Hiring an accountant should help with handling various deadlines related to tax and business. But how does it work when an accountant fails to meet an essential deadline for the submission of a document, and HMRC or Companies House imposes a penalty?
The quick answer may be shocking: a penalty will still be levied against the taxpayer or company, regardless of whether an accountant had to submit the document. According to HMRC, the taxpayer or company is still liable for returns, calculations and payment even if an agent makes a return on their behalf.
However, it doesn’t automatically mean that there is nothing you can do if your accountant has committed such a mistake. It may be possible to appeal against a penalty in case of a reasonable excuse, as well as to discuss your losses with the accountant according to the contract between you.
Here is everything you need to know.
Who Pays The Fine If Your Accountant Misses A Deadline? Accountant Or Client
It is important to differentiate between who is responsible for filing and who has the legal duty to pay the tax.
When appointing an accountant or a tax agent, they become authorized to act on your behalf towards HMRC. But giving an authority to act on their behalf does not shift the responsibility of fulfilling the legal duty to the appointed agent.
Thus, if the accountant forgets about the filing deadline for your Self-Assessment, the tax authority will be able to charge you with the penalty regardless of the accountant’s fault.
Simply, it means an accountant can be responsible for filing; you bear the legal duty.
Thus, it is important to select an accountant with good deadline management procedures.
What If An Accountant Missed A Tax Deadline?
It depends upon the type of return.
HMRC can penalize the taxpayer for missing a deadline regarding the filing of Self-Assessment Returns, Corporation Tax Returns, and others. The penalty rates vary depending on the tax and the time delay in submitting.
In the case of a Company Tax Return, HMRC says that a penalty of £200 can be issued from day one, and another £200 can be issued after three months. Penalties can be imposed for even later failure to file the return.
Thus, in case an accountant promises to file your tax return, and they fail to do so, the penalty will not magically vanish because an accountant is behind the process.
What About Companies House Deadlines?
It is particularly relevant to talk about the Companies House deadlines when dealing with limited companies.
If the accounts of a private company are late, an auto penalty will apply. The penalties for private companies and LLPs for accounts late are:
- Up to one month – £150
- Between one and three months – £375
- Between three and six months – £750
- Over six months – £1,500
The penalties can be doubled if accounts are late in two consecutive financial years according to corresponding rules.
Thus, appointing an accountant does not release a director from their responsibilities.
Is It Possible For “My Accountant Forgot” To Be A Reasonable Excuse?
In accordance with the rules of HMRC, sending the return through somebody else may be considered reasonable in certain cases. It is one of those things that can be considered a reasonable excuse.
However, it does not mean that all deadlines which have been missed by accountants automatically become reasonable excuses.
Reasonable excuses are considered by HMRC on a case-by-case basis. The taxpayer should correct the problem immediately after the excuse ends without undue delay.
While it is not enough to claim that your accountant forgot, you should provide reasonable proof of that.
What Does This All Imply For You?
If your accountant really has not filed a return, even though he had the necessary information and instructions, then you might still want to appeal the penalty.
However, do not take it for granted that the appeal will be granted.
What Should You Do When Your Accountant Has Missed The Deadline?
Take action rather than waiting for the accountant to sort it out.
- Determine what was missed
- Which return or filing was late?
- What was the deadline?
- What date was the return or filing actually filed on?
- Why was it not filed within the deadline?
- Have HMRC or Companies House imposed a penalty?
- Are there any outstanding returns or filings or tax obligations?
- Submit any outstanding return as soon as possible
If there is an outstanding return, don’t wait for an argument as to who is to blame.
According to HMRC guidance, in case there is a reasonable excuse, the outstanding filing obligation is required to be completed as soon as possible without unreasonable delay once the excuse no longer applies.
- Review the penalty notice
Look through the penalty notice and establish:
- The filing it relates to
- The original deadline
- The amount of the penalty
- The reason for the penalty
- The deadline for appeal
In most cases, you have 30 days from the day you were issued a penalty notice to contact HMRC or appeal.
- Look into an appeal
If you think that there was good cause for the failure to file the return, then you may appeal against the imposition of the penalty.
Your appeal will need to detail the events, along with appropriate dates and documentation in support of your claim.
What If The HMRC Does Not Accept The Appeal?
Where the HMRC does not agree to your reasonable excuse, then there will be other things that could be done by you, depending on the nature of the penalty levied.
As per HMRC, there are cases where taxpayers have a right to appeal against the penalties if they feel the penalty levied is wrong, or if they have a reasonable excuse for the same.
Can You Make Your Accountant Pay The Penalty?
This is different from asking HMRC to withdraw the penalty.
