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Advice please about potential client who didn't realise they needed to register for Self Assessment

  • Associate
  • Practice Licence
  • 10 posts
  • # 115174

Hi there, 

I've been approached by a potential client, an unicorporated partnership who have a craft business selling jewellery on Etsy.

They've been trading since 2015 but didn't realise they needed to register for self assessment. They only got in touch with me because they are trying to grow their business and thought they might need to register for tax soon! The business had been reinvesting profits into their business and didn't realise that profits constituted income. Alarm bells were ringing as soon as I spoke to them and I explained that they needed to register for SA as soon as possible - they've emailed me to say they've done so. They also need to register their partnership, and from the information I've gleaned, they need to file tax returns for 2015/16 and 2016/17 to get up to date. 

I see this as a misunderstanding by the business about the tax system, but even so, they need to get this right promptly.

1) Does anybody have experience of this situation where a client failed to register for SA in time? Can anybody advise as to what penalty they are likely to face for the 2015/16 return?

2) Am I going to get myself into any difficulty (reputation-wise or otherwise) for taking on such a client?

3) And, is there any obligation on me to report them to HMRC?

Many thanks, Zoe

  • Member PM.Dip
  • Practice Licence
  • 78 posts
  • # 115505

Hi Zoe

 

I have been looking into a similar situation for a potential client once I have passed my Diploma (taking this weekend).  If you go on to Google there is a HMRC tool you can use that provides a calculation of how much the fine would be.  You need to know what the expected tax bill will be and the date it would be paid but it does give you an idea.  Also I spoke to HMRC who have advised that if the client (via Agent or otherwise) admits they have not done their SA then they are more lenient and from the point they have registered this fact with HMRC they get a 3 month grace period.

 

I hope that helps.

 

Sue

  • Member PM.Dip
  • Practice Licence
  • 78 posts
  • # 115540

Hi Zoe

 

Did you get any advice.  I have now passed my Diploma and have my first SA client.  She is in part time employment and did not realise she had to submit an SA and has property income from October 2015 onwards.  

I am pulling everything together for her but would be interested to know if you found out about how she could go about trying to keep the penalties as low as possible.  We have now requested her UTR number and spoken to HMRC and they have made a note on her file.  They say that once the return has been submitted she can appeal in writing and I have also found a form on HMRC to do this, but she needs a "reasonable excuse".  Although the website does give a list of reasonable excuses it doesnt say either way whether the fact that she did not know will be acceptable.

Let me know if you found anything out at all that might be helpful and if there is anyone else out there with any advice I would be very grateful.  I would like to do a good job with my very first SA client. :)

 

Thanks

Sue

 

  • Member
  • 9 posts
  • # 115543

Hi Zoe and Sue

The client will need to register with HMRC and and get a UTR number explaining why they need to complete a tax return. They will then get 3 months to submit the tax return and pay any tax due. I haven't seen a case where penalties have been applied as long as the tax return is submitted on time.

Your reputation won't suffer if you take on these cliets it happens all the time :-)

I don't believe you have an obligation to report them to HMRc if they are not your clients yet.

Sue - HMRC are currently running a Let Property Campaign for landlords who haven't declared income here is a link you may find helpful https://www.gov.uk/government/publications/let-property-campaign-your-guide-to-making-a-disclosure/let-property-campaign-your-guide-to-making-a-disclosure

Hope the above helps

Andrew

 

 

  • Member PM.Dip
  • Practice Licence
  • 78 posts
  • # 115544

Hi ya

 

This is brilliant.  Thank you so much.  I will follow this up.

 

Sue

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