HMRC letter re Capital Gains Tax submitted 21 months ago

meishka

Hi My son employed an accountant/sol to do his capital gains tax calculation in 2021. It was complicated as he had jointly owned it for a while, lived there for a while and rented it out for a while so thought it best to emply someone and paid the acccountant £300 to submit it. He's received a letter from HMRC basically saying to check the calculations as letting relief had been abolshied in 2020. On speaking to the accountant they have admitted they got it wrong as they 'interpreted it differently than HMRC' and did not realise HMRC were doing it 'retrospectively' Or something like that! Question is can HMRC go back 21 months on this? Should the accoutnant refund their fees if they did it incorrectly? The letter from HMRC advises if 'my son has done it correctly theres no need to do anything if the return meets the new rules? But apparetnly it doesn't!

user1977

If he's already gone back to his accountant, then presumably they can advise him and sort it out? 21 months isn't a problem, they can go back several years more than that.

Mutton_Geoff

Generally they can go back 6 years

meishka

Yes meant to say after being advised by accountant nothing was owed now £6000 is owed

SDLT_Geek

meishka said:

Hi My son employed an accountant/sol to do his capital gains tax calculation in 2021. It was complicated as he had jointly owned it for a while, lived there for a while and rented it out for a while so thought it best to emply someone and paid the acccountant £300 to submit it. He's received a letter from HMRC basically saying to check the calculations as letting relief had been abolshied in 2020. On speaking to the accountant they have admitted they got it wrong as they 'interpreted it differently than HMRC' and did not realise HMRC were doing it 'retrospectively' Or something like that! Question is can HMRC go back 21 months on this? Should the accoutnant refund their fees if they did it incorrectly? The letter from HMRC advises if 'my son has done it correctly theres no need to do anything if the return meets the new rules? But apparetnly it doesn't!

I think that "lettings relief" was abolished for most cases for disposals from 6 April 2020.  I recall that the date of the "disposal" is usually the date of the contract.  I do not suppose your son exchanged contracts before 6 April 2020? 
I understand that after that date, "lettings relief" can only apply where the taxpayer lived in part of the property and the tenant in another part.

SonnyLumiere

Take a look at the HMRC website e.g. https://www.gov.uk/government/publications/private-residence-relief-hs283-self-assessment-helpsheet/hs283-private-residence-relief-2022#letting-relief

Suggest approaching another accountant who knows what they are doing.

If HMRC seek to charge penalties, blaming the original accountant may not get you off the hook, but helps with mitigation.

TBagpuss

He will have topay the extra tax. He can complain to the accountnats and I would expect them to deal with corecting and resubmitting the return . If he has incurred interest or penelties then it would not be unreasonable to ask the accountnat to assist with those as they proesumably would not have been incurred had they compelted the return correctly. 

That said, he needs to check his terms of business with them about any limits to their liability.

theartfullodger

He should pay up promptly to avoid further fines but note accountant and that he & accountant will be in touch later.

silvercar

Is this a professional qualified accountant? If so they will have professional liability insurance to cover them for the costs of putting this right.

If tax is owed it will need to be paid, but the accountancy firm should cover the cost of any interest and penalties for getting it wrong. They may also be liable for the consequences of giving wrong advice and submitting an incorrect form eg if your son spent money he had set aside for paying this tax until they said he had less to pay.

Boat_to_Bolivia

Please could someone explain to me why, if lettings relief was abolished in 2020, was the option to do so still there when the Accountant did his calculations/filled in the form? 

Just curious.

housebuyer143

Boat_to_Bolivia said:

Please could someone explain to me why, if lettings relief was abolished in 2020, was the option to do so still there when the Accountant did his calculations/filled in the form? 

Just curious.

As someone mentioned above, it's still applicable in a select few cases.