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HMRC fines/interest if they disagree with your accounts

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    HMRC fines/interest if they disagree with your accounts

    Without going into details - this is on my other thread re: 24 month rule.

    If you submit an annual return to HMRC and it relies on an interpretation that HMRC might not agree with what can potentially happen?

    Appreciate that falsifying and blatant fraud is one thing (which is not clever at all) but, as I've found out, there is a lot of interpretation (IR35 is a prime example!). Appreciate also that, as there should be, theres a different between deliberate/negligent issues and accidental/wrong interpretation....

    In the first instance, what do HMRC do? Surely no-one goes through a company return in detail?
    In reality, if they disagreed with an interpretion, what would happen? Pay it back? Pay it back with interest added? Fines as well?

    Basically, £2000 up front for something that 1) May never get picked up on, 2) May be ok anyway, and then 3) May only cost £2200 if it all goes wrong.

    Anyone got any experience thereof?
    Rhyddid i lofnod psychocandy!!!!

    #2
    CT Penalties

    As well as the tax to be repaid, there's also the interest and potentially penalties depending on the level of disclosure:-

    HMRC CT Penalty Guide

    There can be a bit of negotiation with the inspector as to the level of any penalties.

    Before it gets to that stage, the revenue have to go through due process in order to open a return and have a poke around. We've noticed a reduction in the number of CT enquiries and an increase in personal SAR enquiries over the last couple of years but given current changes that could easily be turned on it's head.
    Last edited by Darren at Fox-Bartfield; 16 May 2016, 12:40.

    Comment


      #3
      Originally posted by Darren at DynamoAccounts View Post
      As well as the tax to be repaid, there's also the interest and potentially penalties depending on the level of disclosure:-

      HMRC CT Penalty Guide

      There can be a bit of negotiation with the inspector as to the level of any penalties.

      Before it gets to that stage, the revenue have to go through due process in order to open a return and have a poke around. We've noticed a reduction in the number of CT enquiries and an increase in personal SAR enquiries over the last couple of years but given current changes that could easily be turned on it's head.
      Thanks Darren. But would it be classed as an error.

      If HMRC contacted me and said, "Umm PC you should have stopped claiming at 12 months", then my response would be "Well, yes this is what I did and this is the way I understood the rules are this, because of this, and that, so this is how I did it".

      Ok they well say "no PC, we've decided you're wrong and you should have done it".

      Its not concealed, yes its deliberate because of the interpretation, but its not really careless either because I did it on purpose. Surely, they need another category for "did it wrong but we decided its not right". Or its at most "non-deliberate" ie. I didnt do it because I knew it was wrong, I thought I was right.

      And surely theres "reasonable care". Yes I looked at the legislation, took advice and decided that I was doing it the right way.

      Either way looks like max fine is 100% which is never going to cover this. Its hardly deliberate and neither is it concealed. 30% max maybe?
      Rhyddid i lofnod psychocandy!!!!

      Comment


        #4
        Penalties

        Depending on the circumstances but if you had it documented that took advice and was interpreted according to that advice, you'd be able to demonstrate that reasonable care was taken and unlikely to raise a penalty.

        The tax & interest would be a given, just the level of penalty, if any. If ended up full blown enquiry/investigation then it's likely to start at the "Careless" range but they could be headed off by things like voluntary disclosure or the accountant simply talking to the inspector. Each circumstance and inspector is different and has to be handled as such but bottom line being if don't like the findings of an inspector, they can be challenged. Ultimately, best to settle these things before it gets this far and starts mounting costs, time and stress.

        PS....in 25 years I've never come across a client with a 100% penalty!

        Comment


          #5
          Originally posted by Darren at DynamoAccounts View Post
          Depending on the circumstances but if you had it documented that took advice and was interpreted according to that advice, you'd be able to demonstrate that reasonable care was taken and unlikely to raise a penalty.

          The tax & interest would be a given, just the level of penalty, if any. If ended up full blown enquiry/investigation then it's likely to start at the "Careless" range but they could be headed off by things like voluntary disclosure or the accountant simply talking to the inspector. Each circumstance and inspector is different and has to be handled as such but bottom line being if don't like the findings of an inspector, they can be challenged. Ultimately, best to settle these things before it gets this far and starts mounting costs, time and stress.

