Using estimated or provisional figures during self assessment can be a common area of concern
As the self-assessment deadline approaches, a common area of concern for most practitioners will be the use of estimated or provisional figures. This is especially likely to be a greater worry if clients have not kept adequate records.
In its internal manual SAM121190, HMRC makes a distinction between:
Provided that provisional figures are reasonable and take account of all the information which is available at the time of completing the return, they are acceptable in cases where waiting for information to be available means that the tax return would otherwise be late. The expectation is that taxpayers should include either a best estimate or a provisional figure.
The taxpayer should not either leave a box blank or enter ‘details to follow’ as HMRC will regard this as an incomplete return and the taxpayer will be liable to penalties for late filing. HMRC also expects that final figures will be provided once they become available and will take appropriate action to obtain these (ie via an enquiry).
It should be added that HMRC does not accept that the use of estimated or provisional figures is justified if the taxpayer makes little or no effort to obtain the final figures before the filing deadline and may challenge the completeness of the return if it is suspected that this may be the case. If an amendment is made to the return following an enquiry into the return, there could be a penalty payable on the additional tax assessed.
The penalty regime for inaccuracies on tax returns is based on behaviours such as reasonable care, careless, or deliberate, etc. and guidance is available in HMRC’s Compliance Handbook at CH160000 and CH81100 onwards. HMRC has updated its guidance for reasonable excuse recently.
Note that HMRC states in its manual referred to above ’where it appears that a particular agent is filing a significant proportion of returns with provisional or estimated figures, you should inform the Compliance Manager’.
Members should also fully bear in mind the requirement of Professional Conduct in Relation to Taxation (PCRT) and AML legislation.