestnut, what will they do next?

With thanks

bd6759
Posts: 3072
Joined: Sat Feb 01, 2014 3:26 pm

Re: HMRC "check of your self assessment tax return" received

Postby bd6759 » Sat Sep 13, 2014 8:52 pm

I suppose the question you need to ask yourself is "did I check my return before signing it". If you didn't, then you were at least careless. If you did check the return but didn't notice the error, then it will boil down to the effect of the error. If you got a repayment you weren't expecting, or paid less tax that you expected, and the difference is significant relative to the accurate position, then you will have been careless.
Careless errors carry a minimum 15% penalty (max 30%).
It is up to HMRC to prove carelessness, but that can be done by simply pointing out that you cannot have taken reasonable care otherwise you would have noticed the error.

Obama320
Posts: 1
Joined: Sat Nov 08, 2014 11:27 am

Re: HMRC "check of your self assessment tax return" received

Postby Obama320 » Sat Nov 08, 2014 11:28 am

Received a check letter today, from P14 team, pointing out that there is a discrepancy between the figures on my tax return and that provided by my employer (also my own Ltd Co). :lol: :lol:
watson

LozaACCS
Posts: 1504
Joined: Wed Aug 06, 2008 3:55 pm

Re: HMRC "check of your self assessment tax return" received

Postby LozaACCS » Sun Nov 09, 2014 7:08 pm

Firstly, I would advise your accountants to dust off their PII policy.
Secondly I would expect them (or you should instruct them) to appeal against the penalty on the basis that it was a mistake and as such is not liable to any penalty by virtue of S3 Sch 24 FA 2007.

bd6759
Posts: 3072
Joined: Sat Feb 01, 2014 3:26 pm

Re: HMRC "check of your self assessment tax return" received

Postby bd6759 » Mon Nov 10, 2014 1:22 am

Para 3 Sch 24 FA 2004 gives no such dispensation for a "mistake". Para 3 deals with the degree of culpability after the mistake has been identified. The OP does not tell us how the mistake arose, so we do not know if it was careless or not.

LozaACCS
Posts: 1504
Joined: Wed Aug 06, 2008 3:55 pm

Re: HMRC "check of your self assessment tax return" received

Postby LozaACCS » Mon Nov 10, 2014 6:36 pm

FA 2007 Sch 24 does offer relief in the event of a mistake.
Paragraph 1(2) condition 1 states that a document contains an inaccuracy.
Paragraph 1(3) condition 2 is that the inaccuracy was careless or deliberate.
Paragraph 3 defines careless as a failure to take reasonable care, clearly then taking reasonable care exempts P from a penalty.
HMRC compliance manual 81120-81140 discuss reasonable care, Factsheet CC/FS7a also specifically refers to the four patterns of behaviour,
1 Reasonable care
2 Careless
3 Deliberate
4 Deliberate and concealed

A penalty can only be charged if the behaviour is within 2 and 4.

We do know about the behaviour because the OP has told us, ie his advisers treated a repayment as a payment resulting in Potential Lost Revenue of twice the amount.

If the OP were my client I would certainly advise him to confirm that he did in fact take reasonable care and the inaccuracy resulted from a mistake by his advisers.

bd6759
Posts: 3072
Joined: Sat Feb 01, 2014 3:26 pm

Re: HMRC "check of your self assessment tax return" received

Postby bd6759 » Mon Nov 10, 2014 10:28 pm

We do know about the behaviour because the OP has told us, ie his advisers treated a repayment as a payment resulting in Potential Lost Revenue of twice the amount.
A mistake is the same as an inaccuracy. It can be brought about carelessly or deliberately. The "relief" is due (no penalty is payable because of the mistake) if the person took reasonable care.

What the OP explained was the adviser's behavior, and it is irrelevant.
The OP said that he discovered the error after "a quick review". If it was that easy to spot, HMRC will want to know why it wasn't spotted before he signed the return. If he didn't review the return before signing it, that is careless bordering on deliberate.

LozaACCS
Posts: 1504
Joined: Wed Aug 06, 2008 3:55 pm

Re: HMRC "check of your self assessment tax return" received

Postby LozaACCS » Tue Nov 11, 2014 10:20 am

Clearly there is no penalty due where the mistake arose despite taking reasonable care.
My view is that the OP did take reasonable care by appointing a professional adviser to complete his return, they made a mistake which is very relevant.
The OP wants to know how to respond, I have advised that he writes to HMRC explaining his advisers mistake and that he should be regarded as having taken reasonable care notwithstanding that he did not spot their mistake.
Your suggestion appears to be that he writes to HMRC and admits to careless behaviour (and be charged a penalty) you further suggest that it was in fact so careless (because I only glanced at the return and failed to spot the mistake) that it should be treated as a deliberate error on my part, and so liable to an even bigger penalty.

The OP must form his view accordingly

bd6759
Posts: 3072
Joined: Sat Feb 01, 2014 3:26 pm

Re: HMRC "check of your self assessment tax return" received

Postby bd6759 » Tue Nov 11, 2014 10:35 pm

The OP wants to know how to respond, I have advised that he writes to HMRC explaining his advisers mistake and that he should be regarded as having taken reasonable care notwithstanding that he did not spot their mistake.
I agree. But he will need to say how he took reasonable care. He will not be "regarded" as taking care if he does not say what he did to ensure the return was correct. If there were lots if entries in the return, overlooking a figure in the wrong box might be understandable. If there were only two entries and the repayment was unexpected, HMRC will want to know more. Simply saying "my accountant got it wrong" is not sufficient.
What he should say is that he checked the return carefully, and although he recognised the correct figure for tax repaid, he did not notice that it was in the wrong box. What he should not say is that he relied on his accountant to get it right and signed the return without checking it.


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