          PS....in 25 years I've never come across a client with a 100% penalty!
          Ah so if accountant is saying "in their opinion" its best to pay up then thats not good lol?

          But surely be definition an accountant is risk adverse because they dont want clients coming back 12 months down the line saying "you told me it was ok!". And of course its not their money.
          Last edited by psychocandy; 17 May 2016, 08:20.
          Rhyddid i lofnod psychocandy!!!!

          Comment


            #6
            One other thing. If something like this is highlighted is there any chance its like putting your head above the parapet and attracting unwanted IR35 attention?
            Rhyddid i lofnod psychocandy!!!!

            Comment


              #7
              Originally posted by psychocandy View Post
              But surely be definition an accountant is risk adverse because they dont want clients coming back 12 months down the line saying "you told me it was ok!". And of course its not they're money.
              Before the grammar guys come in, you may want to change "their" lol!

              Many accountants I've come across are risk averse, human nature and you're right they don't want clients coming back to bite them on the backside for bad advice. However they should be providing advice as though it is their money and what they would do in those circumstances, ultimately it is the client's choice to heed that advice or not. I think we're getting a bit off topic here!

              "If something like this is highlighted is there any chance its like putting your head above the parapet and attracting unwanted IR35 attention?"

              Do you mean if went for a voluntary disclosure? IR35 is a different matter altogether and looked after by a separate dept to the CT inspectors. If they're looking to take a look at IR35 then will have to notify as such. Realistically, I would say that a voluntary disclosure for expenses is unlikely to result in an IR35 enquiry.....it's always possible but in this case would suggest it's unlikely.

              Comment


                #8
                Originally posted by Darren at DynamoAccounts View Post
                Before the grammar guys come in, you may want to change "their" lol!

                Many accountants I've come across are risk averse, human nature and you're right they don't want clients coming back to bite them on the backside for bad advice. However they should be providing advice as though it is their money and what they would do in those circumstances, ultimately it is the client's choice to heed that advice or not. I think we're getting a bit off topic here!

                "If something like this is highlighted is there any chance its like putting your head above the parapet and attracting unwanted IR35 attention?"

                Do you mean if went for a voluntary disclosure? IR35 is a different matter altogether and looked after by a separate dept to the CT inspectors. If they're looking to take a look at IR35 then will have to notify as such. Realistically, I would say that a voluntary disclosure for expenses is unlikely to result in an IR35 enquiry.....it's always possible but in this case would suggest it's unlikely.
                No I meant if I submitted my accounts and then subsequently HMRC found an issue with them where they disagreed with my interpretation.

                Right good to know that it wouldn't be a case of "right hes tried it on with CT, so lets have a look at everything else now".
                Rhyddid i lofnod psychocandy!!!!

                Comment


                  #9
                  Originally posted by Darren at DynamoAccounts View Post
                  Before the grammar guys come in, you may want to change "their" lol!

                  Many accountants I've come across are risk averse, human nature and you're right they don't want clients coming back to bite them on the backside for bad advice. However they should be providing advice as though it is their money and what they would do in those circumstances, ultimately it is the client's choice to heed that advice or not. I think we're getting a bit off topic here!
                  Mine is very risk averse I think. Very good as well mind and mostly this is something I like about them.

                  But if there are two ways to interpret something and there is a difference in a few £K between the two interpretations, then surely, its worth considering.

                  For instance, £2K difference, maybe 1% chance of it ever getting picked up, then 25% chance it'll be considered incorrect, with possible extra cost of £500-£600.
                  Rhyddid i lofnod psychocandy!!!!

                  Comment


                    #10
                    Originally posted by psychocandy View Post
                    Mine is very risk averse I think. Very good as well mind and mostly this is something I like about them.

                    But if there are two ways to interpret something and there is a difference in a few £K between the two interpretations, then surely, its worth considering.

                    For instance, £2K difference, maybe 1% chance of it ever getting picked up, then 25% chance it'll be considered incorrect, with possible extra cost of £500-£600.
                    Have a read through your posts with fresh eyes, PC. It sounds like you're trying to convince yourself. The real risk as you know, I suspect, is that ll your accounts get opened up to inspection, and if you're not sure about the defensibility of your IR35 status...

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