Even if the delay was caused by your accountant, HMRC might still consider you or your business to be liable for the penalty. Whether or not you are able to seek compensation from the accountant is a completely separate issue.
Your engagement letter or terms of business should state:
- Which filing obligations the accountant undertook
- What information HMRC expected you to supply
- The consequences of late delivery of information
- Whether the accountant undertakes to be responsible for specific administrative mistakes
- Any limitations of liability
- The complaints process of the firm
If the accountant explicitly took upon himself to file by a certain date and did not do so, you should lodge a formal complaint against the firm, requesting an explanation of what steps the firm will take regarding the resulting penalty.
Remember, however, that just because your accountant made the mistake does not mean he is legally obligated to pay the fine.
What If You Provided Your Information After The Deadlines?
The scenario would be completely different if the accountant failed to receive the information on time.
For example, imagine that your deadline for the Self-Assessment is about to expire but you haven’t provided the accountant with the bank statements, income figures or expense details, even after multiple reminders.
Under such conditions, it may be hard for the client to convince anyone that the only reason for missing the deadlines was the accountant.
Preventing Deadline Problems In Accounting
The most effective way to address problems with deadlines is to try to prevent them from arising.
Update your records
Don’t leave everything until a few days before a tax deadline to give your accountant your financial records.
Meet requests for information
Provide any information that your accountant requests as soon as you can.
Be aware of your own deadlines
Even if your accountant takes care of all of your filings, be sure to note important deadlines for HMRC and Companies House.
Request confirmation
Where there is an important filing that has been made, request confirmation from your accountant and retain the confirmation of receipt if necessary.
Employ accounting software
Accounting software allows better tracking of records, transaction details, and the communication of information to your accountant.
How Lexarox Accounts Ensures Their Clients Are Always On Time
The ideal accounting services provider should do more than prepare numbers at the end of the year.
Lexarox Accounts offers accounting, tax, bookkeeping, VAT, payroll, and Self-Assessment services to UK businesses.
Its packages include annual accounts, Company Tax Returns, Confirmation Statements, and Self-Assessments for directors based on the packages used. Its team constantly reviews its clients’ business activities and provides accounting support.
It offers cloud-based accounting support for businesses to have their financial records well-organised and access to their accounting support teams.
It acts as an HMRC authorisation agency and as AAT-Certified Accountants, providing accounting support to UK businesses.
From the perspective of a business owner who does not want to worry about last-minute filing, having organised bookkeeping with accounting support is a great advantage.
Contact Information
Address: Lexarox Accounts MS.128, 203-213 Mare Street, Hackney, London, E8 3JS
Tel: 0208 533 1358
Mobile: 0792 883 0368 / 0747 235 6282
Email: info@lexaroxaccounts.co.uk
What Qualities Should An Accountant Have?
Price should not be your main priority while hiring an accountant.
Hire an accountant who:
- Is clear about the deadlines
- Issues timely reminders before deadlines
- Explains what information they require from you
- Notifies you when returns have been filed
- Uses good accounting software
- Maintains proper financial records
- Is clear about their roles and responsibilities
- Has a simple complaints procedure
- Is well-versed in tax requirements relevant to your business
Conclusion
So, who will be liable to pay the penalty in case your accountant fails to meet the deadline?
HMRC clearly states that the client is always liable for the returns, calculations and payments, even if it uses an agent to perform these actions.
However, the mistake made by your accountant does not automatically mean that you should accept the penalty. Find out if there are any reasons to contest the decision, collect the necessary evidence, sort out your files and reconsider the terms of the cooperation with the accountant.
Above all, select the accounting service that sees meeting deadlines as one of the aspects of its services rather than just putting everything to the last moment.
Frequently Asked Questions
Will my accountant take care of my HMRC penalty if they miss a deadline?
Not necessarily. As per HMRC rules, clients are responsible for their tax returns and payments despite the accountant being an agent.
Can I contest a tax penalty on behalf of my accountant’s mistake?
Yes, but only if you feel you had a reasonable excuse or otherwise feel the penalty was not right. HMRC takes a case-by-case view while accepting reasonable excuse claims.
Are directors held liable if they submit late filings of Company House accounts?
Yes. The directors are liable and must ensure company accounts are submitted before the deadline expires.
What is the Companies House penalty amount for late filing?
For private companies and LLPs, the current penalty amount is anywhere between £150 and £1,500 based on late filing time.
How can I avoid missing my accounting deadlines?
By keeping your accounting records up to date, providing the information required immediately, maintaining a record of your deadlines yourself and working with an accountant who sends you reminders.
Does Lexarox Accounts offer deadline reminders?
Yes. Lexarox Accounts has automatic email reminders regarding account and returns deadlines.
