I’m engaged in preparing the 2022/23 Tax Return for a new client. It’s transpired that his previous accountant “used estimates” on the 2021/22 Return for interest received and dividend income from various shareholdings.
Though my client is a higher rate taxpayer, substituting the correct interest and dividends received in 2021/22 makes no difference whatever to the income tax liability.
On these bare facts alone, Is it necessary, advisable, or not necessary at all to submit a revised 2021/22 Return? It’s no big deal to submit a revised 2021/22 Return – I’m more interested in the legal obligation, even if the errors are minor (and of course don’t alter the tax liability).
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I know what I'd do, but not the answer to your specific question:
"I’m more interested in the legal obligation"
However do you mean the previous return included 'provisional figures' or 'estimated figures' - the impact can be different.
https://www.gov.uk/hmrc-internal-manuals/self-assessment-manual/sam121190
"* A provisional figure is one which the taxpayer / agent has supplied pending the submission of the final / accurate figure.
* An estimated figure is one which the taxpayer / agent wishes to be accepted as the final figure because it is not possible to provide an accurate figure for example where the records have been lost."
Personally (i.e. without reference to the law although I know how that will go down in some quarters here), I would probably make a decision based primarily on materiality and balanced by the cost of making what sound like tiny changes.
BUT materiality can be in the eye of the beholder and can change with hindsight - so I'd not rely solely on 'no extra income tax' being due.
There is a possibility of unchanged values coming back to haunt in the future - maybe involving other taxes (although "interest received and dividend income from various shareholdings" don't sound too threatening in that respect).
You are not as au fait with PCRT as, perhaps, you should be. In particular para 16 of helpsheet C1.
Not sure if that is addressed to me or OP ... but it *is* a helpful steer, as is para 41.
On the other hand all the references are to 'errors' ... and I'm unclear as to whether a figure subsequently found to be incorrect (although clearly labelled as an estimate when submitted) should be considered an 'error' in this context?
I'd call the difference between actual and provisional estimates as the error in the estimate.
If HMRC policed* the tax system properly they would chase taxpayers who tick the provisonal box and then don't follow up with an amended return. But they don't as far as I know, so there seems to be no downside to failing to correct provisonal figures where the difference is trivial.
The law too doesn't deal with small things -
Whenever a fellow called Rex
Flashed his small organ of sex
He always got off
For judges would scoff
De minimis non curat lex
*A word TD in explicitly baulked at the other day.
@ songb1rd (OP).
The agreement between the accountancy bodies and HMRC covers this point, and is here:-
https://www.icaew.com/-/media/corporate/files/technical/tax/pcrt/pcrt.ashx
If you click on Helpsheet C and scroll down to paragraph 16, this answers your question (hence, as there would be no upward adjustment to the Income Tax at all in your client’s case, you can safely decide, on behalf of your client, not to submit an amended Tax Return) subject to my "caveat" below.
It is a judgment call as to whether, in any specific case, you consider it appropriate to amend the Tax Return. The client (via you as the accountant) is perfectly entitled to submit the amended Tax Return, and your doing so might display to the client that you are “on the ball”.
To explain the “caveat” referred to above, please refer to the HMRC internal manual, here (the remainder of this post is only relevant to your case if Box 20 on page TR6 was ticked on the 2021/22 Tax Return):-
SAM121190 - Returns: individuals returns: provisional or estimated figures: individuals - HMRC internal manual - GOV.UK (www.gov.uk).
You will note HMRC’s distinguishing (a) “estimates” from (b) “provisional” figures. If “Box 20” was completed on page TR8 of a standard 2021/22 Tax Return, therefore, the HMRC manual states that they will be expecting a “final” Return and indeed that they will chase for an amended Return with FINAL figures. Hence an amended Tax Return should (at least “theoretically”) be submitted (regardless of the fact that such amended Tax Return would show no increase in liability). I say “theoretically” inasmuch as, from my own experience, HMRC would only “chase” for an amended Tax Return (after they have previously received a Return with Box 20 ticked) where they believe that the final figure will differ materially from the provisional figure: nonetheless the SAFE option is to submit an amended Tax Return WHENEVER a previous Tax Return has been submitted with Box 20 on page TR8 ticked.
Basil.
EDIT. "Slowcoach typist Basil" has now seen previous posts, including especially MUL's 16.12 post.
HMRC might reject it if submitted by a new accountant. I don't know whether it still happens but it happened when I did it years ago. PTP picks up whether an amended return is being filed if you have filed the original but not if you didn't.
I don't know the answer to this
If no amended return is submitted and Provisional has been ticked could HMRC penalise the client in the future for not filing the "final" correct return ??
I don't know the answer to this
If no amended return is submitted and Provisional has been ticked could HMRC penalise the client in the future for not filing the "final" correct return ??
Based on a percentage of tax lost ?
I'd probably resubmit, mainly so that the return on my file was correct. It's not that much effort, really.
