Forum

• # 97138
• Sat 18 Jan 2014 09:13 PM

I have a client that has run his business as a sole trader for a number of years. His wife finished employment in August 2012 and his accountant was supposed to convert his sole tradership to a partnership with his wife in August 2012. His financial year runs from Aug to July and he has just had Aug 2011 - July 2012 reported on his 2012/13 self assessment.

We have just found out that his accountant never informed HMRC, so they still have the business down as sole trader - and this accountant is also now not being used by my client as his agent.

Does anyone know if HMRC will backdate this sort of information to this degree?

If, as I suspect, that this will not be accepted by HMRC - what do you think would be a sensible option? Might it be worth asking HMRC to consider allowing it to be backdated to April 2013, so that he could have his accounts drawn up Aug 2012 to March 2013 as sole trader, then begin April 2013 as partnership for a full 12 months reporting?

He could really do with his wife being shown as a partner for the sharing of the profits, but has been let down badly by his ex accountant. He hasn't appointed another accountant yet, so this is with me at the moment.

Has anyone come across this kind of scenario before?

• Carol Saunders
  Lady of Ledger Book Keeping
  Telford, Shropshire

  
  

• 
  Quote
  

• # 97139
• Sat 18 Jan 2014 09:45 PM

Hi Carol,

Personally I have not been in this situation.

However,it is still the responsibility of the individual to make sure HMRC are made aware of any changes - even if the accountant said he would do it on his behalf.

The problem with your client is that the wife should also have registered as self-employed at the same time as the husband intended to change the business to a partnership.

So HMRC could if they wanted to apply penalties to both parties individually and the partnership which is given a separate UTR number, for failure to notify. Plus the wife would have to pay back dated Class 2 NI if applicable.

If it were me I would contact HMRC and ask the possible outcome of the scenario without declaring the name of the client.

Even your suggestion of just back dating to April 2013 means notification would be 10 months late.

Good luck with this.

Marilyn

• A clever person solves a problem.

  A wise person avoids it.

  Albert Enstein

• 
  Quote
  

• # 97140
• Sat 18 Jan 2014 09:58 PM

Thanks Marilyn

One of the reasons that my client or his wife didn't question it was that his wife has been paying NI Class 2 all along and the accountant had been talking about claiming back the overpayment between Aug 2010 and July 2012 - but never got around to it!

  The business used to be a partnership until July 2010, then his wife began employment, so it was changed to a sole tradership. However, to add complications, HMRC never shut this partnership down properly (the accountant DID inform HMRC of the conversion this way around in 2010!) so my client had partnership letters coming through about the return not having been submitted. We got this sorted and HMRC admitted that was their fault!

Like you say - I'm going to have to ring them...........I wonder what penalties they normally enforce on this sort of thing?   
 

• Carol Saunders
  Lady of Ledger Book Keeping
  Telford, Shropshire

  
  

• 
  Quote
  

• # 97141
• Sun 19 Jan 2014 12:46 AM

Hi Carol,

Oh dear what a mess!

The overpayment of Class 2 can still be reclaimed as I think it is still within the time limit - just!

I'm not sure what the penalties would be in this situation but I have a partnership client who had not submitted returns for 6 years and the penalties were horrendous. They had been paying the penalties on time but by the time I had sorted everything along with my fees they actually had paid out more in penalties than what it would have cost them to get their accounts done on time plus the tax due in the first place. Needless to say they are keeping up to date now!

I seem to remember the partnership penalties were something like £900 plus per annum plus their individual penalties.

Marilyn

• A clever person solves a problem.

  A wise person avoids it.

  Albert Enstein

• 
  Quote
  

• # 97142
• Sun 19 Jan 2014 06:30 AM

Hi Carol,

Registration for self assessment, be it Sole Trader or Partnership can be done any time upto 6 months following the year to be assessed. So if you wish to register from 6th April 2013 onwards, you have until 5th October 2014 to register and then must submit by 31st October 2014 manually or 31 Jan 2015 online.

Regards

Gordon

• 
  Quote
  

• # 97145
• Sun 19 Jan 2014 09:35 PM

Thanks Gordon

Carol 

• Carol Saunders
  Lady of Ledger Book Keeping
  Telford, Shropshire

  
  

• 
  Quote