Self Assessment Correction

[Dillan1601]

Hi everyone
I created a post last week regarding an error i discovered in a clients priory year tax return.
'i have noticed that their previous bookkeeper/accountant (??) claimed both depreciation and capital allowances for a vehicle which has resulted in his tax being under assessed. His tax bill was £1500 but should have been £2700 approx - inclusive of a POA.'
I have since discussed the situation with my client and he has left the ball in my court as he has no understanding of tax or even want to understand it. I have therefore reassessed his last years accounts but my results are completely different to those of his previous b/keeper however the tax assessment is similar to the error declared by the previous b/keeper (£1500).
I have recommended to my client that he make an amendment to his prior year return to ensure that everything is above board but he is concerned that they will enquire into his affairs and doesn't see what difference it is going to make if the total sum payable is broadly similar.
What would you recommend?

[CertaxBexley]

If the previous year resulted in Tax due of £1.5k and your calculation is similar +- £100 I think I would leave well alone. I assume your client is not a Ltd

[Dillan1601]

Thanks CertaxBexley, he is a sole trader in his 2nd year.

[CertaxBexley]

If your calculation of the previous year shows a *minor* underpayment of Tax, you could I guess make an adjustment to this years return to incorporate this.

[Jaydee]

I have therefore reassessed his last years accounts but my results are completely different to those of his previous b/keeper however the tax assessment is similar to the error declared by the previous b/keeper (£1500).

If I understand you correctly, the previous book-keeper made a £1,500 error in claiming depreciation as an allowable expense, but there has been no significant tax loss to the Crown as you have identified other compensating errors of a similar size?

I would still suggest that you/he submit an error or mistake claim as otherwise there could be material deficiencies with the individual boxes in the return itself, even though I presume the taxable profit figure does not materially change.

By not doing so, your opening balances for the current year will be incorrect and so your adjustments in year 2 to correct the errors in year 1 may make the individual boxes in year 2 materially incorrect too.

You may also have to consider the MLR rules for non-disclosure of the errors.

[Dillan1601]

Hi Jaydee
Many thanks for your reply. I agree totally with what you are saying. I feel i have a moral obligation to disclose the errors that i have found regardless. When i looked at the P&L provided by his previous b/keeper i thought something was amiss as some of the expenses were way too low to be even mildly realistic and needless to say the tax return error was apparent the minute i opened it up.
I shall amend as necessary. Many thanks again